Keycorp (KEY)

KeyCorp: The Cleveland Regional Bank in the Middle of a Comeback

KeyCorp (NYSE: KEY) is the holding company for KeyBank National Association, a regional bank headquartered in Cleveland, Ohio with roughly $190 billion in total assets. It operates across the United States with a focus on commercial banking, commercial payments, investment banking through KeyBanc Capital Markets, and wealth management.

The Turnaround Story: From Underwater Bond Book to NII Inflection

Back in 2023-2024, KEY was one of the regional banks hit hardest by a low-yield securities (bond) book purchased during the 2020-2021 low-rate era. When the Federal Reserve hiked rates aggressively, the value of those bonds cratered, squeezing both Net Interest Income (NII) and Tangible Book Value (TBV).

In the second half of 2024, management took a bold step: it sold roughly $7 billion of low-yield available-for-sale securities at a loss, funded by fresh capital, and redeployed the proceeds into higher-yielding assets. That 'securities repositioning' is now complete and clearly paying off - NIM climbed from 2.66% to 2.89% over the year, while NII grew 9.4% YoY in Q2 2026.

Scotiabank's Strategic Investment

In August 2024, Bank of Nova Scotia (Scotiabank) agreed to invest roughly $2.8 billion for a 14.9% common equity stake in KeyCorp - a deal completed in December 2024 with Fed approval. That capital infusion is what largely funded the securities repositioning described above.

The latest twist: in March 2026, Scotiabank filed for approval to raise its stake to as much as 19.99% - a move that has fueled takeover speculation among analysts, though part of the increase is mechanical (KEY's own buybacks automatically push BNS's ownership percentage higher without BNS buying a single extra share).

Franchise Focus

KeyCorp positions itself as a targeted commercial bank - emphasizing commercial payments, investment banking / debt placement (via Laurel Road and KeyBanc Capital Markets), and wealth management. Management has flagged record investment banking pipelines heading into the second half of 2026.

Leadership & Recognition

Chris Gorman remains Chairman & CEO, targeting ROTCE above 15% by the end of 2027. In 2026, Moody's upgraded KeyCorp's issuer rating - external validation that the balance-sheet repair has worked.

Shariah Status

NON-SHARIAH-COMPLIANT. KeyCorp is a conventional bank that generates core revenue from interest (riba) - including commercial lending, credit cards, and other interest-based banking products. This stock is not suitable for investors prioritizing a Shariah-compliant portfolio.

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