KeyCorp (KEY): Earnings Swing, Dividend Strain and Balance-Sheet Recalibration

Immediate Development: Loss in FY2024, Operational Recovery in 2025 and a High-Yield Dividend#

KeyCorp [KEY] reported a FY2024 net loss of -$161MM versus net income of $967MM in FY2023, a swing of -116.65% that reshaped the bank’s near-term earnings profile. At the same time, management has kept the cash dividend at $0.82 per share annually (four quarterly payments of $0.205) delivering a 4.32% yield at the current share price, even as trailing profitability has been under pressure. After FY2024’s dislocation, the company posted a series of quarterly EPS beats in 2025 — the most recent reported EPS surprises in January, April and July 2025 all topped consensus — which points to operational improvement into 2025 even as the bank digests balance-sheet and liquidity shifts.

That juxtaposition — a calendar-year loss followed by sequential-quarter earnings resilience and an unchanged dividend — is the central tension for KeyCorp’s story today. It forces a triage of priorities: rebuild sustainable earnings, justify the dividend from cash flow, and use the balance sheet to fund loan growth without sacrificing capital ratios. The figures that follow are drawn from KeyCorp’s fiscal results and subsequent quarterly reports (FY2024 figures filed 2025-02-21) and the company’s reported quarterly results through mid-2025.

Financial performance: what changed in 2024 and why it matters#

KeyCorp’s top-line and bottom-line moved in opposite directions in FY2024. Revenue fell to $9.05B from $10.23B in FY2023, a decline of -11.54% year-over-year, driven by mix shifts and reduced noninterest activities. Operating income swung from $1.16B in FY2023 to an operating loss of -$306MM in FY2024, producing an operating margin of -3.38% in FY2024. The net result was a net margin of -1.78%, reflective of weaker core revenue plus reserve or other one-time items that turned a profitable 2023 into a loss in 2024 (all figures per company financials).

While FY2024 results look poor in isolation, the sequential picture into 2025 shows improvement. KeyCorp has reported positive per-share results in multiple 2025 quarters (actuals: $0.30 on 2024-10-17, $0.38 on 2025-01-21, $0.33 on 2025-04-17, $0.35 on 2025-07-22 — each beating estimates modestly), indicating that the negative FY2024 result came from concentrated year-end items and that core operations have been recovering. That divergence — an anomalous annual loss plus improving quarterly run-rate — is why investors must look through FY2024 and focus on the durability of the 2025 operating recovery.

Income-statement trends (2021–2024)#

The sequential deterioration from 2022–2024 is stark: operating margin compressed from double digits to a negative figure in 2024. The primary drivers were revenue contraction and cost elements that outpaced immediate revenue normalization. However, quarterly results in 2025 show a rebound in core EPS, implying at least partial normalization of these drivers.

Cash flow and earnings quality: operating cash remained positive while free cash flow slid#

Cash generation presents a nuanced picture. KeyCorp reported net cash provided by operating activities of $664MM in FY2024, down from $2.90B in FY2023, a decline of -77.10%. Free cash flow followed the same pattern, dropping to $599MM in FY2024 from $2.76B in FY2023, a decline of -78.33%. Those falls mirror the revenue and earnings swing and signal that operating cash conversion was materially weaker in 2024.

Despite the net loss in 2024, the company generated positive operating cash flow (indicating non-cash charges or timing items weighed on GAAP earnings), which is an important quality signal: the business still produces core cash even in a loss year. The magnitude, however, dropped meaningfully, and the company paid $927MM in dividends in 2024 — a cash outlay that exceeded reported net income and came from operating and other balance-sheet sources.

Balance-sheet read: liquidity reshaped, debt posture improved, capital remains adequate#

KeyCorp’s balance sheet is large and banklike: total assets of $187.17B at FY2024 year-end, with total stockholders' equity of $18.18B (equity/assets = 9.71%). Total debt stood at $14.25B, producing a debt-to-equity ratio of 78.39% (14.25 / 18.18). Notably, the company materially reduced short-term liquid investments: cash and short-term investments dropped from $48.94B at the end of 2023 to $22.51B at the end of 2024 — a depletion of roughly $26.4B.

That reduction in near-cash holdings explains much of the liquidity action in 2024 and should be read as an intentional rebalancing of funding sources (redeployment of liquidity into loans, debt paydowns, or other balance-sheet adjustments). Total debt also decreased from $22.64B at FY2023 year-end to $14.25B at FY2024 year-end, signalling active deleveraging or term-realignment. Net debt (total debt minus cash-like assets) fell to $12.51B in 2024 from $21.70B in 2023.

