CLEVELAND - KeyCorp (NYSE: NYSE:KEY) announced today that The Bank of Nova Scotia (NYSE:BNS), commonly known as Scotiabank (TSX: TSX:BNS) (NYSE: BNS), has finalized the acquisition of a 14.9% stake in KeyCorp's common stock, representing an investment of roughly $2.0 billion. This transaction follows the Federal Reserve's approval on December 12, 2024, and fulfills the agreement initially disclosed on August 12, 2024. The deal comes as KeyCorp, currently valued at $17.1 billion, has seen its stock surge over 30% in the past six months.
The strategic minority investment by Scotiabank into KeyCorp is now complete, marking a significant financial event for both institutions. KeyCorp, with a history spanning nearly two centuries and headquartered in Cleveland, Ohio, stands as one of the largest bank-based financial service companies in the United States. As of September 30, 2024, KeyCorp reported assets of approximately $190 billion.
KeyCorp operates under the KeyBank National Association, offering a variety of services, including deposit, lending, cash management, and investment services across 15 states. It boasts a network of around 1,000 branches and 1,200 ATMs. Additionally, KeyCorp provides corporate and investment banking products through KeyBanc Capital Markets. The bank maintains a strong dividend profile, offering a 4.72% yield and having raised its dividend for 13 consecutive years, according to InvestingPro data.
Scotiabank, with assets of about $1.4 trillion as of October 31, 2024, is one of North America's leading banks by assets. The bank offers a comprehensive range of services, including personal and commercial banking, wealth management, private banking, corporate and investment banking, and capital markets.
The completion of this investment is expected to further the strategic interests of both KeyCorp and Scotiabank, although the specific implications of the minority stake acquisition have not been detailed in the press release statement. InvestingPro analysis suggests KeyCorp is currently trading slightly below its Fair Value, despite showing weak overall financial health scores. The information reported is based on a press release statement from KeyCorp. For deeper insights into KeyCorp's valuation and financial metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, KeyCorp is set to undergo significant developments. The Federal Reserve Board has approved the Bank of Nova Scotia's application to acquire up to 14.99% of KeyCorp's voting shares. This acquisition will increase the Bank of Nova Scotia's current 4.93% ownership in KeyCorp without constituting a controlling interest, thus avoiding regulatory presumptions of control. The acquisition is anticipated to bolster KeyCorp's capital position and enhance its ability to serve customers.
Moreover, KeyCorp's stock has been downgraded from 'Buy' to 'Neutral' by Citi, despite the bank's strong performance. This decision was prompted by the assessment that KeyCorp's current valuation appears relatively full. However, DA Davidson and RBC Capital Markets have both raised their stock price targets for KeyCorp, citing strong growth prospects.
KeyCorp has reported a 7% quarter-over-quarter increase in net interest income during its Third Quarter 2024 Earnings Call. The bank also expects a 20% increase in net interest income for 2025, despite a projected decline of 2% to 5% in 2024. The bank's management remains cautiously optimistic about the future, with the CEO expecting stabilization in nonperforming loans and the CFO indicating that expense growth for the next year could be in the mid-to-single digits. These are the latest developments in KeyCorp's ongoing journey.
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