KeyCorp Wasn't Loved Before, And Now Reserves Are A New Worry

I thought that KeyCorp (KEY), even with some legitimate concerns and criticisms was underappreciated earlier this year, but that was before Covid-19 started to work its way across the U.S. economy. Now on top of longer-standing issues/concerns like the company’s far-flung footprint, its operating efficiency, and its capabilities (or lack thereof) in digital, there are risks concerning the company’s reserves and capital adequacy.

I do think it is likely that KeyCorp will increase its reserves as the year goes on; most banks have already acknowledged that the second quarter is on a worse trajectory than Q1 reserving decisions anticipated, but I also think the company will come through this okay. This is basically a trade now on Street sentiment around reserves, and KeyCorp admittedly doesn’t have as thick of a capital cushion as I’d like. Still, more aggressive investors may want to consider Key, as it is a bank that is at least of “decent” quality and likely to remain profitable through this downturn currently trading below tangible book.

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KeyCorp Wasn't Loved Before, And Now Reserves Are A New Worry