Goldman Sachs’ Stocks With Highest Consensus Returns: 42 Stocks With The Highest Consensus ROE

17. KeyCorp (NYSE:KEY)

Consensus ROE: 22%

Number of Hedge Fund Investors in Q2 2024: 38

KeyCorp (NYSE:KEY) is a Ohio based regional bank that primarily finances industrial firms and businesses. As of Q2 2024, $53 billion of the bank’s $107 billion in loans were made to businesses and industrial firms. KeyCorp (NYSE:KEY) is also relatively well insulated from troubles in the commercial real estate industry, as $17 billion of its loans are to the sector which has come under increased scrutiny because of high profile defaults in today’s high interest rate era. Its exposure to businesses and industrial firms also positions KeyCorp (NYSE:KEY) well to capitalize on growth in economic activity. It also protects the firm against losses since these businesses typically have a robust asset base which can be liquidated to cover the loan in case of a default. KeyCorp (NYSE:KEY) is also focusing on streamlining its balance sheet and raising funds by selling its 15% stake to Scotiabank.

KeyCorp (NYSE:KEY)’s management has also been keeping a tight control on its capital ratios. Here’s what management shared 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.”