UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15d of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 16, 2002
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KEYCORP
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(Exact name of registrant as specified in its
charter)
Ohio 0-850 34-6542451
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(State or other jurisdiction Commission File Number (I.R.S. Employer
of incorporation or Identification No.)
organization)
127 Public Square, Cleveland, Ohio 44114-1306
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (216) 689-6300
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
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On July 16, 2002, the Registrant issued a press release announcing its earnings
results for the three- and six-month period ended June 30, 2002. This press
release, dated July 16, 2002, is attached as Exhibit 99.1 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits
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99.1 The Registrant's July 16, 2002, press release announcing its
earnings results for the three- and six-month period ended June
30, 2002.
ITEM 9. REGULATION FD DISCLOSURE
------------------------
On July 16, 2002, the Registrant conducted a conference call/webcast to discuss
its quarterly earnings and currently anticipated earnings trends. The slide
presentation reviewed by the Registrant in the conference call/webcast follows
as Annex A to this Item 9.
1
ANNEX A
SECOND QUARTER 2002 REVIEW
JULY 16, 2002
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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
FORWARD-LOOKING STATEMENT DISCLOSURE
The conference call and discussion, including related questions and answers, and
presentation materials, contain forward-looking statements about issues like
anticipated third quarter and full-year 2002 earnings, anticipated level of net
loan charge-offs and nonperforming assets and anticipated improvement in
profitability and competitiveness. Forward-looking statements by their nature
are subject to assumptions, risks and uncertainties. Actual results could differ
materially from those contained in or implied by such forward-looking statements
for a variety of factors including: changes in interest rates; continued
weakness in the economy, which could materially impact credit quality trends and
the ability to generate loans; failure of the capital markets to function
consistent with customary levels; delay in or inability to execute strategic
initiatives designed to grow revenues and/or manage expenses; consummation of
significant business combinations or divestitures; new legal obligations or
restrictions or unfavorable resolution of litigation; further disruption in the
economy or the general business climate as a result of terrorist activities or
military actions; and changes in accounting, tax or regulatory practices or
requirements.
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SECOND QUARTER REVIEW
- INTRODUCTION B. SOMERS
- OVERVIEW H. MEYER
- FINANCIAL REVIEW L. IRVING
- ASSET QUALITY K. BLAKELY
- OUTLOOK / Q&A B. SOMERS
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OVERVIEW
- CONTINUED PROGRESS ON STRATEGIC INITIATIVES
- REDUCED AUTO LOAN/ LEASES BY $1.8 BILLION
- RUN-OFF PORTFOLIO REDUCED BY $887 MILLION
- REFOCUSED ON CORE RELATIONSHIP BUSINESSES
- STRONG EXPENSE CULTURE
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FINANCIAL HIGHLIGHTS - 2Q02
- EPS OF $0.57 MEETS CONSENSUS ESTIMATE
- SOLID, CLEAN QUARTER
- REVENUE UP 3% FROM 1Q02
- STRONG EXPENSE MANAGEMENT
- NONPERFORMING LOANS DOWN
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NET INTEREST INCOME & MARGIN (TE)
$ in millions
[GRAPH]
2Q01 3Q01 4Q01 1Q02 2Q02
NET INTEREST $719 $730 $726 $702 $721
INCOME
NET INTEREST 3.77% 3.85% 3.98% 3.93% 3.98%
MARGIN
AVG. EARNING $76,546 $75,687 $72,706 $71,981 $72,579
ASSETS
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NET INTEREST MARGIN (TE)
2Q02 VS. 1Q02
NET INTEREST MARGIN 1Q02 3.93%
Deposit Related 5
Loan Fees (2)
Other 2
---
Total 5 b.p.
