2024-04-22 07:51:50 ET
Summary
- KeyCorp reported mixed Q1 results which were driven by weak net interest income, but lower provisioning expenses.
- The recent inflation report suggests a higher for longer rate environment, but the long term trajectory in rates points south.
- KeyCorp's valuation has seen a major revaluation after the regional banking crisis of 2023.
- While I see limited upside revaluation potential, the 6% yield is worth buying.
KeyCorp (KEY) submitted a mixed earnings sheet for the first fiscal quarter last week that showed a large drop in net interest income, but also solid credit quality. Importantly, I believe the recent inflation report -- which reflected a 3.5% increase in consumer prices in the month of March -- creates a favorable backdrop for banks in the short term. However, we are at the brink of cuts to the federal fund rate in FY 2024 which is set to result in even steeper drop-offs to the bank's net interest income going forward. With KeyCorp still trading at a premium valuation, I believe the upside potential is limited here. However, the 6% yield looks sustainable to me from a payout perspective!...
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KeyCorp: A Solid 6% Yield For Income Investors