KeyCorp (KEY) Stock Forecast & Price Target

KeyCorp demonstrated robust financial performance with a notable 3.7% quarter-over-quarter increase in net interest income, reaching $1.193 billion, largely driven by a 9 basis point rise in net interest margin to 2.75%. The bank's investment banking revenues surged approximately 19% year-over-year, totaling $353 million, benefiting from enhanced debt and equity capital markets activity. Additionally, the tangible common equity (TCE) ratio rose to 8.06%, reflecting improved balance sheet strength, while period-end loans are expected to increase by 2% amidst a positive outlook for margin expansion.

KeyCorp's financial challenges are highlighted by significant declines in key loan categories, including Consumer, Commercial Real Estate (CRE), and lease financing, resulting in reduced overall loan growth expectations, which have been revised down from 4.9% to 4.2% for 2026. Despite maintaining strong capital levels with a common equity tier 1 (CET1) ratio of 11.7%, the anticipated recession in 2026 poses threats to earnings, profitability, and potential credit losses, further exacerbating negative financial projections. Additionally, a notable decline in line utilization to 31% raises concerns about the bank's ability to efficiently utilize its capital and meet growth objectives in a challenging economic environment.