Two important flags should be called out. First, the conventional current-ratio figure reported in aggregate metrics (7.85x) conflicts with the direct balance-sheet calculation using current assets ($25.22B) and current liabilities ($151.9B), which yields roughly 0.17x, not 7.85x. This is almost certainly a reporting/definition mismatch (banking current-liability conventions differ from industrials) or a dataset inconsistency; therefore, I rely on the raw balance-sheet lines for analysis. Second, the company’s equity cushion (9.7% of assets) remains within a healthy range for a large regional bank but is not immune to stress if credit deteriorates materially.

Balance-sheet key lines (2021–2024)#

The net picture is a bank that materially repositioned liquidity and pared debt in 2024 after a prior period of elevated short-term investments; that strategy reduced net debt and short-term cushions in equal measure.

Capital allocation, dividend sustainability and payout math#

KeyCorp paid $927MM in dividends in FY2024 and reported quarterly dividends of $0.205. That equals an annual dividend of $0.82 per share. Using the fundamentals-provided trailing metrics (net income per share TTM = $0.16), the computed payout ratio equals 512.50% (0.82 / 0.16), which is unsustainably high if EPS stays at the TTM level.

There are two ways to reconcile that math. First, the FY2024 loss depressed trailing GAAP EPS, but 2025 quarter-to-date EPS results have been positive, improving a run-rate perspective on earnings. Second, banks can prudently pay dividends above GAAP net income when capital ratios are strong and when operating cash flow covers distributions — but that requires careful board-level justification. The important takeaway is that, at FY2024 earnings levels alone, dividends would be funded largely from balance-sheet sources rather than current-year earnings, creating potential risk if earnings do not continue to recover.

Note: a dataset payout figure of 547.16% was present but differs from the payout calculated above; I have used the company reported TTM EPS and dividend-per-share to compute the 512.50% payout ratio and highlight the discrepancy in reporting.

Profitability and valuation context: margins compressed, book-value still important#

KeyCorp’s valuation multiples reflect the earnings cycle and asset-heavy franchise. Price-to-book sits near 1.07x and price-to-sales at 2.25x, while reported trailing metrics vary because FY2024 included a loss. Forward consensus estimates embedded in the dataset show analysts expecting EPS recovery (estimated EPS $1.432 for 2025, $1.7376 for 2026 and $2.0136 for 2027) and forward P/E compressions to the low-to-mid-teens on normalized earnings assumptions (for example, forward P/E for 2025 listed at 15.29x in the dataset).

That path — a transition from a one-year loss to normalized earnings in the mid-single to low-double EPS range — helps explain why management kept the dividend: forward earnings are expected to recover and drive distributable earnings. But investors must watch whether recurring fee income and loan NII can provide the durable base to support the payout rather than episodic reserve releases or one-time items.

Strategy and competitive positioning: fintech partnerships and fee diversification#

Management has emphasized three strategic pillars: stabilize revenue growth, protect Net Interest Income (NII), and accelerate fee income via fintech partnerships and digital distribution. The firm’s pivot toward higher-fee payments, wealth and treasury services is designed to change revenue mix toward recurring, higher-margin sources. The company’s commentary and the 2025 quarterly calls highlight targeted fintech alliances intended to broaden distribution without the full expense of in-house product builds.

The attractive part of this strategy is it leverages distribution to scale fee revenue with relatively controlled incremental capital. The risk is execution timing: fee monetization from fintech relationships can lag investment and integration costs, creating near-term pressure on margins even as the long-run potential remains intact. Early 2025 results — modest sequential EPS improvement and beat cadence — suggest the initiatives are beginning to show incremental revenue, but the contribution is not yet large enough to offset 2024’s swing on its own.

Credit quality and loan outlook: selective growth and conservative underwriting#

KeyCorp’s loan book is weighted to commercial and middle-market credit, with consumer mortgages and card exposure as secondary pieces. The company signalled selective loan origination in 2024 and into 2025, favoring higher-yield commercial opportunities where underwriting is compelling. With the balance sheet’s composition shift and conservative provisioning in 2024 that produced a GAAP loss, management has emphasized maintaining underwriting discipline.

At present, the available data show no material spike in charge-offs or non-performing assets reported in the FY2024 summary lines, but investors should monitor quarterly asset-quality disclosures, allowance coverage and sector exposures. If credit conditions remain benign and loan yields can reprice faster than deposit costs, NII should benefit — but that is a macro and competition-dependent outcome.

