After KeyCorp’s second-quarter earnings beat Wall Street’s estimates, the stock declined over 3 percent on management’s somewhat tepid full-year guidance, so Chairman and CEO Beth Mooney wanted to clarify the company’s prospects and goals.
“We see strength in our company, strong balance sheet, and I do believe, if there is some more clarity and some fiscal stimulus added to this economy, that there’s almost a coiled-spring effect that has not yet come through in expenditures for capital expenditures or other kinds of business investments,” Mooney told “Mad Money” host Jim Cramer on Thursday.
Mooney said the company’s forecast of the rest of 2017 was based in part on a slower-than-anticipated first half of the year and in part on falling consumer confidence.
KeyCorp also finalized its acquisition of First Niagara Financial just a year ago, and Mooney said the company was still in the throes of integrating the two entities to create the best value possible for KeyCorp’s shareholders.
“We announced today that we hit the $400 million cost-saving targets, but that our strategy is very much about executing that, which includes our core momentum, as well as fully realizing the value on First Niagara,” the CEO said. “At the end of the day, I think we are clear [that] we have everything we need to be successful and compete, and we do believe First Niagara created good value for our shareholders and was a good use of capital.”
With First Niagara, KeyCorp not only expanded its network, but added a mortgage servicing business to its roster, something the bank conglomerate was not capable of before the merger.
“So it’s not only in new markets, it’s our ability to turn it on our footprint,” Mooney said. “So we do see that as an area of growth in the coming years, and while we’re early days in the revenue synergies, that is probably one of our biggest opportunities.”
On top of that, the company, which operates some 1,200 locations across the Western and Eastern United States, recently passed the Federal Reserve’s Comprehensive Capital Analysis and Review stress test, giving it the opportunity to raise its dividend and buy back shares.
Mooney said that KeyCorp, the parent of KeyBank, would raise its dividend by 26 percent over the next year and plan an $800 million share buyback.
“The ability to continue to buy back stock and return that capital to our shareholders we believe is a good use of our capital,” Mooney told Cramer. “And if there is more economic stimulus or confidence, Key is always well positioned to take advantage of commercial loan growth trends.”
Disclosure: Cramer’s charitable trust owns shares in KeyCorp.
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Source: Investment Cnbc
KeyCorp CEO Beth Mooney says economic stimulus will have 'a coiled-spring effect' on banks' capital