KeyCorp (KEY)

FairStock Score: 62/100 — STEADY

Key Financials

Strengths

• Modest P/E ratio of 12.77 with acceptable P/B of 1.20 suggests limited downside if earnings stabilize
• Strong recent net profit margin of 26.34% in Q4 2025 demonstrates operational execution capability
• Solid Piotroski F-Score of 7/9 indicates reasonable financial statement quality and operational trends
• Diversified business model spanning Consumer and Commercial Banking reduces single-segment dependency
• Mid-range Beta of 1.09 suggests only modest volatility premium versus market

Concerns

• Negative margin of safety of -47.16% means stock trades well above intrinsic value with no cushion for error
• Abysmal ROCE of 0.98% indicates the bank is barely covering its cost of capital; shareholder value destruction
• Alarming Altman Z-Score of 0.21 suggests financial distress risk; well below the 2.99 'safe zone'
• ROE of only 9.48% is inadequate compensation for banking sector risks; subpar capital deployment
• Weak competitive moat as a regional bank facing scale disadvantages and technological disruption

AI Analysis

KeyCorp presents a classic case of a regional bank trading at a modest valuation, but I'm troubled by the fundamental economics. At $19.69, the stock sits 47% above Graham's calculated fair value of $13.38—a negative margin of safety that violates our first principle of investing. The P/B of 1.20 is reasonable for a bank, and the P/E of 12.77 appears attractive on the surface, but dig deeper and the picture darkens. The ROE of 9.48% is mediocre at best; I've seen better returns in Treasury bonds. More concerning is the ROCE of 0.98%—essentially destroying shareholder capital when adjusted for risk. The Altman Z-Score of 0.21 signals potential distress, while the Piotroski F-Score of 7/9 shows mixed financial health. The latest quarter's 26.34% net margin is strong, but this reflects one-time items and seasonal patterns rather than sustainable earning power. With 17,883 employees generating $1.9B quarterly revenue, productivity appears adequate, yet the underlying competitive moat is weak. Regional banks face relentless pressure from larger competitors, fintech disruption, and rate sensitivity. The dividend yield remains undisclosed, suggesting limited shareholder returns. The FCF yield of 3.1% is uninspiring given the risks. I cannot ignore that KeyCorp operates in a structurally challenged industry with declining margin compression and elevated credit risk in an uncertain economic environment.

Bull Case

If interest rates remain elevated longer than consensus expects, KeyCorp's net interest margin could expand, driving earnings growth and justifying current valuations. Potential consolidation in regional banking could unlock acquisition value, while operational improvements and cost discipline could push ROE above 11% and justify a higher multiple.

Bear Case

A recession or sharp rate cuts could compress net interest margins, eroding the thin profitability that supports current valuations. Credit quality deterioration combined with loan losses could push the Z-Score into outright distress territory, forcing equity dilution or dividend cuts as regulatory pressures mount.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer