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KeyCorp shares decline as expenses rose more than expected

Beacon Journal staff and wire report

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Shares in KeyCorp, the top performer last year in the KBW Bank Index, fell the most in four months on Thursday as fourth-quarter expenses exceeded the Cleveland lender’s forecast.

KeyCorp’s stock price fell 46 cents to $13.68.

The bank, which on Thursday posted a 21 percent profit increase, said noninterest expenses in the period were $712 million, surpassing its guidance of $680 million to $700 million, including one-time charges.

KeyCorp, led by Chief Executive Officer Beth E. Mooney, made improved efficiency a priority for 2013. The company incurred $24 million in costs related to its efficiency initiative and a pension settlement in the quarter, according to a statement. The firm forecast expenses to decline in 2014 by a single digit percentage from the previous year.

“Average loans were up 5 percent in 2013 compared to the prior year, driven by a 12 percent increase in commercial, financial and agricultural loans, and our credit quality improved to levels not seen since 2007,” Mooney said in a statement. “Both commercial and consumer loans grew relative to the full year and fourth quarter of 2012. ... We achieved the goal we set in June 2012, by implementing annualized cost savings of $241 million.”

Mooney said KeyCorp returned 76 percent of its net income to shareholders through dividends and share repurchases last year.

Industry analysts in a conference call asked Mooney and other KeyCorp executives about the company’s forecast for 2014.

KeyCorp said it expects mid-single digit growth in loans, relatively stable net interest income, a low single-digit decline in expenses compared to 2013 and continued share repurchases. The lender said it expects to announce its 2014 capital plan in March.

“Clearly our guidance is reflective of the momentum of our view of interest rates, our view of the economy as we go into 2014,” Mooney said in the conference call. “2014 is the year that is beginning with more economic strength and optimism than we have seen in years.”

Afterward, Mooney said she thinks analysts were hoping for more guidance from the bank.

“If you look into the tone and tenor of the call, I think a lot of people were looking for more aggressive guidance than we ultimately gave them,” Mooney, 58, said in a phone interview.

KeyCorp’s net income rose to $229 million, or 26 cents a share, from $190 million, or 20 cents, a year earlier.

Profit excluding one-time items was 28 cents a share, beating the 25-cent average estimate of 25 analysts surveyed by Bloomberg.

“We have been an out-performer now for some period of time and as we said today we are giving a little of that back,” Mooney said.

KeyCorp shares climbed 59 percent last year to lead the 24-company KBW Bank index, which advanced 35 percent.


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