Last Update 15 Nov 25
Fair value Increased 0.22%KEY: Revenue Momentum Will Likely Carry Forward Amid Strong Capital Levels
KeyCorp's analyst price target saw a modest reduction from $22 to $21. Analysts cite strong revenue guidance, robust capital levels, and continued credit quality as key supporting factors for the updated outlook, reflecting cautious optimism.
Analyst Commentary
Recent Street research reveals a mix of optimism and caution regarding KeyCorp's near-term prospects. Analysts are broadly constructive on the company's capital strength and revenue outlook, though some maintain a measured stance due to valuation and industry dynamics.
Bullish Takeaways
- Bullish analysts continue to raise KeyCorp's price targets, citing strong capital ratios that compare favorably to peer institutions.
- Management guidance suggests robust revenue growth, with expectations that positive momentum could continue into 2026.
- Several researchers have highlighted the company's credit quality, pointing to consistent asset quality performance as a support for valuation.
- Revisions to earnings and net interest income estimates reflect improving net interest margins and ongoing success in investment banking.
Bearish Takeaways
- Some analysts emphasize that recent positive guidance was largely anticipated by the market, which limits the upside surprise and moderates target price adjustments.
- There is a consensus that recent bank-sector rallies have outpaced estimate revisions. This prompts caution around expectations for further rapid share appreciation.
- While revenue and fee growth remain on track, expectations for expense increases have slightly ticked up. This leads to conservative outlooks for margin expansion.
What's in the News
- From July 1, 2025 to September 30, 2025, KeyCorp completed a buyback tranche with no shares repurchased. This reflects 0% of the announced program for $0 million. (Buyback Tranche Update)
- For the third quarter ended September 30, 2025, KeyCorp reported net loan charge-offs totaling $114 million, or 0.42% of average total loans. This is down from $154 million, or 0.58%, in the same quarter of 2024. (Impairments/Write Offs)
Valuation Changes
- Fair Value: increased slightly from $21.46 to $21.51, marking a modest rise.
- Discount Rate: increased from 7.14% to 7.26%, reflecting updated risk assessments.
- Revenue Growth: remained essentially unchanged at 16.76%, indicating continued steady growth expectations.
- Net Profit Margin: declined marginally from 29.09% to 28.90%, indicating a slight compression in projected profitability.
- Future P/E: decreased marginally from 13.10x to 13.01x, indicating a slightly reduced valuation multiple based on earnings.
Key Takeaways
- Shift from net interest income headwinds to tailwinds and strategic deposit cost management expected to enhance revenue growth and profitability.
- Expansion in wealth management and commercial payments, alongside strong growth in commercial loan servicing, poised to drive noninterest income and earnings stability.
- Deteriorating asset quality, regulatory pressures, and challenges in loan demand and investment banking sectors indicate potential profitability and growth issues for KeyCorp.
Catalysts
About KeyCorp- Operates as the holding company for KeyBank National Association that provides various retail and commercial banking products and services in the United States.
- The anticipated shift from net interest income (NII) headwinds to tailwinds due to a pivot in fixed asset repricing and the structure of swap and treasury maturities, expected to significantly enhance NII in the forthcoming quarters, impacting revenue growth positively.
- Improved deposit costs dynamics, with a more stable increase in deposit costs and a strategic focus on high-value consumer and commercial deposits, aiming to fortify net interest margins and overall profitability.
- Expansion in the wealth management and commercial payments sectors, marked by record production volumes and significant client growth, poised to drive noninterest income upwards, influencing both revenue and net margins positively.
- Strong growth in the national third-party commercial loan servicing business, providing a counter-cyclical revenue stream and insights into the commercial real estate market, which could bolster diversified revenue streams and enhance earnings stability.
- Persistent discipline in pricing and cost control amidst the evolving economic and interest rate landscape to maintain and potentially improve net margins, thereby supporting earnings growth even in a tepid loan demand environment.
Assumptions
How have these above catalysts been quantified?- Analysts are assuming KeyCorp's revenue will grow by 10.5% annually over the next 3 years.
- Analysts assume that profit margins will increase from 12.5% today to 31.0% in 3 years time.
- Analysts expect earnings to reach $2.4 billion (and earnings per share of $1.74) by about October 2027, up from $716.0 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.0x on those 2027 earnings, down from 22.7x today. This future PE is greater than the current PE for the US Banks industry at 11.9x.
- Analysts expect the number of shares outstanding to grow by 14.11% per year for the next 3 years.
- To value all of this in today's dollars, we will use a discount rate of 6.99%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?- The decline in earnings per share from the previous year and an increase in nonperforming loans could indicate potential issues with asset quality and profitability.
- Lower than expected loan demand and competitive pricing environment could lead to lower interest income and pressure on net interest margins.
- The preliminary stress capital buffer increase suggested by the Fed's stress test results could imply higher capital requirements, potentially impacting the company's ability to distribute capital to shareholders or invest in growth opportunities.
- Tepid loan demand and the impact of higher funding costs could pressure net interest income, despite growth in deposits and controlled expenses.
- Risks associated with investment banking and commercial real estate markets could affect noninterest income and loan quality, impacting earnings and capital ratios.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $19.86 for KeyCorp based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $43.0, and the most bearish reporting a price target of just $16.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $7.7 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 14.0x, assuming you use a discount rate of 7.0%.
- Given the current share price of $17.49, the analyst's price target of $19.86 is 12.0% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.