KeyCorp maintained its full-year 2026 financial guidance on Monday, outlining expectations for net interest income growth, margin expansion, and loan demand at the Barclays 24th Annual Global Financial Services Conference.
Chief Financial Officer Clark Khayat said the bank is tracking toward 9% to 11% growth in net interest income and a core net interest margin of 3% to 3.05% for the year, up from 2.89% in the second quarter. The bank projects fixed-asset repricing of roughly $9 billion in the second half of 2026 and about $21 billion in 2027, which should support margin expansion to above 3.25% next year.
Overall loan growth for 2026 is now forecast at 4.5% to 5%, reflecting a stronger first half and a slower second half. Commercial and C&I loans are expected to grow 8% to 10%, while consumer deposits are projected to rise more than 2%, or about $3 billion, over the second half. Consumer term deposit betas are expected to remain in the low 40s following rate hikes, gradually approaching 50 to 55 over time. Khayat noted that loan demand has been stronger than initially expected heading into the year.
Investment banking fee guidance was raised to 4% to 5%, up from 3% to 4%, implying roughly 20% sequential growth. Expense growth is expected in the 4% range, partly driven by the August acquisition of Clearwater, a U.K.-based capital markets firm. Khayat said Clearwater is expected to reach profitability in the back half of 2026 and contribute $60 million to $70 million in annual revenue starting in 2027. Operating leverage is on track to exceed 400 basis points in 2026.
On capital, KeyCorp plans share repurchases of at least $1.3 billion this year. Its Common Equity Tier 1 ratio ended the second quarter at 9.8%, within the 9.5% to 10% target range. The bank also faces approximately $525 million in Series D preferred stock redemptions, with a $500 million Series E redemption expected in December.
Khayat addressed the shifting interest-rate landscape, noting that markets have moved from pricing multiple rate cuts to three high-probability rate hikes. On cost discipline and technology, he said the bank is pursuing AI-driven efficiencies across major end-to-end processes and maintains a $1 billion technology budget. Consumer deposits are running at a runoff pace of about $400 million per quarter, slower than prior expectations of $500 million to $600 million.
Non-performing assets rose by $126 million in Q2, concentrated in commercial real estate, agriculture, and consumer goods. Data-center exposure stands at roughly $700 million to $800 million. Assets under management in wealth management reached a record $74 billion in the second quarter, with about 60,000 accounts added over the past two to three years. Scotiabank continues to increase its stake in KeyCorp from 14.9% to 19.9% under the terms of a 2024 agreement.
