KEYCORP /NEW/ (KEY): what the price requires
At today's price, KEYCORP /NEW/ (KEY) is priced for 15.4% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/KEY
Headline
| Field | Value |
|---|---|
| Ticker | KEY |
| Company | KEYCORP /NEW/ |
| Current price | $23.24/sh |
| Composition | Consumer Bank 48% / Commercial Bank 52% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | financials |
| Price-to-book | 1.44x |
| Return on equity now | 9.4% |
The implied return on book is non-physical at this price-to-book and is suppressed as misleading. The price sits beyond a 12.4% return on equity sustained for 40 years and is not resolvable as a sustainable-ROE point. The rarity read below is the honest signal.
Solve inputs: computed at a 11.9% cost of equity; ROE searched up to the 12.4% ROE ceiling.
Reconcile: at the x-ray's 9.3% required return this reads ~11.6%; the models below use their own rates.
How unusual the bet is: extreme
| Reference | Value |
|---|---|
| vs own history | +1.56σ |
| cohort percentile (of 119 peers) | 56 |
| sustained it ~10 years at this level | 59% |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.18x | 3 | expensive |
| Earnings | 0.88x | 2 | justifies |
| Relative | 1.09x | 3 | expensive |
| Growth | 0.69x | 2 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.
Per-Model Detail (n=10)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| Bank Fair Value (P/TBV) | — | $16.63 | 1.40x | yes | TBVPS $15.74 × 1.06x (ROE (TTM) 9.7% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 1.34% allowance/loans → ×0.95) |
| Relative Valuation | Relative | $21.30 | 1.09x | yes | P/E 10x (static sector reference · 2026-04), scenarios: 8.0x / 10.0x / 12.0x (bear / base = reference held flat / bull), EV/EBITDA N/Ax |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $33.57 | 0.69x | yes | Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $19.22 | 1.21x | yes | BV/sh $18.26, ROE (TTM) 9.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $19.71 | 1.18x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $33.71 | 0.69x | yes | Rev $7.7B, growth 30% (input: historical growth; tapered), Terminal P/S: 2.6x / 3.3x / 4.0x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $19.56 | 1.19x | yes | EPS $1.63, growth 1% (input: historical EPS growth), PEG=10.38 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | $25.88 | 0.90x | yes | √(22.5 × EPS $1.63 × BVPS $18.26) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $52.59 | 0.44x | yes | EPS $1.63 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | — | — | no | — |
| PEG Fair Value | Relative | $61.12 | 0.38x | yes | EPS $1.63 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $17.62 | 1.32x | yes | EPS $1.63 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Share count CAGR (dilution) | 4.1% |
Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).
Bullet Takeaways
- KeyCorp is a regional bank split between a commercial bank and a consumer bank, and the surprise in the recent numbers is how quickly its profitability is recovering as funding costs fall faster than loan yields.
- The defining risk is concentrated credit exposure, with the company naming concentrated exposure in commercial and industrial loans, commercial real estate, and commercial leases as a material risk, the segments most exposed if the cycle turns.
- Watch the net interest margin and capital return, with the margin improving from 2.58% to 2.87% toward a year-end target near 3.05% and management planning at least $1.3 billion of buybacks in 2026.
Bull Case
The counterintuitive thing about KeyCorp right now is that a bank with a middling return on equity is generating one of the sharpest profitability recoveries in the regional group, and the engine is funding cost, not loan growth. The net interest margin jumped from 2.58% to 2.87% in a single year, and earnings per share rose 33% to $0.44, with net income of $486 million. The reason is mechanical and powerful: as higher-cost deposits and borrowings reprice lower while the loan book reprices into higher-yielding commercial and industrial loans, the spread widens. Total funding costs fell 15 basis points in the quarter. That is the most valuable thing a bank can have, a tailwind on the largest line of its income statement, and the 10-K confirms how central it is, noting interest income is "the largest source of revenue for us".
The fee businesses are diversifying the recovery rather than leaning entirely on spread. Noninterest income grew 8% to $723 million, helped by record investment banking fees, and KeyCorp's filing describes the advisory and debt-placement revenue recognized "upon completion of a contractually identified transaction", a capital-light fee stream that does not consume the balance sheet. A regional bank with both a widening margin and a real capital-markets franchise has two distinct ways to grow earnings, which is unusual for a bank this size.
The trajectory is the bull case made concrete. Return on tangible common equity exceeded 13% in the quarter, with a stated goal of 15% or more by the end of 2027, and management raised full-year net interest income guidance to 9% to 10% growth and plans at least $1.3 billion of buybacks. The price is supported across the valuation methods rather than stretched, so an investor is paying a reasonable multiple for a bank whose profitability is improving toward elite-regional levels. A bank with a self-reinforcing margin recovery, a growing fee franchise, and a clear path to a mid-teens return is doing more than its modest reputation suggests.
Bear Case
The bear case is a sector-cycle argument: the earnings recovery is real, but it is happening at a benign point in the credit cycle, and banks make their worst loans in their best times. KeyCorp's own filing names the vulnerability directly, listing as a material risk that it has "concentrated credit exposure in commercial and industrial loans, commercial real estate loans, and commercial leases". Those are exactly the categories that deteriorate first in a downturn, and commercial real estate in particular remains a sector working through elevated vacancies and refinancing pressure. The margin recovery and the loan growth that look so good today are extending credit into a late cycle, and the cost of that credit shows up later, as provisions, not now.