Reconciliations and dataset inconsistencies you should know#

Two notable data conflicts appear in the available materials and require explicit mention. First, the reported current-ratio figure (7.85x) in summary metrics is inconsistent with the raw balance-sheet lines (current assets of $25.22B vs current liabilities $151.9B) which compute to roughly 0.17x. Given the peculiarities of bank balance sheets (large deposit balances classified as current liabilities), I prefer the direct-line calculation and treat the 7.85x figure as a definitional or dataset error.

Second, trailing EPS and PE metrics differ across dataset components: market-quote EPS shows -0.08 while fundamentals TTM net income per share is $0.16. The difference reflects timing (calendar-year GAAP loss vs rolling-TTM earnings including positive 2025 quarters). For forward-looking work, the TTM numbers and sequential quarter results provide a better read on the operational run-rate than a single-year GAAP loss.

What this means for investors (data-driven implications)#

First, assess dividend coverage not against FY2024 GAAP alone but against the 2025 run-rate. The payout ratio calculated at FY2024 earnings is unsustainably high; recent sequential quarter EPS improvement narrows the gap, but durable coverage requires the company to sustain positive operating cash flows and continue converting fintech investments into recurring fee streams.

Second, KeyCorp’s balance-sheet reshuffle — a material drawdown of cash-like investments and a reduction of total debt — reduced net debt and signals an active funding management strategy. That increases flexibility to redeploy capital into higher-yield assets, but it also removes part of the short-term liquidity cushion, making deposit retention and stable funding a live risk item.

Third, the strategic pivot toward fee income is logical and visible in management commentary and early 2025 results, but it is not yet a dominant revenue driver. Analysts’ forecasts (2025 estimated revenue $7.39B, rising to $8.32B by 2027) imply an expectation of top-line stabilization and EPS recovery; those are the metrics that will determine multiple expansion and dividend durability.

Finally, valuation remains tied to execution. With price-to-book around 1.07x and forward P/Es that compress as earnings normalize, the stock’s multiple will be influenced primarily by: (a) evidence of durable NII and fee-income growth, (b) maintenance of credit quality, and (c) clarity on dividend funding sources.

Key takeaways#

• FY2024 net loss: -$161MM, a -116.65% swing from the prior year, driven by revenue decline and year-end items. (Company FY2024 filings)
• Revenue dropped -11.54% to $9.05B in 2024; operating margin compressed to -3.38%. (Company FY2024 filings)
• Operating cash flow remained positive at $664MM but fell -77.10% YoY; free cash flow fell -78.33% YoY, reflecting weaker cash conversion in 2024. (Company FY2024 filings)
• Balance-sheet rebalancing was sizable: cash & short-term investments fell ~$26.4B year-over-year while total debt declined from $22.64B to $14.25B, lowering net debt to $12.51B. (Company FY2024 filings)
• Dividend math is stretched at FY2024 EPS: the computed payout ratio using TTM EPS (0.16) equals 512.50%, underscoring reliance on earnings recovery or balance-sheet resources to sustain distributions. (Company reported TTM metrics)
• Management’s strategic emphasis on fintech partnerships and fee income is visible and early 2025 quarterly beats indicate progress, but scale is not yet sufficient to offset 2024’s earnings hole. (Company commentary and Q1–Q3 2025 reported results)

Closing synthesis (no investment advice)#

KeyCorp entered 2025 with a repaired narrative: FY2024 produced a headline loss, but the 2025 quarterly cadence shows operational improvement and modest beat consistency. The balance sheet actions in 2024 — drawing down short-term investments while reducing debt — materially changed liquidity composition and reduced net leverage, a trade-off that offers both opportunity and risk. The bank’s dividend remains generous relative to near-term GAAP earnings, which raises a clear monitoring item for investors: dividends are sustainable only if the operating recovery persists and recurring fee income accelerates as management expects.

Watch the coming quarterly disclosures for three specific, verifiable signals: (1) continued sequential growth in core pre-provision net revenue (NII + recurring fees), (2) stable or improving asset-quality metrics and provision trends, and (3) evidence that fintech partnerships are delivering recurring fee revenue rather than one-off gains. Those three data points will determine whether the recovery reflected in 2025 quarters can become a durable earnings foundation or whether FY2024 proves a structural inflection that requires deeper remediation.

(Company financials and quarterly earnings releases as provided in the dataset, FY2024 filings and subsequent 2025 quarterly reports.)