<PAGE> 1
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): April 16, 1998
[KEYCORP LOGO]
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Ohio 0-850 34-6542451
- ------------------------------- ------------------------------------ -------------------------------------
(State or other jurisdiction Commission File Number (I.R.S. Employer Identification No.)
of incorporation or
organization)
127 Public Square, Cleveland, Ohio 44114-1306
- --------------------------------------- -----------------------------------
(Address of principal executive (Zip Code)
offices)
</TABLE>
Registrant's telephone number, including area code: (216) 689-6300
<PAGE> 2
ITEM 5. OTHER EVENTS
On April 16, 1998, the Registrant issued a press release announcing its earnings
results for the three-month period ended March 31, 1998. This press release,
dated April 16, 1998, is attached as Exhibit 99 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
--------
99 The Registrant's April 16, 1998, press release announcing its
earnings results for the three-month period ended March 31,
1998.
<PAGE> 3
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
------------------------------------
(Registrant)
Date: April 17, 1998 /s/ Lee Irving
------------------------------------
By: Lee Irving
Executive Vice President
and Chief Accounting Officer
<PAGE> 1
EXHIBIT 99
MEDIA CONTACTS: ANALYST CONTACTS:
John Fuller (216) 689-8140 Lee Irving (216) 689-3564
Mary Lou Ringle (216) 689-0456 Vern Patterson (216) 689-0520
WEB SITE: http://www.Key.com
FOR IMMEDIATE RELEASE
KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
-------------------------------------------
- EPS OF $0.53, UP 13 PERCENT FROM THE YEAR-AGO QUARTER
- STRONG PERFORMANCE IN FEE INCOME
- COMMERCIAL LOAN GROWTH CONTINUES, UP AN ANNUALIZED 13 PERCENT FROM THE
FOURTH QUARTER
CLEVELAND, April 16, 1998 -- KeyCorp (NYSE: KEY) today reported net
income of $235 million for the first quarter of 1998, up 11 percent from $212
million in the first quarter of 1997. On a diluted per common share basis,
Key's first quarter 1998 earnings were $0.53, amounting to a 13 percent
increase from $0.47 recorded in the year-ago quarter. The diluted earnings per
common share reflect Key's two-for-one stock dividend paid in the first quarter
of 1998. Return on average equity was 18.3 percent and return on average total
assets was 1.32 percent for the first quarter of 1998, compared with 18.1
percent and 1.30 percent, respectively, for the same period last year. Key's
first quarter 1998 earnings reflect trends evident throughout 1997--strong
commercial loan growth, good performances in both noninterest income generation
and noninterest expense management, stable credit quality, and continued
reduction in the net interest margin.
"Results for the first quarter were consistent with our expectations
and confirm the success of our business strategies," said Robert W. Gillespie,
Key's chairman and chief executive officer. "Our increased focus on
fee-producing businesses and expense management enabled us to grow our earnings
at a double-digit pace. We're achieving revenue growth through diverse fee
income sources, including various investment banking and capital markets
activities which provide a relatively new, yet significant, source of earnings
at Key. At the same time, Key's expense levels reflect the success of our
streamlining efforts, particularly those implemented over the last six quarters.
Key will continue to evolve as a bank-based financial services provider and to
employ its
<PAGE> 2
KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 2
capital in businesses which allow it to become less dependent on
traditional bank activities for growth."
Net interest income totaled $664 million in first quarter 1998, down 4
percent from $689 million in the first quarter of last year. This decrease
reflected a 52 basis point reduction in the net interest margin to 4.23 percent,
which more than offset an 8 percent increase in average earning assets to $63.9
billion. Compared with the fourth quarter of 1997, net interest income declined
by $41 million as the net interest margin fell 27 basis points, while average
earning assets rose by $469 million during the first quarter of 1998. The
decrease in the margin since the year-ago quarter is partially the result of
growth in assets, such as leases, with lower interest rate spreads, but with
higher after-tax returns. The lower margin also reflects the higher cost of
borrowings due largely to the reduction in core deposits resulting from branch
divestitures and continued deposit mix changes as customers seek higher returns.
In addition, the growth in earning assets was moderated by Key's decision to
sell nearly $1 billion of prime credit automobile loans in mid-December. These
were sold consistent with the goal of divesting assets which do not support
Key's return on equity objective.
Noninterest income for the first quarter of 1998 was $356 million,
significantly higher than the $259 million reported for the year-ago quarter and
only $10 million lower than the $366 million recorded in last year's fourth
quarter, normally Key's seasonal peak quarter for noninterest income production.
Excluding certain nonrecurring items, noninterest income was up $10 million from
the fourth quarter of 1997. Key did not undertake any loan securitizations in
the 1998 first quarter. Increased revenues derived from several fee income
sources contributed to the improvement in the year-over-year and
quarter-to-quarter performances. In addition, first quarter 1998 results
benefited from Key's recently announced joint venture with NOVA Information
Services, Inc. in which Key retained a 49 percent interest in a merchant
services subsidiary.
