KEY Q2'26 Conference Call Notes
Three things from KEY's call, starting with: The wholesale funding bridge is the real story: management chose expensive wholesale funding over repricing deposits, betting on $3B deposit inflows that b
Three things that matter from KEY’s Q2’26 call:
The wholesale funding bridge is the real story: management chose expensive wholesale funding over repricing deposits, betting on $3B deposit inflows that better materialize: Funding costs only declined 1bp despite 22bp drop in deposit costs because they supplemented with wholesale funding. Clark: ‘We chose to fill that with wholesale funds rather than reprice the client deposit base because the expectation is we are going to see some good deposit growth here in the second half.’
C&I loan growth of 3% looks great until you realize it’s all investment grade at tighter spreads, crushing NIM expansion: The binding constraint is credit quality migration: they’re growing loans but at lower yields. Clark admitted loans came in at ‘higher credit quality and therefore a little bit tighter spread.’
Investment banking’s 20% guide for Q3 is suspect given pipelines haven’t converted and middle market M&A remains frozen: Chris downgraded from ‘we will see them’ to ‘I think we will see them’ on deal closures. Transaction volumes down 24% YTD despite 83% value increase shows only mega-deals are happening.
Disclosure Quality: C+ | Financial Quality: C
