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Shares of KeyCorp KEY gained 3.5% in response to the announcement of a new share repurchase program. The company’s board of directors authorized a $1 billion plan, which will commence in the second half of the year.
KeyCorp has not been actively buying back shares because of the challenging macroeconomic environment and its efforts to navigate it for almost three years.
KEY raised its quarterly dividend by 5.1% to 20.5 cents per share in 2022 and has maintained that level since. While the company initially benefited from the Federal Reserve's rate hikes (that started in March 2022), rising funding and deposit costs later strained its financials and capital ratios.
To counter this tough backdrop, KeyCorp took several steps, including selling a 14.9% equity stake to The Bank of Nova Scotia BNS for $2.8 billion. For BNS, this step marks a massive advancement as it tries to expand operations in North America, while for KEY, the investment is expected to boost its capital ratios.
Following the completion of the investment in two tranches, KeyCorp undertook the balance sheet repositioning actions last year, which will drive net interest income and margin expansion in 2025 and 2026. The efforts are also expected to be low single-digit accretive to the company’s 2025 earnings and slightly accretive to its 2026 earnings.
Our Take on KeyCorp’s Buyback Plan
As of Dec. 31, 2024, KeyCorp had a total debt worth $19.2 billion (the majority of this is long-term in nature). Its cash and due from banks and short-term investments were also $19.2 billion as of the same date. Thus, the company now has an impressive liquidity position.
Hence, the announcement of a new buyback program is a step in the right direction to reward shareholders.
Over the past year, shares of KEY have rallied 8.6%, underperforming the industry’s growth of 15.8%.
Image Source: Zacks Investment Research
At present, KeyCorp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Another Bank Rewarding Shareholders
Last week, Metropolitan Bank Holding Corp. MCB announced a new share repurchase program. Under the plan, the company has been authorized to buy back shares worth $50 million. There is no expiration date for the program.
In the last two years, MCB did not have any share repurchase plan in place. Also, the company does not pay any dividends to its shareholders.
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