Noninterest expense totaled $600 million for the first quarter of 1998,
up $25 million, or 4 percent, from the year-ago quarter due largely to the
impact of acquisitions completed in the third quarter of 1997. Compared with the
fourth quarter of 1997, which included certain nonrecurring charges of $15
million, noninterest expense declined by $30 million.
The provision for loan losses was $77 million in the first quarter of
1998 and equal to the level of net loan charge-offs. The provision was $10
million higher than that reported in the first quarter of 1997 and relatively
unchanged from that reported in the fourth quarter of last year. Net
<PAGE> 3
KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 3
loan charge-offs were 0.58 percent of average loans outstanding, little changed
from 0.55 percent and 0.57 percent for the first and fourth quarters of 1997,
respectively.
Key's capital ratios continue to exceed all "well-capitalized"
benchmarks. In addition, its tangible equity to tangible assets ratio (including
capital securities receiving Tier 1 treatment) grew to 6.51 percent as of March
31, 1998, compared with 6.32 percent a year earlier and 6.21 percent at December
31, 1997. No shares were acquired under Key's share repurchase authorization
during the first quarter of 1998. As a result of the quarter's two-for-one stock
dividend, diluted common shares averaged 445 million for the first quarter of
1998; of these, 439 million were actually outstanding on average during the
quarter.
- --------------------------------------------------------------------------------
This news release contains forward-looking statements which are subject to
numerous 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: sharp and/or rapid changes in interest
rates; significant changes in the economic scenario from the current anticipated
scenario which could materially change anticipated credit quality trends and the
ability to generate loans; significant delay in or inability to execute
strategic initiatives designed to grow revenues and/or manage expenses;
consummation of significant business combinations or divestitures; and
significant changes in accounting, tax, or regulatory practices or requirements.
- --------------------------------------------------------------------------------
# # #
<PAGE> 4
KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 4
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<CAPTION>
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
Three months ended
-------------------------------------------
03-31-98 12-31-97 03-31-97
----------- ---------- --------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C>
Net interest income (TE) $673 $716 $700
Provision for loan losses 77 76 67
Noninterest income 356 366 259
Noninterest expense 600 630 575
Net income 235 248 212
PER COMMON SHARE
Net income $ .53 $ .56 $ .48
Net income - assuming dilution .53 .56 .47
Cash dividends .235 .21 .21
Book value at period end 12.15 11.83 10.64
Market price at period end 37.81 35.41 24.38
AT PERIOD END
Full-time equivalent employees 24,650 24,595 26,603
Full-service banking offices 1,006 1,015 1,161
PERFORMANCE RATIOS
Return on average total assets 1.32% 1.38% 1.30%
Return on average equity 18.25 19.16 18.07
Efficiency (1) 57.39 56.81 58.92
Overhead (2) 35.36 36.17 43.71
Net interest margin (TE) 4.23 4.50 4.75
CAPITAL RATIOS AT PERIOD END
Equity to assets (3) 7.98% 7.71% 7.62%
Tangible equity to tangible assets (3) 6.51 6.21 6.32
Tier 1 risk-adjusted capital (4) 6.89 6.65 7.47
Total risk-adjusted capital (4) 11.47 10.83 12.31
Leverage (4) 6.61 6.40 6.68
<FN>
(1) Calculated as noninterest expense (excluding certain nonrecurring charges
and distributions on capital securities) divided by taxable-equivalent
net interest income plus noninterest income (excluding net securities
transactions and gains from branch divestitures).
(2) Calculated as noninterest expense (excluding certain nonrecurring charges
and distributions on capital securities) less noninterest income
(excluding net securities transactions and gains from branch
divestitures) divided by taxable-equivalent net interest income.
(3) Excluding capital securities receiving Tier 1 treatment, these ratios at
3-31-98 are 7.29% and 5.81%, respectively; at 12-31-97 are 7.03% and
5.52%, respectively; and at 3-31-97 are 6.88% and 5.58%, respectively.
(4) 3-31-98 ratio is estimated.
