Key Corp (NYSE:KEY) reported a lousy quarter but one that was not the worst case scenario. Sure, NPLs and loan loss reserves rose. However, KEY is cleaning itself up for sale. On the conference call management stated that it would apply for $1.1 billion to $3.3 billion in TARP financing. The company also cut costs aggressively.
The feeling I get is that KEY is putting itself up for sale with the assistance of the TARP despite its assertion that there is no regulatory or government pressure to consolidate. KEY is trading significantly higher despite reporting a loss yesterday.
I do not believe that KEY will merge with National City (NCC) as was speculated in the cable media yesterday morning. It is more likely that KEY would be bought out by a foreign bank. I am thinking a neighbor to the north like Toronto Dominion (NYSE:TD) could take on KEY. TD has a penchant for buying regional banks as it did with Commerce Bank.
Disclosure: At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC was long shares of KEY --- although positions can change at any time.