5. KeyCorp (NYSE:KEY)
Number of Hedge Fund Holders: 38
Cramer views KeyCorp (NYSE:KEY) favorably, labeling it a reliable operator. He pointed out that the stock is approaching the values it had prior to the collapse of Silicon Valley Bank last spring. Here’s what Mad Money’s host had to say:
“The regional banks got squashed when the Fed rapidly raised interest rates, then decided to leave short rates higher for longer. But now that the Fed’s in rate-cut mode… We know that’s going to happen, they stand to benefit even if the pace of the cut slows down. In fact, we’re in a terrific scenario for these guys.
First is KeyCorp. This is a Cleveland-based, parent of KeyBank. It’s a high-quality consumer and commercial bank franchise with a sneakily large reach. They’ve got roughly 1000 branches across 15 states, Midwest, Northeast, Northwest. Unfortunately, KeyCorp made some mistakes with its bond portfolio that severely damaged its earnings power when bond yields soared and bond prices got clobbered. Now, if the Fed is our friend, that won’t be a problem anymore.”
Cramer mentioned that a couple of months ago, Scotiabank announced a significant investment for nearly a 15% stake in KeyCorp, which will occur in three tranches, with the first tranche completed and the remaining two contingent on regulatory approval.
“Plus, a couple of months ago, we learned that the Bank of Nova Scotia, also known as Scotiabank, will be paying $2.8 billion to take a nearly 15% stake in KeyCorp. Oh, man. It’s a complex transaction, which will take place in three tranches. The first tranche has happened and the other two will come over time after the deal gets regulatory approval. But what matters is Scotiabank’s investment gives KeyCorp a much better capital cushion that it can use to reposition its investment portfolio. I think this is a nice reset opportunity for KeyCorp. And I’d be buying it right along the side of the Canadians, especially since the stock currently yields nearly 5%. In fact, with KeyCorp trading at $16 and change, you know, you’re actually getting a slightly better price than the $17.17 per share Scotiabank’s paying for its stake. That sounds good to me.”
KeyCorp (NYSE:KEY) serves as the holding company for the KeyBank National Association, delivering a wide range of retail and commercial banking services throughout the United States. On October 2, Evercore ISI analyst John Pancari raised the price target on the stock to $20 from $18.50 and kept an Outperform rating.
Pancari noted that the upcoming third-quarter results for regional banks are expected to reflect a continued fundamental improvement that began to emerge in the previous quarter. He believes that the downward revisions in earnings per share estimates, influenced by a lower interest rate environment and declining loan trends, will help stabilize expectations for sector earnings.
KeyCorp (NYSE:KEY) reported a net income from continuing operations of $237 million for the second quarter of 2024, translating to $0.25 per diluted common share. This figure is an increase from the first quarter of 2024, which saw a net income of $183 million, or $0.20 per diluted common share, but represents a decline compared to the $250 million, or $0.27 per diluted common share, recorded in the second quarter of 2023.