The margin tailwind itself is conditional. KeyCorp's improving net interest margin depends on funding costs continuing to fall faster than asset yields, and management's own guidance is built on a no-rate-cut base case. If the rate environment shifts, if deposit competition reignites and deposit betas climb back, or if the yield curve moves against the bank, the spread that drove the 33% EPS jump compresses. A recovery powered primarily by funding-cost relief is more fragile than one powered by durable loan or fee growth, because it can reverse with the rate cycle rather than persisting through it.
That fragility matters because of what the price assumes. A bank is worth the return it earns on its capital, and at roughly 1.4 times book KeyCorp is priced for a return on equity above the elite tier large banks have historically sustained. It earns around 9% to 10% on equity now, climbing, but the price requires that climb to reach and hold a mid-teens return, which sits in the upper half of where its regional peers trade on price-to-book and which only a minority of banks sustain for a decade. If credit costs normalize or the margin tailwind fades, the return on equity stalls short of that target, and a price-to-book multiple built on the elite-return assumption compresses. The bet at this price is that the late-cycle credit exposure stays benign while the margin recovery becomes permanent, two things that historically do not both hold.
Valuation
A bank is valued on the return it earns on its capital, read through price-to-book, and KeyCorp trades at roughly 1.4 times book. The arithmetic of that multiple is demanding: it implies a return on equity above the elite tier large banks have sustained over decades. This is best stated as a bound rather than a precise figure, the price requires a return beyond what even a top-tier bank reliably holds, against a bank currently earning roughly 9% to 10% on equity and climbing toward a mid-teens target. The recent return on tangible common equity above 13% shows the trajectory supports the direction, even if the destination is unproven.
Unlike the largest banks, KeyCorp's valuation methods broadly support the price rather than reading it as stretched: the asset-based, earnings-power, and relative-multiple lenses all land at or above the price, so this is a value-and-quality setup, not a premium one. The peer comparison places it in the upper half of regional-bank price-to-book, which makes sense given the margin-recovery story. A reader should weigh that the methods endorsing the price are crediting the improving return on equity; if that improvement stalls, the support weakens.
The solvency frame for a bank is capital and payout capacity, not leverage or cash burn, and here KeyCorp is on solid footing: it is funding a $1.3 billion buyback plan and a growing dividend while improving profitability, which signals capital strength rather than stress. The genuine question the valuation raises is not solvency; it is return durability. The price is reasonable if the margin recovery becomes structural and the late-cycle credit exposure stays contained, and it has downside if either the rate tailwind reverses or the concentrated commercial credit book turns.
Catalysts
The first quarter was a strong step in the profitability recovery. KeyCorp reported net income to common shareholders of $486 million, or $0.44 per diluted share, up 33% year over year, with taxable-equivalent revenue up 10% to $1.95 billion on 11% net interest income growth to $1.23 billion and 8% noninterest income growth to $723 million, including record investment banking fees. The net interest margin improved to 2.87% from 2.58% as funding costs fell 15 basis points, and return on tangible common equity exceeded 13%.
Looking forward, management raised full-year 2026 net interest income guidance to 9% to 10% growth on a no-rate-cut base case, targeting a year-end margin near 3.05% and roughly 7% revenue growth with commercial loans up 6% to 8%. It also set a return on tangible common equity goal of 15% or more by the end of 2027 and plans at least $1.3 billion of share repurchases in 2026, subject to final Basel III rules. The catalysts to track are the margin path under the rate environment, deposit pricing, the buyback pace, and credit trends in the commercial and commercial-real-estate book.
Peer Cohorts (Per Segment, With Filing Citations)
Consumer Bank (reported)
- HBAN (Huntington Bancshares Incorporated)
- (no filing in the citation store)
- RF (Regions Financial Corporation)
- (no filing in the citation store)
- CFG (CITIZENS FINANCIAL GROUP INC/RI)
- (no filing in the citation store)
- FITB (Fifth Third Bancorp)
- (no filing in the citation store)
- MTB (M&T BANK CORPORATION)
- (no filing in the citation store)
- ONB (OLD NATIONAL BANCORP /IN/)
- (no filing in the citation store)
- COLB (COLUMBIA BANKING SYSTEM, INC.)
- (no filing in the citation store)
Commercial Bank (reported)
- FITB (Fifth Third Bancorp)
- (no filing in the citation store)
- CFG (CITIZENS FINANCIAL GROUP INC/RI)
- (no filing in the citation store)
- MTB (M&T BANK CORPORATION)
- (no filing in the citation store)
- RF (Regions Financial Corporation)
- (no filing in the citation store)
- HBAN (Huntington Bancshares Incorporated)
- (no filing in the citation store)
- ZION (ZIONS BANCORPORATION, NATIONAL ASSOCIATION)
- (no filing in the citation store)
- CFR (Cullen/Frost Bankers, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 earnings release · Q1 2026 guidance