KeyCorp (KEY) Stock Forecast & Price Target

KeyCorp's financial outlook appears robust, with a projected fee income growth of over 5% year-over-year for 2025, indicating strong demand and stable customer relationships in its core markets. The bank's net interest income surged by 10.4% quarter-over-quarter to $1.061 billion in 4Q24, driven by an increase in net interest margins, which points to improved profitability and effective interest rate management. Additionally, the Common Equity Tier 1 (CET1) ratio rose by 120 basis points to 12%, reflecting a solid capital position supported by a significant $2 billion investment from Scotiabank, which bodes well for future growth potential and financial stability.

KeyCorp faces a negative outlook primarily due to declining loan volumes, evidenced by a sequential drop in average Commercial and Industrial (C&I) loans to $52.9 billion, as well as a 1.0% decrease in period-end loans, indicating ongoing weakness in loan demand. Additionally, the forecast for net interest income growth was lowered to 20.9%, highlighting challenges in maintaining profitability amidst a backdrop of anticipated weaker loan growth of 2-5%. Furthermore, the bank's reliance on capital markets activity, where only 12% of capital originations were placed on the balance sheet, reflects a dependence on external sources rather than a robust lending operation, which raises concerns about the sustainability of its business model.