Senior Equity Analyst Kevin Barker of Compass Point Research & Trading says KeyCorp (KEY) is one of his favorite stocks within his domestic regional bank coverage. He says the bank has the ability to cut expenses without affecting operations.
“It continues to cut expenses, the bank gets little credit for its asset sensitivity and it holds an outsized amount of capital compared to peers. Over time, this will give the bank the capacity to lower its share count and deploy capital via growth initiatives,” Barker said.
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Barker says that KeyCorp’s management has shown it can make difficult decisions in order to increase operating leverage by closing branches and reducing headcount in other areas of the business.
“KeyCorp has a large investment bank, which is a larger portion of their overall earnings profile compared to most regional banks of its size,” Barker said. “Key is particularly focused on not just cutting branches, but also moving back on some of its trading personnel and investment banking in particular, given those are higher-cost jobs. I think it has an ability to cut a little bit there.”
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