Higher interest rates along with robust loan and deposit growth aid KeyCorp KEY. Given a solid capital position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.
However, the company’s significant exposure to risky loan portfolios might curb its growth in the near term. Also, elevated expenses are likely to hurt bottom-line growth.
KeyCorp’s Zacks Consensus Estimate for the current-year earnings has remained stable over the last 30 days. The stock currently carries a Zacks Rank #3 (Hold).
Looking at the company’s price performance, its shares have gained 10.5% in the past 12 months, underperforming 11.8% rally of the industry.
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Going by the fundamentals, the company’s revenues have increased at a CAGR of 15.3% over the last four years (2014-2017). Moreover, continued rise in loans and deposits, along with lesser regulations, are expected to continue supporting top-line growth in the quarters ahead.
The company is well poised to benefit from the improvement in the rate scenario. Notably, subsequent to the latest Fed rate hike, the company raised its prime lending rate from 4.75% to 5.00%.
However, the company continues to have significant exposure to home equity and commercial real estate loans. Despite an improvement in the housing sector, it is likely to pose some challenges for the company in the near term.
Further, increasing expenses remain a major concern for the company. Total operating expenses have witnessed a five-year (2013-2017) CAGR of 9.9%, mainly due to rise in personal expenses. Given the company’s investment in its franchise and inorganic growth plans, expenses are likely to remain elevated in the near term.
Some better-ranked stocks in the finance space are Lazard Ltd LAZ, Comerica Incorporated CMA and East West Bancorp, Inc. EWBC. All of these currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the last 60 days, Lazard witnessed an upward earnings estimate revision of 5.2% for the current year. Its share price has increased 8% in the last 12 months.
Comerica’s earnings estimates for the current year have been revised 1.2% upward over the past 60 days. Its shares have gained 30.9% in the last 12 months.
Over the last 60 days, East West Bancorp witnessed an upward earnings estimate revision of 1.3% for the current year. Its share price has increased 18.9% in a year’s time.
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