Key Bank and Leasing Appear Timid

Oct.25.10 | About: KeyCorp (KEY)

KeyCorp (NYSE:KEY) third quarter net income was $163 million, compared to a net loss of $422 for the 2009 third quarter. Tier 1 risk-based capital ratio was 14.26% up from 13.62% one quarter ago.

Chief Executive Officer Henry L. Meyer III noted that Key opened 34 new branches during the first nine months of 2010 and expects to open an additional five new branches during the fourth quarter of 2010, increasing its market presence in selected markets of its 14-state branch network.

While the move appears to be more consumer oriented, the loan composition from the third quarter *-K indicates otherwise, except for a rise in real estate residential loans. All the commercial loan compositions and community equity loans are down (in millions):

3Q10
2Q10
3Q09
6,587
6,759
8,073
Loan Composition:
Commercial, Fin. & Ag.
16,541
17,113
20,600
Comm. mortgage
9,673
9,971
11,169
Construction
2,731
3,430
5,473
Commercial Leasing
6,538
6,620
7,787
R.E.-Residential
1,853
1,846
1,787
Home Equity-Community
9,655
9,775
10,154
other
707
753
884
Consumer Other-Community
15
15
19
Consumer-Marine
25
31
35
Consumer-Other
3
3
5
Click to enlarge

There did not appear to be an indication of the leasing numbers by divisions, but overall the "Nonperforming Assets from Continuing Operations" also show a decline:

dollars in millions 3Q10 2Q10 1Q10 4Q09 3Q09
Commercial lease financing 84 83 99 112 132
Click to enlarge

It appears the bank is more in a strengthening holding position than one of growth. This does not mean that they appear to not to be looking for a profit, but are more interested in improving their assets and decreasing their losses. At the same time, they are continuing to "build" branches rather than delete them.

Disclosure: No position