Tuesday, Piper Sandler reaffirmed its Overweight rating on KeyCorp (NYSE:NYSE:KEY) with a steady price target of $18.00. The firm highlighted KeyCorp's announcement of a 14.9% minority investment from Scotiabank, structured through a two-phase capital raise. This strategic move is expected to restructure KeyCorp's AFS securities portfolio, which could result in an approximate $400 million boost to net interest income (NII).
The financial metrics associated with this transaction indicate a promising outlook for KeyCorp. The pro forma Common Equity Tier 1 ratio (CET1), inclusive of accumulated other comprehensive income (AOCI), is projected to strengthen to between 9.1% and 9.4%. This range suggests a shift from the lower end to the higher end among peer institutions. Additionally, tangible book value per share (TBV/sh) is anticipated to see an approximate 10% improvement.
The comprehensive transactions are expected to be beneficial to KeyCorp's earnings per share (EPS). Estimates show a low single-digit accretion to the EPS for the year 2025 and a slight increase for 2026. Piper Sandler's analysis points to these developments addressing several investor concerns and enhancing future financial flexibility.
The firm's analyst commented on the rarity and advantageous nature of the capital raise, noting its execution at a premium. This transaction is seen as a positive step for KeyCorp, providing both immediate financial benefits and strategic advantages in the longer term. Piper Sandler's reiterated Overweight rating reflects confidence in KeyCorp's financial strategy and potential for growth.
In other recent news, KeyCorp has been under the financial spotlight with a series of significant developments. Morgan Stanley adjusted its outlook on KeyCorp, raising the bank's price target from $18.00 to $20.00, reflecting confidence in the corporation's capital raise and anticipated growth opportunities by 2025. Despite potential share dilution, KeyCorp's earnings per share (EPS) for 2025 are expected to increase modestly.
Simultaneously, Scotiabank made a strategic move into the U.S. banking sector with a $2.8 billion acquisition of a 14.9% stake in KeyCorp. This acquisition, set to complete in fiscal 2025, will make Scotiabank KeyCorp's largest investor and allow the appointment of two directors to KeyCorp's board.
In addition, Stephens raised the price target for KeyCorp shares to $18.00 following the company's second quarter earnings report. The report showed earnings per share of $0.25 and pre-tax, pre-provision net revenue of $452 million, approximately 3% above consensus estimates.
KeyCorp reported stable second quarter earnings of $237 million, or $0.25 per share, despite a decline in investment banking fees. The company's net interest income showed improvement and is expected to continue growing. These are recent developments that investors should monitor closely.
InvestingPro Insights
In light of Piper Sandler's reaffirmed Overweight rating on KeyCorp, recent data from InvestingPro provides additional context for investors. KeyCorp's market capitalization stands at $14.7 billion, reflecting its substantial presence in the financial sector. The company's P/E ratio is currently at 20.34, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at 19.1, indicating a modest valuation relative to earnings.
Notably, KeyCorp has demonstrated a commitment to shareholder returns, having raised its dividend for 13 consecutive years. This is a testament to the company's financial health and management's confidence in its ability to generate consistent cash flow. Additionally, the dividend yield as of the latest data point is 5.14%, which is quite attractive in the current market environment. It's also worth mentioning that the company has been profitable over the last twelve months, which aligns with Piper Sandler's positive outlook.
Investors should be aware that there are 9 additional InvestingPro Tips available for KeyCorp, which can provide deeper insights into the company's financial health and future prospects. These tips are accessible on the InvestingPro platform and can be a valuable resource for those looking to make informed investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.