KeyCorp (KEY +0.86%), a regional bank offering a broad array of consumer and commercial financial services, released its earnings for the second quarter of fiscal 2025 on July 22, 2025. GAAP earnings per share were $0.35 for Q2 2025, precisely matching analyst forecasts. GAAP revenue for Q2 2025 was $1.80 billion, slightly below consensus expectations. Year-over-year profit and revenue growth were strong, highlighted by improved net interest income and solid fee-based results. However, the bank saw higher credit loss provisions and continued cost growth. On balance, the quarter reflected steady performance and resilience, though signs of rising risk and macroeconomic caution remain.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.35 (GAAP) | $0.35 (GAAP) for Q2 2025 | $0.25 per diluted common share (GAAP) | |
| Revenue (Non-GAAP) | $1.84 billion (GAAP) revenue | $1.80 billion (GAAP) revenue | $1.80 billion (GAAP) | |
| Net Interest Income (Non-GAAP) | $1.15 billion (taxable-equivalent net interest income) | n/a | $899 million | |
| Net Loan Charge-Offs | $102 million | n/a | $91 million | |
| Total Noninterest Expense | $1.15 billion (taxable-equivalent net interest income, Q2 2025) | n/a | 7.0% increase in noninterest expense (Q2 2025 vs. Q2 2024) |
Source: Analyst estimates for the quarter provided by FactSet.
Understanding KeyCorp's Business and Recent Priorities
KeyCorp operates as a regional bank, serving retail, small business, and commercial clients across the United States. Its business splits into two main parts: Consumer Bank, which delivers everyday banking, loans, and wealth management for individuals, and Commercial Bank, targeting businesses with lending, payments, treasury, and advisory services.
Recently, its major focus areas have included managing regulatory responsibilities, strengthening its competitive edge, investing in digital banking, and attracting top staff. It aims to grow by improving technology offerings, keeping a tight grip on its risk profile, and building stronger ties with both consumer and business clients. Success hinges on staying compliant, vigilant risk controls, and offering innovative products that resonate with changing customer preferences.
Quarter Highlights: Financial and Operating Performance
In the period, KeyCorp posted meaningful improvements across several key measures. Net income attributable to shareholders rose 63% year-over-year in Q2 2025. Return on average tangible common equity from continuing operations (non-GAAP) -- a measure of profitability relative to shareholder capital -- was 11.09% for Q2 2025, up from 10.39% in Q2 2024. Net interest income, which reflects the difference between what the bank earns on loans and what it pays on deposits and borrowings, climbed 27.9% in Q2 2025.
This performance came despite only modest growth in average loans, which totaled $105.7 billion for Q2 2025, a decline of 3.0% from the prior year. Commercial and industrial loans increased 5.5% year-over-year, while consumer loans decreased 7.1%. The bank intentionally reduced low-yielding consumer loans and focused more on higher-yielding business lending.
Noninterest income -- such as fees from investment banking, commercial mortgage servicing, and deposit account service charges -- increased 10.0% for Q2 2025. In particular, investment banking and debt placement fees grew by 41.3%, while commercial mortgage servicing fees increased 14.8% in Q2 2025 compared to Q2 2024. This fee growth was driven by higher investment banking and debt placement fees, as well as increased commercial mortgage servicing fees.
On the cost side, total noninterest expense (GAAP) increased 7.0% year-over-year in Q2 2025 to $1.15 billion, mainly due to higher personnel and technology investments. Notably, personnel expense rose 10.8% in Q2 2025, reflecting additional staff to support growth in fee-based business lines and higher incentive compensation for improved results. The bank also increased spending on computer processing and professional fees, primarily for technology-related investments.
Credit quality remains in focus. Net loan charge-offs -- a measure of loans unlikely to be collected -- rose to $102 million in Q2 2025, up 12.1% year-over-year, yet improved from the prior quarter. The provision for credit losses increased in Q2 2025 to cover loan growth, changes in loan types, and early signs of a softer economic outlook. Management noted it added $36 million to reserves in Q2 2025 as a prudent step. Nonperforming loans, which are past due or in default, stood at $696 million, slightly lower than the year before and representing 0.65% of total loans for Q2 2025.
Within its Consumer Bank segment, revenue increased 20.3% from the prior year in Q2 2025, while net income more than doubled over the same period. Loan volumes declined, assets under management reached a record, and money market deposits increased. The Commercial Bank segment saw a 26.8% increase in revenue and a 69.4% rise in net income for Q2 2025, driven by strong fee income, especially from investment banking and payments products.
On the balance sheet, KeyCorp ended Q2 2025 with $146.9 billion in deposits -- up less than 1% from Q2 2024 -- and a total deposit cost that fell to 1.99%. Assets under management reached a record $64 billion as of Q2 2025, an 11.5% increase from last year. Both commercial and consumer businesses contributed, and the company gained more relationship households.
From a regulatory standpoint, capital ratios remained solid. The Common Equity Tier 1 ratio was 11.7% as of Q2 2025, well above required minimums. Tangible common equity as a share of total assets was 7.8% (non-GAAP) for Q2 2025, up from 5.2% in Q2 2024, giving the bank flexibility to pursue further investment or share buybacks. Book value per share rose 17.0% year-over-year for Q2 2025. Management highlighted ongoing investments in technology and personnel for growth and compliance.
Personnel investment was a central theme, with average full-time employees increasing by nearly 3% year-over-year for Q2 2025. The bank reiterated its goal to increase front-line bankers by 10% in 2025 to deepen client relationships and drive business growth. "We continue to make investments in people and technology that will drive future growth for our company. We remain on target to increase our front line bankers," the CEO stated.
Outlook: Guidance and What to Watch Next
Net interest income is expected to increase by around 20% for 2025, supported by balance sheet changes and continued improvement in loan and deposit mix. Management expects adjusted fee income to grow 5% or more in 2025, assuming no substantial decline in economic conditions. No formal quarterly outlook was issued beyond the ongoing year.
Looking ahead, investors should keep an eye on credit costs, deposit growth, and expense trends. Management signaled readiness to adapt cost controls and capital spending if conditions change. Share repurchases totaling up to $1 billion are authorized and expected to begin in the second half of 2025, depending on economic growth and evolving capital rules. The board declared a dividend of $0.205 per share for the quarter.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