NET INTEREST MARGIN 2Q02 3.98%
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NONINTEREST INCOME 2Q02 VS. 1Q02
IN MILLIONS
NONINTEREST INCOME 1Q02 $ 443
Investment Banking Fees 13
Service Charges 4
Trust & Investment Services 2
Trading/Derivative Income (11)
All other-net (3)
----
Total 5
NONINTEREST INCOME 2Q02 $ 448
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NONINTEREST EXPENSE 2Q02 VS. 1Q02
IN MILLIONS
NONINTEREST EXPENSE 1Q02 $ 661
Salaries & Incentives 6
Marketing 4
Computer Processing (6)
---
Total 4
NONINTEREST EXPENSE 2Q02 $ 665
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KEY CONSUMER BANKING
in millions
[BAR GRAPH]
Revenue (TE) Net Income
2Q01 2Q02 2Q01 2Q02
Retail Banking $327 $327 $ 62 $ 68
Small Business 98 98 29 30
Indirect Lending 99 94 16 13
National Home Equity 45 60 -- 4
---- ---- ---- ----
TOTAL KEY CONSUMER
BANKING $569 $579 $107* $115
==== ==== ==== ====
*Excludes one-time charge for retained interests in securitized assets
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KEY CORPORATE FINANCE
in millions
[BAR GRAPH]
Revenue (TE) Net Income
2Q01 2Q02 2Q01 2Q02
Corporate Banking $201 $177 $ 62 $ 50
National Commercial R/E 95 86 36 29
National Equipment Finance 44 62 7 21
---- ---- ---- ----
TOTAL KEY CORPORATE
FINANCE $340 $325 $105 $100
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KEY CAPITAL PARTNERS
in millions
[BAR GRAPH]
Revenue (TE) Net Income
2Q01 2Q02 2Q01 2Q02
Victory Capital Management $ 60 $ 57 $ 12 $ 12
High Net Worth 149 148 9 17
Capital Markets 83 83 11 13
---- ---- ---- ----
TOTAL KEY CAPITAL
PARTNERS $292 $288 $ 32 $ 42
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NET CHARGE-OFFS BY LOAN TYPE
in millions
2Q01 3Q01 4Q01 1Q02 2Q02
---- ---- ---- ---- ----
CONTINUING PORTFOLIO
Commercial $39.9 $47.8 $62.3 $69.2 $75.8
Consumer 59.6 68.1 70.4 66.9 58.9
------ ----- ----- ----- -----
99.5 115.9 132.7 136.1 134.7
RUN-OFF PORTFOLIO &
LOAN SALES 71.3 57.0 87.2 70.2 67.8
------ ----- ----- ----- -----
TOTAL NET C/O $170.8 $172.9 $219.9 $206.3 $202.5
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ASSET QUALITY INDICATORS
TOTAL TOTAL CONTINUING CONTINUING
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
$ IN MILLIONS 1Q02 2Q02 1Q02 2Q02
--------- --------- ---------- ----------
Nonperforming Loans $973 $957 $765 $825
to EOP Loans 1.52% 1.50% 1.21% 1.31%
Nonperforming Assets $1,012 $995 $804 $863
to EOP Loans + OREO 1.58% 1.56% 1.28% 1.37%
Net C/O $206 $203 $136 $135
to Average Loans 1.32% 1.27% 0.88% 0.86%
Allowance $1,607 $1,539 $1,402 $1,402
to Total Loans 2.51% 2.41% 2.22% 2.22%
to Nonperforming Loans 165% 161% 183% 170%
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RUN-OFF PORTFOLIO &
NONREPLENISHING RESERVES
IN MILLIONS
6/30/01 9/30/01 12/31/01 3/31/02 6/30/02
------- ------- -------- ------- -------
COMMITMENTS $2,393 $2,019 $1,694 $1,532 $1,143
OUTSTANDINGS 1,423 1,176 1,023 941 724
ALLOWANCE FOR
LOAN LOSSES 229 172 275 205 137
NPLs 242 233 231 208 132
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ASSET QUALITY OUTLOOK
2002 SECOND HALF
NPL FLAT TO DOWN MODESTLY
NET C/O DOWN MODESTLY
WATCH LIST MODEST FLUCTUATIONS
CONSUMER TRENDS STABLE
RESERVE LEVEL ADEQUATE
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THIRD QUARTER 2002 OUTLOOK
(COMPARED WITH 2Q02)
REVENUE SLIGHT INCREASE
- SLIGHTLY HIGHER LOANS
- RELATIVELY STABLE NIM (mid 3.90% range)
- MODEST FEE GROWTH
EXPENSE SLIGHT INCREASE
TE TAX RATE APPROXIMATELY 33%
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APPENDIX
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NONINTEREST INCOME
IN MILLIONS 2Q01 3Q01 4Q01 1Q02 2Q02
---- ---- ---- ---- ----
RECURRING ITEMS
1. Trust & Invest Services Inc. $132 $140 $137 $135 $137
2. Inv. Banking & Cap. Mkts. Inc. 72 46 6 72 68
3. Service Charges on Deposits 90 107 106 100 104
4. COLI Income 27 28 32 26 26
5. L/C & Loan Fees 30 27 38 28 29
6. Electronic Banking Fees 18 20 19 18 20
7. Other Income 29 86 80 64 64
---- ---- ---- ---- ----
