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December 20, 2007
KeyCorp said Thursday that it expects to post a fourth quarter loss of up to 5 cents a share as the Midwest regional bank sets aside additional reserves for loan losses and eliminates 1,040 jobs.
Analysts surveyed by Thomson Financial were expecting a profit of 63 cents a share.
KeyCorp said it expects to report net loan charge-offs of $110 million to $120 million, fixed-income losses of $55 million to $65 million, and layoff expenses of $26 million for the fourth quarter.
The Cleveland-based company plans to lay off 740 workers and eliminate 300 open positions. In Ohio, KeyCorp said it will eliminate 230 jobs in Cleveland and 170 jobs at a call center in Dayton.
KeyCorp said the loan charge-offs are because of deteriorating market conditions in its residential portfolio, primarily in Florida and California. It also said it will no longer make loans to real estate developers outside of the 13-state region where it does business and also will stop making most home-equity loans out of the region.
It has transferred approximately $1.1 billion of homebuilder-related loans and $800 million of condominium exposure to its special asset management group.
KeyCorp also will quit its payroll services businesses, which will eliminate 170 jobs.
KeyCorp previously announced a $32 million charge, or 5 cents per share, related to the settlement of an antitrust lawsuit between credit card companies American Express Co. and Visa Inc.
"Like most banks, Key's homebuilder loan portfolio has been adversely impacted by the downturn in the U.S. housing market, and our participation in the capital markets through various lines of business has adversely impacted market values, and therefore, financial results," Chief Executive Henry Meyer said in a statement.
The company exited its subprime-mortgage business more than a year ago and has "no meaningful" exposure to risky lending or investment vehicles related to the housing market, Meyer said.
KeyCorp said it will increase its dividend to 37.5 cents per share in the first quarter.
The announcement was made after stock markets closed Thursday. KeyCorp shares fell 40 cents, or nearly 2 percent, to close at $21.91 after hitting a new multiyear intraday low of $21.56. The stock lost a penny in after-hours trading.
KeyCorp shares have traded as high as $39.90 in the past year.
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