KeyCorp (NYSE:KEY) reported third-quarter 2026 earnings of $0.51 per share, up 24% from a year earlier, as record revenue, commercial loan growth and improved credit quality supported results. Chairman and Chief Executive Officer Chris Gorman said quarterly revenue exceeded $2 billion, an 8% year-over-year increase, while return on average tangible common equity rose above the company’s 15% target threshold.
“We reported record quarterly revenue of over $2 billion,” Gorman said, adding that KeyCorp generated return on tangible common equity exceeding 15% as it works toward sustaining that level by the end of 2027. The company reported return on average tangible common equity of 15.1%, up 260 basis points from the prior year.
Revenue, margin and loan growth
Chief Financial Officer and Head of Technology Clark Khayat said tax-equivalent net interest income increased 10% year over year and 4% from the second quarter. Net interest margin expanded 6 basis points sequentially to 2.95%, helped by commercial loan growth, deposit growth, funding optimization, securities and swap repricing, and an additional day in the quarter.
Average loans rose $1.5 billion sequentially. Average commercial and industrial loans increased $2.3 billion, or 4%, while period-end C&I balances increased $3.3 billion, or 5%. Gorman said growth was broad-based across industries and geographies, driven by new client acquisition, greater line utilization and business investment.
C&I line utilization rose 200 basis points to 33%, the highest level in more than three years. Gorman said clients were using credit lines to support inventory, capital expenditures and small tuck-in acquisitions. He also pointed to utilities, power and renewable-energy clients as an area of significant growth, saying investment-grade utilities are making major investments in generation and distribution.
Management said it expects some moderation in loan growth during the fourth quarter. Gorman said loan demand remains substantial, though transactional real estate activity has slowed as borrowers and investors adapt to higher financing costs.
The company updated its 2026 outlook, now expecting:
- Approximately 10% full-year net interest income growth, narrowed from prior guidance of 9% to 11%.
- Approximately 5% average loan growth, compared with previous guidance of 4% to 5%.
- Approximately 10% average commercial loan growth, versus a prior outlook of 8% to 10%.
- Net charge-offs of 37 to 39 basis points for the year, improved from prior guidance of 40 to 45 basis points.
- Fourth-quarter net interest margin of about 3%.
Khayat reaffirmed the company’s target for net interest margin of at least 3.25% in the fourth quarter of 2027. He said about $24 billion of securities, swaps and residential mortgages are expected to roll off through the end of 2027, with a projected weighted-average yield pickup of roughly 165 basis points based on current rate assumptions and forward-starting swaps.
Deposits support funding strategy
Average deposits increased $3.6 billion, or 2.4%, from the prior quarter, exceeding loan growth and allowing KeyCorp to reduce wholesale funding. Client deposits, excluding certificate of deposit growth, rose $2.8 billion, driven largely by commercial operating balances.
Total deposit costs increased 3 basis points to 1.66%, while total funding costs increased only 1 basis point. Khayat said third-quarter growth included expected seasonal commercial deposit flows, deeper relationships with existing customers and deposits from clients added earlier in the year.
The company had previously expected at least $3 billion of client deposit growth during the second half of 2026. Khayat said KeyCorp nearly reached that figure in the third quarter alone and now anticipates additional client deposit growth. The company expects fourth-quarter loan growth to be fully funded by client deposits and said it expects deposits to grow at or above loan growth through 2027.
Fee businesses and investment banking
Non-interest income increased 6% from a year earlier, despite a $6 million Visa-related charge in the quarter. Investment banking and debt placement fees totaled $214 million, increasing 27% sequentially on stronger merger-and-acquisition and syndication activity.
Gorman said investment-banking pipelines rose 5% from the second quarter and 20% year over year despite strong third-quarter conversion. He reiterated KeyCorp’s expectation for mid-single-digit investment-banking fee growth in 2026 and said the company remains comfortable with its stated goal of reaching $1 billion in annual investment-banking revenue by 2028.
Management said middle-market M&A activity has yet to normalize. Gorman noted that transactions under $1 billion were down 11% year to date, while deals above $1 billion were up 12%. He said volatility in interest rates and forward rate expectations has contributed to the slower pace of middle-market transactions, although the company sees a significant backlog of potential activity.
Other fee categories also grew. Trust and investment-services income increased 10% year over year on higher market values and positive client flows. Cards and payments fees increased 8%, while service charges on deposit accounts rose 5%. Commercial mortgage servicing fees were $53 million, and the company expects $50 million to $60 million in fourth-quarter servicing fees.
Credit, capital and technology investment
Credit quality improved during the quarter. Net charge-offs were $89 million, or 32 basis points of average loans, while nonperforming assets declined $191 million sequentially to 55 basis points, the lowest level since late 2023. The criticized loan ratio was unchanged at 4.9%.
Khayat said the provision for credit losses was $61 million, including a $28 million reserve release. The release reflected improved portfolio performance, scenario effects and a continued shift toward higher-credit-quality relationships, partially offset by qualitative reserve builds related to economic and geopolitical uncertainty.
KeyCorp’s CET1 ratio was 11.1% at quarter-end, with a marked CET1 ratio of 9%. The company repurchased $320 million of common stock during the quarter and has repurchased more than $1 billion year to date. It has about $250 million remaining under its 2026 target of $1.3 billion in share repurchases.
Gorman said capital priorities remain supporting clients, investing in people and technology, maintaining the dividend and returning excess capital through buybacks. He said traditional whole-bank mergers and acquisitions are not a priority, though the company continues to pursue tuck-in acquisitions such as Clearwater.
KeyCorp said it is investing $1 billion in technology during 2026 and is expanding artificial-intelligence initiatives across commercial onboarding and servicing, commercial originations, consumer servicing and software engineering. Management said the effort is intended to simplify processes, improve productivity, reduce fraud, accelerate client onboarding and enhance risk controls.
Looking ahead, Gorman said KeyCorp expects record revenue and pre-provision net revenue for 2026 and believes the company is positioned for another year of “outsized” revenue and earnings growth in 2027, though formal 2027 guidance is expected at year-end.
About KeyCorp (NYSE:KEY)
KeyCorp is a financial services company headquartered in Cleveland, Ohio, and the parent company of KeyBank National Association. Through KeyBank, it provides retail and commercial banking services to individuals, businesses, institutional clients and government entities.
KeyBank’s offerings include checking and savings accounts, consumer lending, mortgages, home equity financing, credit cards, business loans, treasury management and payment services. The company also provides investment banking and capital markets services through KeyBanc Capital Markets, as well as wealth management, investment management and personal financial planning services.
KeyCorp traces its history to 1825, when the institution that became KeyBank was established in Albany, New York.