CORE NONINTEREST INCOME 398 454 418 443 448
NON-CORE ITEMS - - - - -
---- ---- ---- ---- ----
TOTAL NONINTEREST INCOME $398 $454 $418 $443 $448
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NONINTEREST EXPENSE
IN MILLIONS 2Q01 3Q01 4Q01 1Q02 2Q02
---- ---- ---- ---- ----
RECURRING ITEMS
1. Personnel $345 $334 $335 $363 $361
2. Net Occupancy & Equipment 96 97 96 91 92
3. Computer Processing 63 62 65 54 48
4. Marketing 29 31 25 26 30
5. Amortization of Intangibles 24 22 23 3 2
6. Professional Fees 19 26 25 21 21
7 Postage & Delivery 16 16 14 15 14
8. Telecommunications 12 10 11 8 9
9. Other Expense 82 85 108 80 88
---- ---- ---- ---- ----
CORE NONINTEREST EXPENSE 686 683 702 661 665
NON-CORE ITEMS 172 - - - -
---- ---- ---- ---- ----
TOTAL NONINTEREST EXPENSE $858 $683 $702 $661 $665
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STATEMENT OF INCOME-REPORTED
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$ IN MILLIONS, EXCEPT PER SHARE DATA 2Q01 3Q01 4Q01 1Q02 2Q02
---- ---- ---- ---- ----
Net Interest Income (TE) $719 $730 $726 $702 $721
Loan Loss Provision 401 116 723 136 135
Noninterest Income 398 454 418 443 448
Noninterest Expense 858 683 702 661 665
------ ----- ------ ----- -----
(142) 385 (281) 348 369
Income Taxes & TE adj (6) 136 (107) 108 123
Accounting Change, Net of Tax (24) - - - -
------ ----- ------ ----- -----
Net Income (Loss) $(160) $249 $(174) $240 $246
Avg. Common Shares O/S
Assuming Dilution 429.8 430.3 428.3 430.0 431.9
EPS - Assuming Dilution $(0.38) $0.58 $(0.41) $0.56 $0.57
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SIGNIFICANT NON-CORE ITEMS
IN MILLIONS 2Q01 3Q01 4Q01 1Q02 2Q02
---- ---- ---- ---- ----
Net Interest Income (TE) - - - - -
Loan Loss Provision - - - - -
Noninterest Income - - - - -
Noninterest Expense $172 - - - -
-----
(172) - - - -
Income Taxes and TE adj (8) - - - -
Acct. Change, Net of Tax (24) - - - -
-----
Net Loss $(188) - - - -
2Q01 Goodwill write-down, additional litigation reserves, restructuring and
other one-time net charges, accounting change for retained interests
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STATEMENT OF INCOME-CORE
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$ IN MILLIONS, EXCEPT PER SHARE DATA 2Q01 3Q01 4Q01 1Q02 2Q02
---- ---- ---- ---- ----
Net Interest Income (TE) $719 $730 $726 $702 $721
Loan Loss Provision 401 116 723 136 135
Noninterest Income 398 454 418 443 448
Noninterest Expense 686 683 702 661 665
----- ----- ----- ----- -----
30 385 (281) 348 369
Income Taxes & TE adj 2 136 (107) 108 123
Accounting Change, Net of Tax - - - - -
----- ----- ----- ----- -----
Net Income $28 $249 $(174) $240 $246
Avg. Common Shares O/S
Assuming Dilution 429.8 430.3 428.3 430.0 431.9
EPS - Core $0.07 $0.58 $(0.41) $0.56 $0.57
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ASSET QUALITY INDICATORS
CP: CONTINUING PORTFOLIO
TP: TOTAL PORTFOLIO
CP TP
$ IN MILLIONS 2Q01 3Q01 4Q01 1Q02 2Q02 2Q02
---- ---- ---- ---- ---- ----
Nonperforming Loans $797 $885 $910 $973 $825 $957
to EOP Loans 1.20% 1.37% 1.44% 1.52% 1.31% 1.50%
Nonperforming Assets $823 $913 $947 $1,012 $863 $995
to EOP Loans + OREO 1.23% 1.41% 1.49% 1.58% 1.37% 1.56%
Net C/O $171 $173 $220 $206 $135 $203
to Average Loans 1.02% 1.04% 1.37% 1.32% 0.86% 1.27%
Allowance $1,231 $1,174 $1,677 $1,607 $1,402 $1,539
to Total Loans 1.85% 1.82% 2.65% 2.51% 2.22% 2.41%
to Nonperforming Loans 154% 133% 184% 165% 170% 161%
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NONPERFORMING LOANS: 2Q02
2Q02 DECREASE IN NPL: ($ 16MM) or (2%)
LARGEST NPL: $ 27MM (STRUCTURED FINANCE-CP)
10TH LARGEST: $ 14MM (MEDIA FINANCE-ROP)
20TH LARGEST: $ 9MM (MIDDLE MARKET-CP)
CP: CONTINUING PORTFOLIO
ROP: RUN-OFF PORTFOLIO
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEYCORP
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(Registrant)
Date: July 16, 2002 /s/ Lee Irving
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By: Lee Irving
Executive Vice President
and Chief Accounting Officer