KeyCorp Sells Low-Yielding Investments

(Reuters) – U.S. regional lender KeyCorp (NYSE:KEY) announced on Monday the sale of approximately $7 billion in low-yielding investments, resulting in an after-tax loss of around $700 million for the third quarter.

In August, the bank indicated its intention to reposition its securities portfolio to enhance profitability following a deal with Canada’s Scotiabank.

“While the timing is always a wildcard, recall that KEY had done the Scotiabank transaction in part to offer flexibility for such a repositioning,” noted Piper Sandler analysts.

They added, “Aside from the timing, we doubt the move would shock investors.”

Shares of KeyCorp, which sold investments yielding about 2.3% on average, rose by 2.4% in early trading.

Last month, Scotiabank agreed to purchase a 14.9% stake in KeyCorp for $2.8 billion, seeking growth outside its saturated domestic market.

At the same time, U.S. banks are adjusting their balance sheets to counter a potential downturn from low loan demand. For example, Truist Financial (NYSE:TFC) sold $27.7 billion in low-yielding investments in May to prioritize better alternatives in anticipation of higher revenue in 2024.

Cleveland, Ohio-based KeyCorp has not revealed its plans for the proceeds from this sale. Additionally, in July, the bank projected a greater decline in average loans in 2024 due to weaker demand than previously expected.