- The Washington Times - Tuesday, April 21, 2009

CLEVELAND (AP) - The banking company KeyCorp said Tuesday it lost $488 million in the first quarter, partly due to a large increase in its set-asides for loan losses, and said it plans to cut its dividend on common stock to a penny a share.

“Our results reflect an extremely challenging operating environment,” said KeyCorp CEO Henry Meyer, in a statement. “We believe building additional reserves is appropriate given the continued pressure on credit quality, as more businesses and consumers are affected by the persistent severity of the economic downturn.”

He said a priority is to maintain a strong capital position.

Its shares fell $1.30, or 17.6 percent, to $6.10 in morning trading Tuesday.

KeyCorp said its board plans to cut its dividend from 6.25 cents in the second quarter. It said that will mean it will hold on to an extra $100 million of capital a year. It added its capital ratios remain strong and that its costs are well controlled.

The Cleveland-based banking company said its loss amounted to $1.09 per share for the January-March period. A year earlier, it earned $218 million, or 54 cents per share, in the quarter.

KeyCorp said its loss amounted to 25 cents a share excluding various one-time items, including a non-cash accounting charge for the reduced value of its national banking unit.

Analysts in a Thomson Reuters survey had expected on average KeyCorp to post a loss of 21 cents per share. Such estimates generally exclude one-time charges or gains.

KeyCorp is the holding company for KeyBank National Association that provides various retail and commercial banking services, with about 986 full-service branches in 14 states.

KeyCorp took an $875 million provision for loan losses, which exceeded net charge-offs by $383 million. As of the end of the quarter, its allowance for loan losses was nearly $2.2 billion, or 3 percent of total loans, up from about $1.3 billion, or 1.7 percent of total loans one year ago.

KeyCorp also said the estimated fair value of its national banking unit is now less than the carrying amount, reflecting continued weakness in the financial markets. As a result, Key recorded an after-tax noncash accounting charge of $187 million.

During the first quarter, Key originated approximately $7.8 billion in new or renewed loans and commitments to consumers and businesses.

“In the current environment, it is imperative that we strike a careful balance between managing risk effectively and doing our part to help the country regain its financial viability,” Meyer said.

KeyCorp raised capital twice in 2008, $1.74 billion from institutional and individual investors last June, and $2.5 billion in November, as a participant in the U.S. Treasury’s rescue program. In the first quarter, Key made a $32 million dividend payment to the Treasury as its first quarterly dividend payment under the government’s capital purchase program.


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