10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

[Ö] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2012

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From           To          

Commission File Number 1-11302

KeyCorp

(Exact name of registrant as specified in its charter)

Ohio	34-6542451
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
127 Public Square, Cleveland, Ohio	44114-1306
(Address of principal executive offices)	(Zip Code)

(216) 689-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  þ	Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨  No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Shares with a par value of $1 each	943,463,119 Shares
(Title of class)	(Outstanding at July 31, 2012)

KEYCORP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	Page Number
	Consolidated Balance Sheets — June 30, 2012 (Unaudited), December 31, 2011, and June 30, 2011 (Unaudited)		5
	Consolidated Statements of Income (Unaudited) — Three and six months ended June 30, 2012 and 2011		6
	Consolidated Statements of Comprehensive Income (Unaudited) — Three and six months ended June 30, 2012 and 2011		7
	Consolidated Statements of Changes in Equity (Unaudited) — Six months ended June 30, 2012 and 2011		8
	Consolidated Statements of Cash Flows (Unaudited) — Six months ended June 30, 2012 and 2011		9
	Notes to Consolidated Financial Statements (Unaudited)		10
	Note 1. Basis of Presentation		10
	Note 2. Earnings Per Common Share		13
	Note 3. Loans and Loans Held for Sale		14
	Note 4. Asset Quality		15
	Note 5. Fair Value Measurements		26
	Note 6. Securities		39
	Note 7. Derivatives and Hedging Activities		43
	Note 8. Mortgage Servicing Assets		50
	Note 9. Variable Interest Entities		51
	Note 10. Income Taxes		53
	Note 11. Acquisition and Discontinued Operations		54
	Note 12. Contingent Liabilities and Guarantees		60
	Note 13. Trust Preferred Securities Issued by Unconsolidated Subsidiaries		63
	Note 14. Employee Benefits		65
	Note 15. Shareholders’ Equity		66
	Note 16. Line of Business Results		67
	Report of Independent Registered Public Accounting Firm		72

2

Item 2.	Management’s Discussion & Analysis of Financial Condition
	& Results of Operations	73
	Introduction	73
	Terminology	73
	Selected Financial Data	74
	Forward-looking statements	75
	Economic overview	76
	Long-term financial goals	76
	Strategic developments	77
	Demographics	78
	Supervision and regulation	80
	Regulatory reform developments	80
	Stress Testing	80
	Interchange fees	80
	Enhanced prudential standards and early remediation requirements	80
	U.S. implementation of Basel III	80
	Highlights of Our Performance	81
	Results of Operations	85
	Net interest income	85
	Noninterest income	89
	Trust and investment services income	91
	Operating lease income	91
	Investment banking and capital markets income (loss)	91
	Other income	92
	Noninterest expense	92
	Personnel	93
	Operating lease expense	93
	FDIC Assessment	93
	Other Expense	93
	Income taxes	94
	Line of Business Results	95
	Key Community Bank summary of operations	95
	Key Corporate Bank summary of operations	96
	Other Segments	97
	Financial Condition	98
	Loans and loans held for sale	98
	Commercial loan portfolio	98
	Commercial, financial and agricultural	98
	Commercial real estate loans	98
	Commercial lease financing	99
	Commercial loan modification and restructuring	99
	Extensions	101
	Guarantors	101
	Consumer loan portfolio	102
	Loans held for sale	103
	Loan sales	103
	Securities	103
	Securities available-for-sale	104
	Held-to-maturity securities	105
	Other investments	106
	Deposits and other sources of funds	106
	Capital	107
	Comprehensive capital assessment review and capital actions	107

