Wider net interest margin and a lower provision pushed pre-tax income up 22.6% on 8.3% revenue growth 8-K. Management tightened its 2026 net interest income outlook to up ~10% and lowered its charge-off range 8-K.
KeyCorp · Q3 2026 · Reported 20 Oct 2026 · US
Key figures
Million USD | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
Revenue | 2,052.00 | 1,895.00 | +8.3 % |
Pre-tax income | 738.00 | 602.00 | +22.6 % |
Net income | 579.00 | 489.00 | +18.4 % |
Diluted EPS | 0.51 USD/share | 0.41 USD/share | +24.4 % |
Pre-tax margin | 36.0 % | 31.8 % | +4.2 pp |
Net margin | 28.2 % | 25.8 % | +2.4 pp |
Figures in USD, as reported. Margins are computed from the reported lines.
Pre-tax income grew far faster than revenue
Revenue (TE) rose 8.3% to $2.05 billion and pre-tax income rose 22.6% to $738.00 million 8-K. Pre-tax margin widened to 36.0% from 31.8% a year earlier, and diluted EPS rose 24.4% to $0.51 from $0.41 8-K22.
The year-earlier quarter included a $5 million benefit from the updated FDIC special assessment 8-K. In our calculation, which excludes that item and is not a company figure, pre-tax income rose 23.6% and the margin was 36.0% against 31.5%, up 4.5 points against 4.2 points reported 2226. The one-off flattered the base slightly, so the underlying improvement is a little larger than reported.
Net income was $579.00 million, up 18.4%. Net income from continuing operations attributable to common shareholders was $537 million against $454 million a year earlier 8-K.
Net interest margin expansion did most of the work
Net interest income was $1,300 million against $1,184 million a year earlier, up 9.8% 8-K. Net interest margin (TE) was 2.95% against 2.75% a year earlier and 2.89% in the prior quarter 8-K. Management attributes the gain to lower deposit costs, reinvestment of maturing securities and fixed-rate swaps into higher yields, a larger balance sheet and a shift toward commercial and industrial loans, partly offset by lower rates on repricing assets 8-K. The cost of total deposits fell to 1.66% from 1.97% a year earlier 8-K.
Average commercial and industrial loans grew 13.9% to $64.4 billion while consumer loans fell 7.5% on run-off 8-K. Total average loans rose 5.0% but average deposits only 0.5%, with time deposits down 20.9% 8-K. Growth is therefore coming from commercial lending with deposits roughly flat year on year.
Fee growth outpaced costs, with personnel the pressure point
Noninterest income rose 6.0% to $744 million 8-K. Investment banking and debt placement fees rose 16.3% to $214 million on higher M&A advisory and syndication fees, and trust and investment services income rose 10.0% 8-K. Commercial mortgage servicing fees fell 27.4% to $53 million 8-K.
Noninterest expense rose 5.8% to $1,245 million, slower than revenue, which created the operating leverage 8-K. Personnel expense rose 9.8%, which management ties to investment in people, benefits and incentive pay linked to fee growth 8-K. Other expense fell 11.2% even though the year-earlier quarter included the $5 million FDIC benefit 8-K.
A lower provision helped, and capital ratios are lower than a year ago
The provision for credit losses was $61 million against $107 million a year earlier 28. It reflected net charge-offs of $89 million and a net reserve release of $28 million 28. Net charge-offs were 32 basis points 7. Our reading is that part of the pre-tax gain came from reserve releases rather than operations.
Common Equity Tier 1 was 11.1% against 11.2% in the prior quarter and 11.8% a year earlier, and tangible common equity to tangible assets was 6.9% against 7.7% and 8.1% 8-K. Key repurchased $320 million of shares in the quarter and remains on pace for $1.3 billion in 2026 7. Return on average tangible common equity was 15.11% against 12.51% a year earlier 8-K.
What to watch next
Management's full-year 2026 outlook: net interest income up ~10% (previously 9 - 11%), revenue (TE) up ~8%, and a fourth-quarter net interest margin exit rate of ~3.00% (previously 3.00 - 3.05%) 89.
Net charge-offs to average loans are guided to 37 - 39 bps (previously 40 - 45 bps), so the reserve releases that helped this quarter's provision are worth tracking 8.
Medium-term targets are return on tangible common equity of 15.0%+ and net interest margin of 3.25%+ by the end of 2027, against 15.11% and 2.95% this quarter, alongside lower capital ratios and continued buybacks 8-K9.
The report does not give operating cash flow.
Sources
Produced by Clarifo Research with the Clarifo financial research engine from the company's public filings. AI was used in parts of the analysis and drafting. Figures are checked automatically against the filings they come from. This is not investment advice.