KeyCorp (NYSE: KEY) stepped into the earnings spotlight this morning, announcing that its second-quarter loss checked in at 69 cents per share (68 cents per share excluding charges). A year ago, the bank lost $2.71 per share in the second quarter. Although the results were better than those from a year ago, they were not better than the consensus estimate, which called for a loss of 41 cents per share.
The company also announced that it was cutting the amount of preferred shares that it plans to exchange by 71%. KeyCorp's CEO (Henry Meyer III) stated that the company's results "reflect the weak economic environment and the steps that it has taken to address issues in credit quality, strengthen capital and control costs." Like many regional banks, KeyCorp suffered thanks to the credit crunch; even though the bank was not a major player in the subprime-mortgage fiasco. The company added that loan-loss provisions were $850 million, which was 31% greater than a year ago.
The problem here is that we have a smaller, local bank that is not reaping the benefits of taking part in the TARP program. This is the fundamental problem I have with reading too much into "positive" results from financial companies. I have to question whether their earnings were propped up by TARP, as KeyCorp did not come with an outstretched palm, begging for help with loans that the bank never should have made. Now we are looking at a local bank that announced disappointing earnings and is paying the price.
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