UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15d of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 17, 2002
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(Exact name of registrant as specified in its charter)
Ohio 0-850 34-6542451
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(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification No.)
127 Public Square, Cleveland, Ohio 44114-1306
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 689-6300
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
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On October 17, 2002, the Registrant issued a press release announcing its
earnings results for the three- and nine-month period ended September 30, 2002.
This press release, dated October 17, 2002, is attached as Exhibit 99.1 to this
report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits
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99.1 The Registrant's October 17, 2002, press release announcing its
earnings results for the three- and nine-month period ended
September 30, 2002.
ITEM 9. REGULATION FD DISCLOSURE
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On October 17, 2002, the Registrant conducted a conference call/webcast to
discuss its quarterly earnings and currently anticipated earnings trends. The
slide presentation reviewed by the Registrant in the conference call/webcast
follows as Annex A to this Item 9.
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Annex A
THIRD QUARTER 2002 REVIEW
OCTOBER 17, 2002
SPEAKERS: HENRY MEYER
JEFF WEEDEN
LEE IRVING
KEVIN BLAKELY
CONFERENCE CALL: 913-981-4900 CODE: 457513
REPLAY: 402-398-4261
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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
FORWARD-LOOKING STATEMENT DISCLOSURE
The conference call and discussion, including related questions and answers, and
presentation materials, contain forward-looking statements about issues like
anticipated fourth quarter and full-year 2002 earnings, anticipated level of net
loan charge-offs and nonperforming assets and anticipated improvement in
profitability and competitiveness. Forward-looking statements by their nature
are subject to assumptions, risks and uncertainties. Actual results could differ
materially from those contained in or implied by such forward-looking statements
for a variety of factors including: changes in interest rates; continued
weakness in the economy, which could materially impact credit quality trends and
the ability to generate loans; failure of the capital markets to function
consistent with customary levels; delay in or inability to execute strategic
initiatives designed to grow revenues and/or manage expenses; consummation of
significant business combinations or divestitures; new legal obligations or
restrictions or unfavorable resolution of litigation; further disruption in the
economy or the general business climate as a result of terrorist activities or
military actions; and changes in accounting, tax or regulatory practices or
requirements.
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STRATEGIC OVERVIEW
* COMPLETED MANAGEMENT RESTRUCTURING
- JEFF WEEDEN APPOINTED NEW CFO
* ANNOUNCED ACQUISITION OF UNION BANKSHARES
* CONTINUED PROGRESS ON STRATEGIC INITIATIVES
- AUTO LOANS/ LEASES REDUCED BY $2.3 BILLION SINCE 5/01
- RUNOFF PORTFOLIO REDUCED BY $.9 BILLION SINCE 5/01
* STOCK OPTIONS TO BE EXPENSED IN 2003
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FINANCIAL SUMMARY - 3Q02
* EPS OF $0.57
* SLIGHTLY HIGHER NET INTEREST MARGIN
* TOTAL LOANS DOWN DUE TO WEAK DEMAND
* EXPENSES DOWN 4% FROM YEAR-AGO QUARTER
* REPURCHASED 1.8 MILLION SHARES
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NET INTEREST INCOME & MARGIN (TE)
$ IN MILLIONS
[BAR CHART]
3Q01 4Q01 1Q02 2Q02 3Q02
Net Interest Income $730 $726 $702 $721 $722
NET INTEREST MARGIN 3.85% 3.98% 3.93% 3.98% 3.99%
AVG. EARNING ASSETS $75,687 $72,706 $71,981 $72,579 $72,083
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NONINTEREST INCOME 3Q02 VS. 2Q02
IN MILLIONS
Noninterest Income 2Q02 $448
Loan Fees 7
Investment Banking & Capital Markets (13)
Trust & Investment Services ( 7)
All other-net ( 3)
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Total (16)
Noninterest Income 3Q02 $432
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NONINTEREST EXPENSE 3Q02 VS. 2Q02
IN MILLIONS
Noninterest Expense 2Q02 $665
Personnel (3)
Marketing 3
All other (6)
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Total (6)
Noninterest Expense 3Q02 $659
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LINE OF BUSINESS HIGHLIGHTS
(3Q02 VS. 2Q02)
KEY CONSUMER BANKING
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- Net income up 6% - Revenue growth in Retail Banking (up 2%), Small Business
(up 4%) and National Home Equity (up 3%)
- Revenue down 10% in Indirect Lending - primarily due to downsizing of auto
business
KEY CORPORATE FINANCE
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- Net income up 5% - (3% revenue growth)
- Average deposits up 9%
KEY CAPITAL PARTNERS
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- Net income down 12% due to declining equity markets
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BALANCE SHEET MANAGEMENT
* BUILDING CAPITAL IN UNCERTAIN TIMES
- CAPITAL RATIOS AT HIGH END OF RANGES
- FLEXIBILITY -- INVESTMENT IN HIGHER RETURN BUSINESSES/ DIVIDENDS/ SHARE
REPURCHASE
* FOCUS ON GROWING PROFITABLE, STABLE CORE DEPOSITS
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NET CHARGE-OFFS BY LOAN TYPE
IN MILLIONS 3Q01 4Q01 1Q02 2Q02 3Q02
---- ---- ---- ---- ----
CONTINUING PORTFOLIO
Commercial $48 $62 $69 $76 $84
Consumer 68 71 67 59 51
--- --- --- --- ---
116 133 136 135 135
RUN-OFF PORTFOLIO & LOAN SALES 57 87 70 68 50
--- --- --- --- ---
TOTAL NET C/O $173 $220 $206 $203 $185
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ASSET QUALITY INDICATORS
$ IN MILLIONS 3Q01 4Q01 1Q02 2Q02 3Q02
---- ---- ---- ---- ----
Nonperforming Loans $885 $910 $973 $957 $987
to EOP Loans 1.37% 1.44% 1.52% 1.50% 1.57%
Nonperforming Assets $913 $947 $1,012 $995 $1,017
to EOP Loans + OREO 1.41% 1.49% 1.58% 1.56% 1.61%
Net C/O $173 $220 $206 $203 $185
to Average Loans 1.04% 1.37% 1.32% 1.27% 1.16%
Allowance $1,174 $1,677 $1,607 $1,539 $1,489
to Total Loans 1.82% 2.65% 2.51% 2.41% 2.37%
to Nonperforming Loans 133% 184% 165% 161% 151%
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RUN-OFF PORTFOLIO &
NONREPLENISHING RESERVES
IN MILLIONS
9/30/01 12/31/01 3/31/02 6/30/02 9/30/02
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COMMITMENTS $2,019 $1,694 $1,532 $1,143 $1,005
OUTSTANDINGS 1,176 1,023 941 724 662
ALLOWANCE FOR LOAN LOSSES 172 275 205 137 87
NPLS 233 231 208 132 91
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ASSET QUALITY OUTLOOK
NPLS Flat
TOTAL NET C/Os Flat
WATCH LIST Flat
RESERVE LEVEL Adequate
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FOURTH QUARTER 2002 OUTLOOK
(COMPARED WITH 3Q02)
REVENUE Relatively stable
EXPENSES Stable to slight increase
TAX RATE (TE) Approximately 33%
EPS Relatively stable
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEYCORP
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(Registrant)
Date: October 17, 2002 /s/ Lee Irving
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By: Lee Irving
Executive Vice President
and Chief Accounting Officer