10 Best Local Bank Stocks To Invest In Now

8. KeyCorp (NYSE:KEY)

Number of Hedge Fund Holders In Q2 2024: 38

KeyCorp (NYSE:KEY) is a consumer and commercial bank headquartered in Cleveland, Ohio. When compared to some other banks on our list, it has somewhat of a diversified loan portfolio with lower exposure to the tricky commercial real estate industry. As of Q2 2024, just $17 billion of KeyCorp (NYSE:KEY)’s $107 billion in total loans were to commercial real estate, which removes a large portion of risk from its lending. Roughly half, or $53 billion were to businesses and industrial firms, which typically have sizeable asset bases for worst case recovery and robust cash flow statements and debt management to continue making regular payments. The loan diversity helped KeyCorp (NYSE:KEY) in its Q2 when an improved economic environment allowed the bank to decrease its loan and lease losses for consumers by $24 million which nearly mitigated the impact of a $29 million jump in the same metric for the commercial loan segment. KeyCorp (NYSE:KEY) has also been aiming to streamline its balance sheet by raising capital by selling a minority stake to Scotiabank.

This deal should bump KeyCorp (NYSE:KEY)’s CET1 ratio to 12.9%, and before it took place, here’s what management had to say for this ratio during the Q2 2024 earnings call:

“This quarter, our Common Equity Tier 1 ratio improved by roughly another 20 basis points to 10.5%. Our marked CET1 intangible capital ratios also improved. As reported a few weeks ago, we have received the results of the Fed’s stress test or D-Fest, which implied a preliminary stress capital buffer for Key of 3.1%, which is up 50 basis points from the SCV we received in 2022. I’ll make just a few comments. First, even under this preliminary buffer, we have plenty of excess capital. Our 10.5% CET1 ratio compares to what would be a new 7.6% implied minimum. So the results continue to illustrate our strong capital position. Secondly, we, like others in our industry, don’t have insight into the Fed’s models. The Fed’s modeled loan losses for Key, particularly for our commercial real estate and first-lien mortgage portfolios, are inconsistent with our internally run stress tests”