3

	Repurchase of TARP CPP preferred stock, warrant and completion of equity and debt offerings	108
	Dividends	108
	Common shares outstanding	108
	Capital adequacy	109
	Basel III	110
	Risk Management	112
	Overview	112
	Market risk management	113
	Interest rate risk management	113
	Net interest income simulation analysis	113
	Economic value of equity modeling	114
	Management of interest rate exposure	115
	Derivatives not designated in hedge relationships	115
	Liquidity risk management	115
	Governance structure	116
	Factors affecting liquidity	116
	Managing liquidity risk	116
	Long-term liquidity strategy	117
	Sources of liquidity	117
	Liquidity programs	117
	Liquidity for KeyCorp	117
	Our liquidity position and recent activity	118
	Credit risk management	118
	Credit policy, approval and evaluation	118
	Allowance for loan and lease losses	119
	Net loan charge-offs	122
	Nonperforming assets	124
	Operational risk management	127
	Critical Accounting Policies and Estimates	127
	European Sovereign Debt Exposure	129
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	130
Item 4.	Controls and Procedures	130
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	130
Item 1A.	Risk Factors	130
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	131
Item 6.	Exhibits	131
	Signature	132
	Exhibits	133

Throughout the Notes to Consolidated Financial Statements (Unaudited) and Management’s Discussion & Analysis of Financial Condition & Results of Operations, we use certain acronyms and abbreviations as defined in Note 1 (“Basis of Presentation”), that begins on page 10.

4

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

Consolidated Balance Sheets

in millions, except per share data	June 30,    2012		December 31,    2011		June 30,    2011
	(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks	$	717	$	694	$	853
Short-term investments		2,216		3,519		4,563
Trading account assets		679		623		769
Securities available for sale		13,205		16,012		18,680
Held-to-maturity securities (fair value: $4,396, $2,133 and $19)		4,352		2,109		19
Other investments		1,186		1,163		1,195
Loans, net of unearned income of $1,155, $1,388 and $1,460		49,605		49,575		47,840
Less: Allowance for loan and lease losses		888		1,004		1,230
Net loans		48,717		48,571		46,610
Loans held for sale		656		728		381
Premises and equipment		931		944		919
Operating lease assets		318		350		453
Goodwill		917		917		917
Other intangible assets		15		17		19
Corporate-owned life insurance		3,285		3,256		3,208
Derivative assets		818		945		900
Accrued income and other assets (including $91 of consolidated LIHTC guaranteed funds VIEs, see Note 9)(a)		2,978		3,077		2,968
Discontinued assets (including $2,611 of consolidated education loan securitization trust VIEs (see Note 9) and $73 of loans in portfolio at fair value)(a)		5,533		5,860		6,328
Total assets	$	86,523	$	88,785	$	88,782
LIABILITIES
Deposits in domestic offices:
NOW and money market deposit accounts	$	28,957	$	27,954	$	26,277
Savings deposits		2,103		1,962		1,973
Certificates of deposit ($100,000 or more)		3,669		4,111		4,939
Other time deposits		5,385		6,243		7,167
Total interest-bearing		40,114		40,270		40,356
Noninterest-bearing		21,435		21,098		19,318
Deposits in foreign office — interest-bearing		618		588		736
Total deposits		62,167		61,956		60,410
Federal funds purchased and securities sold under repurchase agreements		1,716		1,711		1,668
Bank notes and other short-term borrowings		362		337		511
Derivative liabilities		763		1,026		991
Accrued expense and other liabilities		1,417		1,763		1,518
Long-term debt		7,521		9,520		10,997
Discontinued liabilities (including $2,401 of consolidated education loan securitization trust VIEs at fair value, see Note 9)(a)		2,401		2,550		2,950
Total liabilities		76,347		78,863		79,045
EQUITY
Preferred stock, $1 par value, authorized 25,000,000 shares:
7.75% Noncumulative Perpetual Convertible Preferred Stock, Series A, $100 liquidation preference; authorized 7,475,000 shares; issued 2,904,839, 2,904,839 and 2,904,839 shares		291		291		291
Common shares, $1 par value; authorized 1,400,000,000 shares; issued 1,016,969,905, 1,016,969,905 and 1,016,969,905 shares		1,017		1,017		1,017
Capital surplus		4,120		4,194		4,191
Retained earnings		6,595		6,246		5,926
Treasury stock, at cost (71,496,550, 63,962,113 and 63,147,538)		(1,796)		(1,815)		(1,815)
Accumulated other comprehensive income (loss)		(72)		(28)		109
Key shareholders’ equity		10,155		9,905		9,719
Noncontrolling interests		21		17		18
Total equity		10,176		9,922		9,737
Total liabilities and equity	$	86,523	$	88,785	$	88,782

(a) The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

See Notes to Consolidated Financial Statements (Unaudited).

