KeyCorp (NYSE: KEY) reported second-quarter 2026 earnings of $0.44 per share, a 26% increase year-over-year, as revenue grew 7% and net interest margin expanded to 2.89%. The bank raised its full-year guidance for net interest income and loan growth, citing strong commercial lending momentum and disciplined capital deployment.

Financial Performance

Tax-equivalent net interest income increased 9% year-over-year and 2% sequentially, primarily driven by commercial loan growth and portfolio repricing. Noninterest income rose 2% year-over-year. Pre-provision net revenue grew 9%. The company reported a net charge-off ratio of 42 basis points, with total deposit costs declining 2 basis points sequentially to 1.63%.

Loan and Deposit Dynamics

Commercial and industrial (C&I) loans increased by $2.1 billion, or 3%, sequentially, reflecting new client acquisition and deeper existing relationships. Average loans grew $2.3 billion sequentially. Period-end deposits closed at $153 billion, temporarily elevated by about $4 billion due to transaction timing. Average noninterest-bearing deposits increased 2.3% sequentially, representing 19% of total deposits. The cumulative interest-bearing deposit beta held steady at 56%.

What the Numbers Show

The divergence between the 9% growth in tax-equivalent net interest income and the modest 2 basis point expansion in net interest margin highlights the impact of balance sheet size versus pricing efficiency. While loan volumes grew significantly—adding $2.1 billion in C&I loans—the margin expansion was constrained by tighter spreads on higher-quality credits and the use of short-term wholesale funding to bridge seasonal deposit troughs. This suggests that while top-line interest income is scaling effectively, per-unit yield optimization remains sensitive to funding mix and credit quality trade-offs.

Strategic Initiatives and Guidance

KeyCorp repurchased $340 million in common stock during the quarter, putting it on pace for its full-year target of at least $1.3 billion. The bank announced an agreement to acquire Clearwater UK to expand its middle market advisory franchise. Investment banking pipelines are at historically elevated levels, with third-quarter fees expected to rise by over 20% quarter-over-quarter.

The company raised its full-year guidance:

• Revenue growth expected at 7% to 8% (previously ~7%).
• Net interest income growth expected at 9% to 11% (previously 9% to 10%).
• Average loans expected to increase 4% to 5% (previously 2% to 4%).
• Average commercial loans expected to grow 8% to 10%.

KeyCorp aims to achieve a return on tangible common equity exceeding 15% by the end of 2027, with a target net interest margin of 3% by year-end 2026.

Stephens & Co. analyst Matt Olney has reiterated an Overweight rating on KeyCorp (NYSE: KEY). The firm maintains its $26 price target for the regional lender.

Analyst View

Olney’s note signals continued confidence in KeyCorp’s valuation relative to peers. The maintained price target suggests the analyst sees limited immediate upside or downside from current levels, holding the stock as a preferred pick within the sector.

What the Numbers Show

The decision to maintain the price target without adjustment indicates stability in the firm’s valuation model for KeyCorp. With no new financial data provided in the update, the rating rests on existing fundamentals and the analyst’s baseline assumptions for the bank’s performance.