KeyCorp: Now Is A Great Time To Start Looking At This Regional Bank

Sep. 26, 2018 10:22 AM ETKeyCorp (KEY)15 Comments
WG Investment Research profile picture
WG Investment Research


  • KeyCorp's stock has underperformed the broader market so far in 2018.
  • However, KeyCorp is in a great position to benefit from an improving backdrop (i.e., rising rate environment, less-burdensome regulations, and a stronger economy).
  • I am long KeyCorp and I plan to stay long through at least 2019.
  • Looking for a portfolio of ideas like this one? Members of Going Long With W.G. get exclusive access to our model portfolio. Start your free trial today »

KeyCorp (NYSE:KEY) is a regional bank that has been lost in the shuffle so far in 2018, as KEY shares are up only 2% compared to the impressive 9% increase for the S&P 500 (SPY) over the same period of time.

ChartKEY data by YCharts

While I have stayed long KeyCorp over the last few years, I believe that now is a great time for prospective investors to start looking at this underperforming regional bank. Why? It's simple, KeyCorp is a well-run bank that is in a position to benefit from an improving backdrop.

A Promising Backdrop

In my last article on KeyCorp, I described to the Seeking Alpha community why I believed that this regional bank was in a great position to benefit from an improving backdrop. I highlighted the fact that KeyCorp was well-positioned to benefit from (1) a rising rate environment, (2) a rollback of burdensome regulations and (3) an improving economy.

These same benefits hold true even today but it now actually appears more likely that interest rates will be higher sooner rather than later. According to a recent FactSet article, all signs are now pointing toward the Federal Reserve raising rates in its September 2018 meeting (odds of a rate hike at the September 26, 2018 meeting are currently 93.8%, according to FactSet).

Source: FactSet

And, more importantly, the Fed appears to be on a path to continue to raise rates over the next few years.

Source: FactSet

It goes without saying that higher rates bode well for regional banks, which includes KeyCorp. For example, each 25bps increase in the Fed Funds rate results in a net interest income benefit of $4M-$8M per quarter for KeyCorp (not material figures but also not meaningless either).

However, it is very important to note that the prospects of a

ChartKEY Price to Tangible Book Value data by YCharts

ChartKEY PE Ratio (Forward) data by YCharts

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long KEY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (15)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.