5

Consolidated Statements of Income (Unaudited)

		Three months ended  June 30,					Six months ended  June 30,
dollars in millions, except per share amounts		2012		2011			2012		2011
INTEREST INCOME
Loans	$		518	$	551	$		1,054	$	1,121
Loans held for sale			5		3			10		7
Securities available for sale			105		149			221		315
Held-to-maturity securities			17		1			29		1
Trading account assets			5		9			11		16
Short-term investments			2		1			3		2
Other investments			10		12			18		24
Total interest income			662		726			1,346		1,486
INTEREST EXPENSE
Deposits			71		100			148		210
Federal funds purchased and securities sold under repurchase agreements			1		2			2		3
Bank notes and other short-term borrowings			2		3			4		6
Long-term debt			50		57			101		106
Total interest expense			124		162			255		325
NET INTEREST INCOME			538		564			1,091		1,161
Provision (credit) for loan and lease losses			21		(8)			63		(48)
Net interest income (expense) after provision for loan and lease losses			517		572			1,028		1,209
NONINTEREST INCOME
Trust and investment services income			102		113			211		223
Service charges on deposit accounts			70		69			138		137
Operating lease income			20		32			42		67
Letter of credit and loan fees			56		47			110		102
Corporate-owned life insurance income			30		28			60		55
Net securities gains (losses)(a)			—		2			—		1
Electronic banking fees			19		33			36		63
Gains on leased equipment			36		5			63		9
Insurance income			11		14			23		29
Net gains (losses) from loan sales			32		11			54		30
Net gains (losses) from principal investing			24		17			59		52
Investment banking and capital markets income (loss)			37		42			80		85
Other income			48		41			81		58
Total noninterest income			485		454			957		911
NONINTEREST EXPENSE
Personnel			389		380			774		751
Net occupancy			62		62			126		127
Operating lease expense			15		25			32		53
Computer processing			43		42			84		84
Business services and professional fees			51		44			89		82
FDIC assessment			8		9			16		38
OREO expense, net			7		(3)			13		7
Equipment			27		26			53		52
Marketing			17		10			30		20
Provision (credit) for losses on lending-related commitments			6		(12)			6		(16)
Other expense			89		97			194		183
Total noninterest expense			714		680			1,417		1,381
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			288		346			568		739
Income taxes			57		94			132		205
INCOME (LOSS) FROM CONTINUING OPERATIONS			231		252			436		534
Income (loss) from discontinued operations, net of taxes of $6, ($6), $3 and ($12) (see Note 11)			10		(9)			5		(20)
NET INCOME (LOSS)			241		243			441		514
Less: Net income (loss) attributable to noncontrolling interests			5		3			5		11
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	$		236	$	240	$		436	$	503
Income (loss) from continuing operations attributable to Key common shareholders	$		221	$	243	$		420	$	427
Net income (loss) attributable to Key common shareholders			231		234			425		407
Per common share:
Income (loss) from continuing operations attributable to Key common shareholders	$		.23	$	.26	$		.44	$	.47
Income (loss) from discontinued operations, net of taxes			.01		(.01)			.01		(.02)
Net income (loss) attributable to Key common shareholders			.24		.25			.45		.44
Per common share — assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders	$		.23	$	.26	$		.44	$	.46
Income (loss) from discontinued operations, net of taxes			.01		(.01)			.01		(.02)
Net income (loss) attributable to Key common shareholders (c)			.24		.25			.45		.44
Cash dividends declared per common share	$		.05	$	.03	$		.08	$	.04
Weighted-average common shares outstanding (000) (b)			944,648		947,565			946,995		914,911
Weighted-average common shares and potential common shares outstanding (000)			948,087		952,133			951,029		920,162

(a) For the three months ended June 30, 2012 and 2011, we did not have any impairment losses related to securities.

(b) Assumes conversion of stock options and/or Preferred Series A, as applicable.

(c) EPS may not foot due to rounding.

