|
|
|
|
|
|
|
|
|
|
|
|
|
<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): July 16, 1998
[LOGO]
[KEYCORP]
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 0-850 34-6542451
- -------------------------------- ---------------------- -------------------
(State or other jurisdiction Commission File Number (I.R.S. Employer
of incorporation or organization) Identification No.)
127 Public Square, Cleveland, Ohio 44114-1306
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-6300
<PAGE> 2
ITEM 5. OTHER EVENTS
On July 16, 1998, the Registrant issued a press release announcing its earnings
results for the three-month and six-month periods ended June 30, 1998. This
press release, dated July 16, 1998, is attached as Exhibit 99 to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
--------
99 The Registrant's July 16, 1998, press release announcing its
earnings results for the three-month and six-month periods
ended June 30, 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: July 17, 1998 /s/ Lee Irving
---------------------------------------
By: Lee Irving
Executive Vice President
and Chief Accounting Officer
<PAGE> 1
EXHIBIT 99
MEDIA CONTACTS: ANALYST CONTACTS:
Bill Murschel (216) 689-0457 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 SECOND QUARTER 1998 EARNINGS
- - NET INCOME UP 12 PERCENT FROM YEAR-AGO QUARTER
- - FEE INCOME, COMMERCIAL LOAN GROWTH AND ASSET QUALITY CONTINUE TO BE STRONG
CLEVELAND, July 16, 1998 -- KeyCorp (NYSE: KEY) today reported net
income of $249 million for the second quarter of 1998, up 12 percent from $223
million in the second quarter of 1997. On a diluted per common share basis,
Key's second quarter 1998 earnings were $0.56, amounting to a 10 percent
increase from $0.51 recorded in the year-ago quarter. For the first six months
of 1998, earnings were $484 million, or $1.09 per diluted common share, both
amounts up 11 percent from $435 million, or $0.98, for the same period last
year.
Key's return on average equity was 18.5 percent, and return on average
total assets was 1.35 percent for the second quarter of 1998, compared with 18.9
percent and 1.32 percent, respectively, for the second quarter of last year. For
the first half of 1998, Key's returns on average equity and assets were 18.4
percent and 1.34 percent, respectively, compared with 18.5 percent and 1.31
percent for the first six months of 1997.
"Key's second quarter featured strong growth in noninterest income,
continued growth in commercial loans and strong asset quality," said Robert W.
Gillespie, KeyCorp chairman and chief executive officer. "Growth occurred in
nearly all major components of core noninterest income, achieving a 25 percent
improvement over the year-ago second quarter. Commercial loans were up 19
percent from the 1997 second quarter, and lower net loan charge-offs permitted a
reduction in the matching provision for loan losses.
<PAGE> 2
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 2
"From a strategic perspective, we were extremely pleased to announce
the agreement under which Key will acquire McDonald & Company Investments, Inc.,
a full-service investment banking and securities brokerage company. This
acquisition creates a powerful business focused on providing capital markets,
investment banking and asset management expertise to corporate and private
clients. As with Key's earlier acquisitions of leasing and home equity
businesses, the McDonald partnership resulted from our efforts to concentrate
resources on product lines with potential for high returns and strong growth. We
intend to continue our strategic focus on such opportunities, leveraged by Key's
distinctive capabilities in technology, marketing and sales."
Net interest income totaled $680 million in second quarter 1998, a $16
million increase from the prior quarter, although a decrease of 2 percent from
$696 million in the second quarter of last year. Compared with the first quarter
of 1998, net interest income improved by 2 percent, reflecting a $1.8 billion
increase in average earning assets, while the net interest margin experienced a
decline of 4 basis points to 4.19 percent. The 4 basis point decline was the
smallest quarterly change in the net interest margin since the fourth quarter of
1996. The decrease in net interest income from the second quarter of 1997
reflected a 50 basis point reduction in the net interest margin, which more than
offset a 9 percent increase in average earning assets to $65.8 billion.
Noninterest income for the second quarter of 1998 was $380 million, up
substantially from the $288 million reported for the year-ago quarter. Excluding
branch divestiture gains of $33 million and $10 million recorded in the second
quarter of 1998 and 1997, respectively, noninterest income increased by $69
million, or 25 percent, and comprised 34 percent of total revenue for the
quarter, compared with 29 percent in the year-ago quarter. The largest increases
came from various investment banking and capital markets activities and trust
and asset management. Key did not execute a planned securitization of certain
home equity loans during the second quarter of 1998, reflecting a decision to
retain most of these loans due to their attractive yield and risk profile.
