KeyCorp (KEY) - Bear Of The Day

KeyCorp’s (KEY) second-quarter net loss came in at 69 cents per share, substantially worse than the Zacks Consensus Estimate. The downside primarily resulted from preferred dividend payment and a significant increase in the provision for loan losses.

Credit quality worsened significantly during the quarter. However, we are impressed by the company’s steps to reduce its exposure to the commercial real estate (CRE) home builders business.

Though the company will benefit by exiting its risky and unprofitable businesses, we expect elevated provision requirements and a weak net interest to put significant pressure on its profitability. As such, the shares carry and Underperform recommendation from us.

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