On Tuesday, Piper Sandler maintained its Overweight rating on KeyCorp (NYSE:KEY) shares with a steady price target of $18.00. The firm highlighted the recent sale of a nearly 15% minority stake in KeyCorp to Scotiabank, noting the transaction's significant impact on KeyCorp's financial outlook. This deal is seen as a resolution to KeyCorp's lingering capital concerns, providing the necessary resources for the bank to restructure its balance sheet.
While the sale to Scotiabank is a pivotal development, Piper Sandler emphasized that KeyCorp's independent story is still unfolding. The analyst pointed out that the relevance of KeyCorp's stand-alone fundamentals might be overshadowed by the deal's proposed share price of $17.17. However, the long-term narrative for KeyCorp remains a point of interest for investors and analysts alike.
Investor focus has turned to KeyCorp's net interest income (NII) trajectory, especially as the current yield curve movements could potentially lower reinvestment rates, affecting the anticipated NII benefits from Treasury roll-off. With this in mind, whether KeyCorp will confirm its financial year 2024 net interest income guidance is a primary concern for stakeholders during this mid-quarter update.
The transaction with Scotiabank is a strategic move for KeyCorp, providing it with a stronger capital position. It also raises questions about the future performance of KeyCorp's shares and the influence of the standalone fundamentals in the face of the new partnership.
Piper Sandler's reiteration of the Overweight rating and price target suggests confidence in KeyCorp's value proposition and its ability to navigate the changing financial landscape. The firm's commentary serves as a key indicator of KeyCorp's current financial health and its prospects amidst strategic corporate developments.
In other recent news, KeyCorp has seen several favorable adjustments from financial firms. Jefferies increased its price target for KeyCorp shares to $19.00, maintaining a Buy rating, based on the impact of KeyCorp's recent Scotia deal and anticipated net interest income (NII) contributions of approximately $400 million through 2025. The firm also predicts potential growth in KeyCorp's earnings per share (EPS), setting estimates at $1.08 for 2024 and $1.65 for 2025.
Simultaneously, Piper Sandler reaffirmed its Overweight rating on KeyCorp, emphasizing the bank's strategic 14.9% minority investment from Scotiabank, which is expected to boost NII by $400 million. The firm also expects KeyCorp's EPS to see a low single-digit accretion for the year 2025 and a slight increase for 2026.
Moreover, Morgan Stanley (NYSE:MS) increased KeyCorp's price target from $18.00 to $20.00, reflecting confidence in the bank's capital raise and anticipated growth opportunities by 2025. Despite potential share dilution, the firm expects KeyCorp's EPS for 2025 to increase modestly.
In addition, Scotiabank made a strategic move into the U.S. banking sector with a $2.8 billion acquisition of a 14.9% stake in KeyCorp. This acquisition, set to complete in fiscal 2025, will make Scotiabank KeyCorp's largest investor and allow the appointment of two directors to KeyCorp's board.
Lastly, Stephens raised the price target for KeyCorp shares to $18.00 following the company's second quarter earnings report. The report showed earnings per share of $0.25 and pre-tax, pre-provision net revenue of $452 million, approximately 3% above consensus estimates. These are recent developments that investors should monitor closely.
InvestingPro Insights
In light of Piper Sandler's recent Overweight rating for KeyCorp, it's worth noting that KeyCorp has demonstrated a strong track record with its dividend, having raised it for 13 consecutive years, according to InvestingPro Tips. This consistent increase in dividends may be appealing to income-focused investors and could be indicative of the company's financial stability and commitment to returning value to shareholders. Additionally, KeyCorp's performance metrics from InvestingPro Data reveal a robust 1 Year Price Total Return of 56.41%, signaling significant investor confidence over the past year.
The company's market capitalization stands at $15.7 billion, and despite a slight decline in revenue over the last twelve months, as of Q2 2024, KeyCorp has maintained a notable operating income margin of 19.47%. Moreover, the stock is trading near its 52-week high, at 99.19% of this peak, which could suggest that it is currently valued highly by the market. For investors considering a deeper dive into KeyCorp's financials, the InvestingPro platform lists several additional tips that could provide further insights into the company's performance and outlook.
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