Ohio-based banking company KeyCorp posts first quarterly profit in 2 years

KeyCorp reports first quarterly profit in 2 years

CLEVELAND — KeyCorp reported its first quarterly profit in two years Thursday with fewer soured loans, more income from fees and better cost controls.

The Cleveland banking company, which had been nagged by a flood of bad loans, said it earned $29 million, or 3 cents per share, in the second quarter.

KeyCorp lost $390 million, or 68 cents per share, in the April-June quarter of 2009.

The company easily beat the Wall Street forecast of an 11-cent loss.

Net charge-offs, or loans that were written off as uncollectable, dropped to $435 million in the second quarter from $502 million a year ago. Nonperforming loans, or loans considered past due and in danger of default, decreased to $1.70 billion from $2.19 billion.

The provision for loan losses was $228 million in the most recent quarter, down from $823 million in the second quarter of 2009 and down from $413 million from the first quarter of 2010.

“These results are encouraging and the return to profitability represents an important step forward for our company,” CEO Henry L. Meyer III said.

But his outlook was cautious. “Some uncertainty remains in the markets, and consumer and business loan demand is soft,” he said.

A Morgan Keegan & Co. research note called the profit a surprise and warned that risk could emerge if credit losses are worse than expected due to a prolonged downturn in KeyCorp markets, putting a drag on earnings.

Meyer told The Associated Press in a phone interview that loan business has been hurt by borrower collateral whose values are depressed from the recession. As a result, “They are not qualified to borrow as much as they were before,” he said.

And businesses making less money also have fewer resources to back up a loan, he said. “We’re looking for good loans,” Meyer said.

As for the return to profitability, “We’ve turned the corner,” Meyer said. “This isn’t a blip. This is a sustainable, profitable turn in the company’s fortunes.”

The bank marked the event by expanding its post-earnings conference call involving several hundred managers to all employees coast-to-coast.

For the first six months of the year, KeyCorp lost $67 million, or 8 cents per share, compared with a January-June 2009 loss of $926 million, or $1.73 per share.

KeyCorp has more than 1,000 community bank branches across a 14-state region. KeyCorp opened 18 new branches in the first six months of the year and plans to open 22 more by Dec. 31.

Its shares closed Thursday up 5.4 percent, or 41 cents, at $7.95.

Online: https://www.key.com