Excluding branch sale gains, noninterest income for the first six months of 1998
was up $160 million, or 30 percent, from the same period last year.
Noninterest expense totaled $616 million for the second quarter of
1998, up $34 million, or 6 percent, from the year-ago quarter. Personnel expense
contributed the largest increase due largely to the impact of acquisitions
completed in the third quarter of 1997, merit increases which took effect on
April 1, 1998, and higher costs associated with various incentive programs,
including those related to investment banking and capital markets activities.
Compared with the first quarter of 1998, noninterest expense increased by $16
million. For the first six months of 1998, noninterest
<PAGE> 3
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 3
expense rose $59 million, or 5 percent, from the comparable 1997 period,
including a $7 million increase in costs incurred to be Year 2000 compliant.
The provision for loan losses for the 1998 second quarter was reduced
to $72 million from $77 million in the first quarter in response to a similarly
lower level of net charge-offs. Net loan charge-offs of $72 million, or 0.51
percent of average loans outstanding for the quarter, were down from $77
million, or 0.58 percent, for the prior quarter.
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) continued to improve, reaching
6.91 percent as of June 30, 1998, compared with 6.51 percent last quarter and
6.39 percent a year earlier. This improvement was due in part to the second
quarter 1998 issuance of an additional $247 million of capital securities
receiving Tier 1 treatment. The number of shares acquired during the second
quarter of 1998 under Key's share repurchase authorization was not significant.
- --------------------------------------------------------------------------------
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; unforeseen
business risks related to Year 2000 computer systems issues; and significant
changes in accounting, tax, or regulatory practices or requirements.
- --------------------------------------------------------------------------------
# # #
<PAGE> 4
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 4
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------------------------
6-30-98 3-31-98 6-30-97
------------- --------------- -----------
SUMMARY OF OPERATIONS
<S> <C> <C> <C>
Net interest income (TE) $689 $673 $707
Provision for loan losses 72 77 75
Noninterest income 380 356 288
Noninterest expense 616 600 582
Net income 249 235 223
PER COMMON SHARE
Net income $.57 $.53 $.51
Net income - assuming dilution .56 .53 .51
Cash dividends .235 .235 .21
Book value at period end 12.55 12.15 11.02
Market price at period end 35.63 37.81 27.94
AT PERIOD END
Full-time equivalent employees 24,711 24,650 25,882
Full-service banking offices 962 1,006 1,130
PERFORMANCE RATIOS
Return on average total assets 1.35% 1.32% 1.32%
Return on average equity 18.47 18.25 18.85
Efficiency(1) 58.22 57.39 57.66
Overhead(2) 37.30 35.36 41.02
Net interest margin (TE) 4.19 4.23 4.69
CAPITAL RATIOS AT PERIOD END
Equity to assets(3) 8.28% 7.98% 7.63%
Tangible equity to tangible assets(3) 6.91 6.51 6.39
Tier 1 risk-adjusted capital(4) 6.86 6.81 7.14
Total risk-adjusted capital(4) 11.38 11.38 11.66
Leverage(4) 7.04 6.61 6.65
<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
6-30-98 are 7.29% and 5.91%, respectively; at 3-31-98 are 7.29% and
5.81%, respectively; and at 6-30-97 are 6.91% and 5.67%, respectively.
(4) 6-30-98 ratio is estimated.
