KeyCorp Reaffirms 2026 Outlook as Loan Growth, Margins and Fees Gain Momentum

KeyCorp reaffirmed its 2026 outlook, citing constructive client activity, commercial loan growth expected near the high end of its 4%–5% target, improving credit quality and deposit growth above 2% in the second half. The bank raised its fee-income growth outlook to 4%–5% following the Clearwater acquisition, while investment banking, payments and wealth management continued to show growth opportunities. KeyCorp expects further margin expansion, plans at least $1.3 billion in share repurchases this year and is increasingly confident in achieving its target of more than 15% core return on tangible common equity by 2027.

KeyCorp Chief Financial Officer Clark Khayat said the bank remains confident in its 2026 outlook as client activity, loan growth and credit quality have continued to perform constructively despite uncertainty around interest rates, tariffs and geopolitical developments. Speaking at an investor conference, Khayat said the economic backdrop has changed substantially from expectations a year earlier, when markets anticipated rate cuts. Forward markets were instead indicating a high probability of three rate increases, he said. Even so, clients have become more comfortable operating amid shifting uncertainty, and KeyCorp continues to see healthy activity across lending and fee-based businesses.

Khayat said KeyCorp remains confident in the midpoint of its full-year average loan growth outlook of 4% to 5%, with commercial lending potentially tracking toward the higher end of expectations. While growth has moderated from an exceptionally strong first half, the company continues to add commercial clients across its geographic footprint and industries. Demand has been especially strong in utilities, power and renewable-energy-related lending, according to Khayat. KeyCorp has approximately $700 million to $800 million in direct data-center exposure, but he said power demand has supported broader utility and renewable lending opportunities.

Higher interest rates have not yet materially reduced borrower demand, Khayat said, though he noted that three additional rate hikes could potentially begin to slow activity. The company’s net interest income and net interest margin guidance is currently relatively agnostic to rate moves, as the balance sheet has been positioned to remain broadly neutral across different rate scenarios.

KeyCorp expects average client deposits to increase by more than 2% in the second half of the year. Khayat said deposit growth has been tracking ahead of loan growth during the current quarter, supported by seasonal rebuilding in commercial operating accounts and new client relationships. Deposit costs had risen only 1 to 2 basis points so far, he added.

The company reported a 2.89% net interest margin in the second quarter and continues to target approximately 3% to 3.05% in the near term, followed by 3.25% or more next year. Khayat cited fixed-rate asset repricing, deposit balances and funding optimization as major drivers. About $9 billion of fixed assets are expected to reprice in the second half of 2026, followed by roughly $21 billion in 2027.

Khayat, who recently assumed responsibility for technology before moving operations functions into the individual businesses they support, said KeyCorp has pursued a long-term modernization strategy for its core systems. The bank has sought to moder...