Line of Business Results

3 Months Ended

Mar. 31, 2012

Line of Business Results [Abstract]

Line of Business Results

16. Line of Business Results

The specific lines of business that comprise each of the major business segments (operating segments) are described below.

Key Community Bank

Key Community Bank serves individuals and small to mid-sized businesses through its 14-state branch network.

Individuals are provided branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans. In addition, financial, estate and retirement planning, and asset management services are offered to assist high-net-worth clients with their banking, trust, portfolio management, insurance, charitable giving and related needs.

Small businesses are provided deposit, investment and credit products, and business advisory services. Mid-sized businesses are provided products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.

Key Corporate Bank

Real Estate Capital and Corporate Banking Services consists of two business units, Real Estate Capital and Corporate Banking Services.

Real Estate Capital is a national business that provides construction and interim lending, permanent debt placements and servicing, equity and investment banking, and other commercial banking products and services to developers, brokers and owner-investors. This unit deals primarily with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from nonaffiliated third parties). Real Estate Capital emphasizes providing clients with finance solutions through access to the capital markets.

Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to clients served by both the Key Community Bank and Key Corporate Bank groups. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a full array of commercial banking products and services to government and not-for-profit entities and community banks. A variety of commercial payment products are provided through the Enterprise Commercial Payments Group.

Equipment Finance meets the equipment financing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets and Commercial Banking) if those businesses are principally responsible for maintaining the relationship with the client.

Institutional and Capital Markets, through its KeyBanc Capital Markets unit, provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.

Institutional and Capital Markets, through its Victory Capital Management unit, also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals. These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.

Other Segments

Other Segments consist of Corporate Treasury, our Principal Investing unit and various exit portfolios.

Reconciling Items

Total assets included under “Reconciling Items” primarily represent the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling Items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

The table on the following pages shows selected financial data for our two major business segments for the three-month periods ended March 31, 2012 and 2011. This table is accompanied by supplementary information for our Key Corporate Bank business segment. The information was derived from the internal financial reporting system we use to monitor and manage our financial performance. GAAP guides financial accounting, but there is no authoritative guidance for “management accounting” — the way we use our judgment and experience to make reporting decisions. Consequently, the line of business results we report may not be comparable to line of business results presented by other companies.

The selected financial data are based on internal accounting policies designed to compile results on a consistent basis and in a manner that reflects the underlying economics of the businesses. In accordance with our policies:

¿ Net interest income is determined by assigning a standard cost for funds used or a standard credit for funds provided based on their assumed maturity, prepayment and/or repricing characteristics.

¿ Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent to which each line of business actually uses the services.

¿ The consolidated provision for loan and lease losses is allocated among the lines of business primarily based on their actual net charge-offs, adjusted periodically for loan growth and changes in risk profile. The amount of the consolidated provision is based on the methodology that we use to estimate our consolidated allowance for loan and lease losses. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” on page 117 in our 2011 Annual Report on Form 10-K.

¿ Income taxes are allocated based on the statutory federal income tax rate of 35% (adjusted for tax-exempt interest income, income from corporate-owned life insurance and tax credits associated with investments in low-income housing projects) and a blended state income tax rate (net of the federal income tax benefit) of 2.2%.

¿ Capital is assigned based on our assessment of economic risk factors (primarily credit, operating and market risk) directly attributable to each line of business.

Developing and applying the methodologies that we use to allocate items among our lines of business is a dynamic process. Accordingly, financial results may be revised periodically to reflect accounting enhancements, changes in the risk profile of a particular business or changes in our organizational structure.

Three months ended March 31,	Key Community  Bank						Key Corporate  Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	353		$	378		$	187		$	187
Noninterest income		175			187			214			219
Total revenue (TE) (a)		528			565			401			406
Provision (credit) for loan and lease losses		2			11			13			(21)
Depreciation and amortization expense		9			10			13			20
Other noninterest expense		447			437			218			208
Income (loss) from continuing operations before income taxes (TE)		70			107			157			199
Allocated income taxes and TE adjustments		13			26			57			73
Income (loss) from continuing operations		57			81			100			126
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		57			81			100			126
Less: Net income (loss) attributable to noncontrolling interests		—			—			—			—
Net income (loss) attributable to Key	$	57		$	81		$	100		$	126
AVERAGE BALANCES (b)
Loans and leases	$	26,617		$	26,312		$	18,584		$	17,677
Total assets (a)		30,194			29,739			22,863			21,747
Deposits		47,768			48,108			11,556			11,282
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	49		$	76		$	25		$	75
Return on average allocated equity (b)		7.74	%		9.97	%		21.07	%		19.71	%
Return on average allocated equity		7.74			9.97			21.07			19.71
Average full-time equivalent employees (c)		8,719			8,378			2,254			2,155

(a) Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software and goodwill held by our major business segments, are located in the United States.

(b) From continuing operations.

(c) The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Other Segments						Total Segments						Reconciling Items						Key
2012			2011			2012			2011			2012			2011			2012			2011
	$              15		$	32		$	555		$	597		$	4		$	7		$	559		$	604
	90			61			479			467			(7)			(10)			472			457
	105			93			1,034			1,064			(3)			(3)			1,031			1,061
	27			(25)			42			(35)			—			(5)			42			(40)
	3			6			25			36			35			38			60			74
	21			23			686			668			(43)			(41)			643			627
	54			89			281			395			5			5			286			400
	9			23			79			122			2			(4)			81			118
	45			66			202			273			3			9			205			282
	—			—			—			—			(5)			(11)			(5)			(11)
	45			66			202			273			(2)			(2)			200			271
	—			8			—			8			—			—			—			8
	$              45			58		$	202		$	265		$	(2)		$	(2)		$	200		$	263
	$         4,189		$	5,294		$	49,390		$	49,283		$	40		$	29		$	49,430		$	49,312
	26,584			31,362			79,641			82,848			825			1,447			80,466			84,295
	487			770			59,811			60,160			(180)			(120)			59,631			60,040
	$             27		$	42		$	101		$	193			—			—		$	101		$	193
	25.93	%		28.20	%		14.59	%		15.99	%		.27	%		.81	%		8.25	%		9.91	%
	25.93			28.20			14.59			15.99			(.18)			(.18)			8.05			9.51
	5			64			10,978			10,597			4,426			4,704			15,404			15,301

Supplementary information (Key Corporate Bank lines of business)

Three months ended March 31,	Real Estate Capital and Corporate Banking Services						Equipment Finance								Institutional and Capital Markets
dollars in millions	2012			2011			2012				2011				2012			2011
Total revenue (TE)	$	161		$	168		$	64			$	63			$	176		$	175
Provision (credit) for loan and lease losses		—			9			(2	)			(26	)			15			(4	)
Noninterest expense		59			69			37				52				135			107
Net income (loss) attributable to Key		64			57			18				23				18			46
Average loans and leases		7,699			8,583			4,779				4,621				6,106			4,473
Average loans held for sale		291			140			24				4				194			131
Average deposits		8,221			8,611			8				6				3,327			2,665
Net loan charge-offs		16			65			5				10				4			—
Net loan charge-offs to average loans		.84	%		3.07	%		.42		%		.88		%		.26	%		—
Nonperforming assets at period end	$	173		$	334		$	28			$	44			$	36		$	49
Return on average allocated equity		27.56	%		15.56	%		26.71		%		27.04		%		10.28	%		24.51		%
Average full-time equivalent employees		951			882			469				521				834			752