TE = Taxable Equivalent
</TABLE>
<PAGE> 5
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 5
FINANCIAL HIGHLIGHTS
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
------------------------------------------------------
6-30-98 3-31-98 6-30-97
--------------- --------------- ------------
ASSET QUALITY
<S> <C> <C> <C>
Net loan charge-offs $72 $77 $65
Net loan charge-offs to average loans .51% .58% .52%
Allowance for loan losses $900 $900 $880
Allowance for loan losses to
period end loans 1.56% 1.64% 1.70%
Allowance for loan losses to
nonperforming loans 240.64 241.29 236.56
Nonperforming loans at period end $374 $373 $372
Nonperforming assets at period end 417 421 433
Nonperforming loans to period end loans .65% .68% .72%
Nonperforming assets to period end loans plus
OREO and other nonperforming assets .72 .77 .84
<CAPTION>
Six months ended
---------------------------------
SUMMARY OF OPERATIONS 6-30-98 6-30-97
------------- ------------
<S> <C> <C>
Net interest income (TE) $1,362 $1,407
Provision for loan losses 149 142
Noninterest income 736 547
Noninterest expense 1,216 1,157
Net income 484 435
PER COMMON SHARE
Net income $1.10 $.99
Net income - assuming dilution 1.09 .98
Cash dividends .47 .42
PERFORMANCE RATIOS
Return on average total assets 1.34% 1.31%
Return on average equity 18.36 18.46
Efficiency(1) 57.81 58.28
Overhead(2) 36.34 42.36
Net interest margin (TE) 4.21 4.72
ASSET QUALITY
Net loan charge-offs $149 $132
Net loan charge-offs to average loans .54% .54%
</TABLE>
<PAGE> 6
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 6
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
<TABLE>
<CAPTION>
ASSETS 6-30-98 3-31-98 6-30-97
--------- --------- ----------
<S> <C> <C> <C>
Loans $57,769 $54,900 $51,644
Investment securities 1,038 1,182 1,484
Securities available for sale 6,482 7,115 7,727
Short-term investments 1,652 1,171 653
--------- --------- ---------
Total earning assets 66,941 64,368 61,508
Allowance for loan losses (900) (900) (880)
Cash and due from banks 3,050 3,287 2,911
Premises and equipment 894 924 1,025
Goodwill 1,028 1,052 795
Other intangible assets 88 99 123
Corporate owned life insurance 1,945 1,921 1,562
Other assets 2,732 2,447 2,628
--------- --------- ---------
TOTAL ASSETS $75,778 $73,198 $69,672
========= ========= =========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $8,967 $9,083 $9,519
Interest-bearing 31,262 32,253 33,655
Deposits in foreign offices-interest-bearing 1,565 325 1,452
--------- --------- ---------
Total deposits 41,794 41,661 44,626
Federal funds purchased and securities
sold under repurchase agreements 6,828 6,468 6,830
Bank notes and other short-term borrowings 7,855 7,442 5,447
Other liabilities 2,583 2,498 2,023
Long-term debt 10,196 9,041 5,182
--------- --------- ---------
TOTAL LIABILITIES 69,256 67,110 64,108
Capital securities of subsidiary trusts 997 750 750
SHAREHOLDERS' EQUITY 5,525 5,338 4,814
TOTAL LIABILITIES, CAPITAL SECURITIES
OF SUBSIDIARY TRUSTS AND --------- --------- ---------
SHAREHOLDERS' EQUITY $75,778 $73,198 $69,672
========= ========= =========
Common Shares outstanding (000) 440,352(1) 439,315(1) 218,380
<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>
<PAGE> 7
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 7
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------------
6-30-98 3-31-98 6-30-97
---------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME $1,372 $1,327 $1,295
INTEREST EXPENSE 692 663 599
-------- -------- --------
NET INTEREST INCOME 680 664 696
Provision for loan losses 72 77 75
-------- -------- --------
608 587 621
NONINTEREST INCOME
Service charges on deposit accounts 75 78 74
Trust and asset management income 80 77 64
Investment banking and capital markets income 50 47 21
Credit card fees 17 15 25
Insurance and brokerage income 24 22 21
Corporate owned life insurance income 24 23 21
Loan securitization income 8 10 3
Net securities gains 2 2 --
Gains from sales of branches/subsidiaries 33 29 10
Other income 67 53 49
----------------------------------------------
Total noninterest income 380 356 288
NONINTEREST EXPENSE
Personnel 302 294 283
Net occupancy 56 56 54
Equipment 45 43 44
Amortization of intangibles 22 23 21
Marketing 28 28 22
Professional fees 15 17 13
Other expense 148 139 145
-------- -------- --------
Total noninterest expense 616 600 582
-------- -------- --------
INCOME BEFORE INCOME TAXES 372 343 327
Income taxes 123 108 104
-------- -------- --------