TE = Taxable Equivalent
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KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
03-31-98 12-31-97 03-31-97
--------- ---------- ---------
ASSET QUALITY
<S> <C> <C> <C>
Net loan charge-offs $ 77 $ 76 $ 67
Net loan charge-offs to average loans .58% .57% .55%
Allowance for loan losses $900 $900 $870
Allowance for loan losses to
period end loans 1.64% 1.69% 1.75%
Allowance for loan losses to
nonperforming loans 241.29 236.22 234.50
Nonperforming loans at period end $373 $381 $371
Nonperforming assets at period end 421 431 425
Nonperforming loans to period end loans .68% .71% .75%
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .77 .81 .85
</TABLE>
<PAGE> 6
KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 6
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<CAPTION>
ASSETS 03-31-98 12-31-97 03-31-97
---------- ---------- -----------
<S> <C> <C> <C>
Loans $54,900 $53,380 $49,724
Investment securities 1,182 1,230 1,628
Securities available for sale 7,115 7,708 7,971
Short-term investments 1,171 1,928 502
--------- --------- ---------
Total earning assets 64,368 64,246 59,825
Allowance for loan losses (900) (900) (870)
Cash and due from banks 3,287 3,651 3,242
Premises and equipment 924 985 1,057
Goodwill 1,052 1,071 811
Other intangible assets 99 105 130
Corporate owned life insurance 1,921 1,895 1,535
Other assets 2,447 2,646 2,163
--------- --------- ---------
TOTAL ASSETS $73,198 $73,699 $67,893
========= ========= =========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 9,083 $ 9,368 $ 8,986
Interest-bearing 32,253 32,005 34,318
Deposits in foreign offices-interest-bearing 325 3,700 935
--------- --------- ---------
Total deposits 41,661 45,073 44,239
Federal funds purchased and securities
sold under repurchase agreements 6,468 6,979 7,509
Bank notes and other short-term borrowings 7,442 5,967 4,261
Other liabilities 2,498 2,303 1,936
Long-term debt 9,041 7,446 4,774
--------- --------- ---------
TOTAL LIABILITIES 67,110 67,768 62,719
Capital securities of subsidiary trusts 750 750 500
SHAREHOLDERS' EQUITY 5,338 5,181 4,674
TOTAL LIABILITIES, CAPITAL SECURITIES
OF SUBSIDIARY TRUSTS AND
SHAREHOLDERS' EQUITY --------- --------- ---------
$73,198 $73,699 $67,893
========= ========= =========
Common Shares outstanding (000) 439,315 438,064 (1) 219,582
<FN>
(1) Adjusted to reflect the impact of a two-for-one stock split declared
January 15, 1998, effected by means of a 100% stock dividend paid March
6, 1998.
</TABLE>
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KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 7
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
03-31-98 12-31-97 03-31-97
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME $1,327 $1,365 $1,255
INTEREST EXPENSE 663 660 566
--------- --------- ---------
NET INTEREST INCOME 664 705 689
Provision for loan losses 77 76 67
--------- --------- ---------
587 629 622
NONINTEREST INCOME
Service charges on deposit accounts 78 77 71
Trust and asset management income 77 72 64
Investment banking and capital markets income 47 42 18
Credit card fees 15 23 23
Insurance and brokerage income 22 24 21
Corporate owned life insurance income 23 25 19
Loan securitization income (loss) 10 (31) 1
Net securities gains 2 1 --
Gains from sales of branches/subsidiaries 29 62 --
Other income 53 71 42
--------- --------- ---------
Total noninterest income 356 366 259
NONINTEREST EXPENSE
Personnel 294 309 290
Net occupancy 56 58 56
Equipment 43 46 43
Amortization of intangibles 23 22 21
Marketing 28 21 21
Professional fees 17 13 11
Other expense 139 161 133
--------- --------- ---------
Total noninterest expense 600 630 575
--------- --------- ---------
INCOME BEFORE INCOME TAXES 343 365 306
Income taxes 108 117 94
--------- --------- ---------
NET INCOME $235 $248 $212
========= ========= =========
Net income per Common Share $.53 $.56 $.48
Net income per Common Share - assuming dilution .53 .56 .47
Wtd. avg. Common Shares (000) 438,589 438,746 443,340
Wtd. avg. Common Shares and potential
Common Shares (000) 444,836 445,152 448,558
Taxable-equivalent adjustment $9 $11 $11
</TABLE>
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KEYCORP REPORTS FIRST QUARTER 1998 EARNINGS
APRIL 16, 1998
PAGE 8
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------
ASSETS 03-31-98 12-31-97 03-31-97
----------- ---------- ----------
<S> <C> <C> <C>
Loans $53,946 $53,304 $49,215
Investment securities 1,196 1,270 1,617
Securities available for sale 7,457 7,502 7,800
Short-term investments 1,350 1,404 411
-------- -------- --------
Total earning assets 63,949 63,480 59,043
Allowance for loan losses (889) (893) (868)
Cash and due from banks 2,621 2,738 2,562
Other assets 6,441 6,165 5,617
-------- -------- --------
TOTAL ASSETS $72,122 $71,490 $66,354
======== ======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $ 8,409 $ 8,750 $ 8,408
Interest-bearing 31,980 32,433 34,245
Deposits in foreign offices-interest-bearing 1,245 1,663 1,150
-------- -------- --------
Total deposits 41,634 42,846 43,803
Federal funds purchased and securities
sold under repurchase agreements 7,117 7,335 7,028
Bank notes and other short-term borrowings 6,683 5,678 3,912
Other liabilities 2,390 2,304 1,867
Long-term debt 8,326 7,443 4,486
-------- -------- --------
TOTAL LIABILITIES 66,150 65,606 61,096
Capital securities of subsidiary trusts 750 750 500
SHAREHOLDERS' EQUITY 5,222 5,134 4,758
-------- -------- --------
TOTAL LIABILITIES, CAPITAL SECURITIES
OF SUBSIDIARY TRUSTS AND
SHAREHOLDERS' EQUITY $72,122 $71,490 $66,354
======== ======== ========
</TABLE>