NET INCOME $249 $235 $223
======== ======== ========
Net income per Common Share $.57 $.53 $.51
Net income per Common Share - assuming dilution .56 .53 .51
Wtd. avg. Common Shares (000) 440,092 438,589 437,946
Wtd. avg. Common Shares and potential
Common Shares (000) 446,568 444,836 442,480
Taxable-equivalent adjustment $9 $9 $11
</TABLE>
<PAGE> 8
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 8
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Six months ended
--------------------------------
6-30-98 6-30-97
---------- ---------
<S> <C> <C>
INTEREST INCOME $2,699 $2,550
INTEREST EXPENSE 1,355 1,165
-------- --------
NET INTEREST INCOME 1,344 1,385
Provision for loan losses 149 142
-------- --------
1,195 1,243
NONINTEREST INCOME
Service charges on deposit accounts 153 145
Trust and asset management income 157 128
Investment banking and capital markets income 97 39
Credit card fees 32 48
Insurance and brokerage income 46 42
Corporate owned life insurance income 47 40
Loan securitization income 18 4
Net securities gains 4 --
Gains from sales of branches/subsidiaries 62 10
Other income 120 91
-------- --------
Total noninterest income 736 547
NONINTEREST EXPENSE
Personnel 596 573
Net occupancy 112 110
Equipment 88 87
Amortization of intangibles 45 42
Marketing 56 43
Professional fees 32 24
Other expense 287 278
-------- --------
Total noninterest expense 1,216 1,157
-------- --------
INCOME BEFORE INCOME TAXES 715 633
Income taxes 231 198
-------- --------
NET INCOME $484 $435
======== ========
Net income per Common Share $1.10 $.99
Net income per Common Share - assuming dilution 1.09 .98
Wtd. avg. Common Shares (000) 439,345 440,628
Wtd. avg. Common Shares and potential
Common Shares (000) 445,707 445,504
Taxable-equivalent adjustment $18 $22
</TABLE>
<PAGE> 9
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 9
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
ASSETS 6-30-98 3-31-98 6-30-97
--------- --------- ---------
<S> <C> <C> <C>
Loans $56,441 $53,946 $50,373
Investment securities 1,141 1,196 1,601
Securities available for sale 6,765 7,457 7,822
Short-term investments 1,422 1,350 497
-------- -------- --------
Total earning assets 65,769 63,949 60,293
Allowance for loan losses (888) (889) (866)
Cash and due from banks 2,574 2,621 2,556
Other assets 6,611 6,441 5,795
-------- -------- --------
TOTAL ASSETS $74,066 $72,122 $67,778
======== ======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $8,328 $8,409 $8,432
Interest-bearing 31,928 31,980 34,072
Deposits in foreign offices-interest-bearing 1,095 1,245 2,361
-------- -------- --------
Total deposits 41,351 41,634 44,865
Federal funds purchased and securities
sold under repurchase agreements 6,773 7,117 6,461
Bank notes and other short-term borrowings 7,710 6,683 4,350
Other liabilities 2,547 2,390 1,998
Long-term debt 9,511 8,326 4,772
-------- -------- --------
TOTAL LIABILITIES 67,892 66,150 62,446
Capital securities of subsidiary trusts 766 750 588
SHAREHOLDERS' EQUITY 5,408 5,222 4,744
TOTAL LIABILITIES, CAPITAL SECURITIES
OF SUBSIDIARY TRUSTS AND -------- -------- --------
SHAREHOLDERS' EQUITY $74,066 $72,122 $67,778
======== ======== ========
</TABLE>
<PAGE> 10
KEYCORP REPORTS SECOND QUARTER 1998 EARNINGS
JULY 16, 1998
PAGE 10
CONSOLIDATED YEAR-TO-DATE AVERAGE BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
Six months ended
-----------------------------------
ASSETS 6-30-98 6-30-97
---------- ----------
<S> <C> <C>
Loans $55,200 $49,797
Investment securities 1,168 1,609
Securities available for sale 7,109 7,811
Short-term investments 1,387 454
-------- --------
Total earning assets 64,864 59,671
Allowance for loan losses (888) (867)
Cash and due from banks 2,597 2,559
Other assets 6,526 5,707
-------- --------
TOTAL ASSETS $73,099 $67,070
======== ========
LIABILITIES
Deposits in domestic offices:
Noninterest-bearing $8,368 $8,420
Interest-bearing 31,954 34,158
Deposits in foreign offices-interest-bearing 1,170 1,759
-------- --------
Total deposits 41,492 44,337
Federal funds purchased and securities
sold under repurchase agreements 6,944 6,743
Bank notes and other short-term borrowings 7,199 4,132
Other liabilities 2,469 1,933
Long-term debt 8,922 4,630
-------- --------
TOTAL LIABILITIES 67,026 61,775
Capital securities of subsidiary trusts 758 544
SHAREHOLDERS' EQUITY 5,315 4,751
TOTAL LIABILITIES, CAPITAL SECURITIES
OF SUBSIDIARY TRUSTS AND -------- --------
SHAREHOLDERS' EQUITY $73,099 $67,070
======== ========
</TABLE>
|
|