See Notes to Consolidated Financial Statements (Unaudited).

6

Consolidated Statements of Comprehensive Income (Unaudited)

		Three months ended June  30,					Six months ended June  30,
in millions		2012		2011			2012		2011
Net income (loss)	$		241	$	243	$		441	$	514
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of ($25), $73, ($31), and $61			(42)		123			(53)		103
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($2), $9, $5, and $4			(4)		15			8		7
Foreign currency translation adjustments			(10)		4			(4)		13
Net pension and postretirement benefit costs, net of income taxes			3		2			5		3
Other comprehensive income (loss), net of tax:			188		387			397		640
Net contribution to (distribution from) noncontrolling interests			4		(254)			4		(239)
Total comprehensive income (loss) attributable to Key	$		192	$	133	$		401	$	401

See Notes to Consolidated Financial Statements (Unaudited).

7

Consolidated Statements of Changes in Equity (Unaudited)

	Key Shareholders’ Equity
dollars in millions, except per share amounts	Preferred Shares Outstanding (000)		Common Shares Outstanding (000)		Preferred Stock		Common Shares		Common Stock Warrant		Capital Surplus		Retained Earnings		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests
BALANCE AT DECEMBER 31, 2010		2,930		880,608	$	2,737	$	946	$	87	$	3,711	$	5,557	$	(1,904)	$	(17)	$	257
Net income (loss)														503						11
Net unrealized gains (losses) on securities available for sale, net of income taxes of $61																		103
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $4																		7
Net distribution to noncontrolling interests																				(250)
Foreign currency translation adjustments																		13
Net pension and postretirement benefit costs, net of income taxes																		3
Deferred compensation												(2)
Cash dividends declared on common shares ($.04 per share)														(38)
Cash dividends declared on Noncumulative Series A Preferred Stock ($3.875 per share)														(12)
Cash dividends accrued on Cumulative Series B Preferred Stock (5% per annum)														(31)
Series B Preferred Stock - TARP redemption		(25)				(2,451)								(49)
Repurchase of common stock warrant										(87)		17
Amortization of discount on Series B Preferred Stock						4								(4)
Common shares issuance				70,621				71				533
Common shares reissued for stock options and other employee benefit plans				2,593								(68)				89
Other						1
BALANCE AT JUNE 30, 2011		2,905		953,822	$	291	$	1,017		—	$	4,191	$	5,926	$	(1,815)	$	109	$	18
BALANCE AT DECEMBER 31, 2011		2,905		953,008	$	291	$	1,017		—	$	4,194	$	6,246	$	(1,815)	$	(28)	$	17
Net income (loss)														436						5
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of ($31)																		(53)
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $5																		8
Net distribution from noncontrolling interests																				(1)
Foreign currency translation adjustments																		(4)
Net pension and postretirement benefit costs, net of income taxes																		5
Deferred compensation												8
Cash dividends declared on common shares ($.08 per share)														(76)
Cash dividends declared on Noncumulative Series A Preferred Stock ($3.875 per share)														(11)
Common shares repurchased				(10,468)												(82)
Common shares reissued (returned) for stock options and other employee benefit plans				2,933								(82)				101
BALANCE AT JUNE 30, 2012		2,905		945,473	$	291	$	1,017		—	$	4,120	$	6,595	$	(1,796)	$	(72)	$	21

See Notes to Consolidated Financial Statements (Unaudited).

8

Consolidated Statements of Cash Flows (Unaudited)

	Six months ended June 30,
in millions	2012		2011
OPERATING ACTIVITIES
Net income (loss)	$	441	$	514
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision (credit) for loan and lease losses		63		(48)
Depreciation and amortization expense		119		143
FDIC (payments) net of FDIC expense		13		35
Deferred income taxes (benefit)		38		157
Net losses (gains) and writedown on OREO		12		5
Provision (credit) for customer derivative losses		1		(12)
Net losses (gains) from loan sales		(54)		(30)
Net losses (gains) from principal investing		(59)		(52)
Provision (credit) for losses on lending-related commitments		6		(16)
(Gains) losses on leased equipment		(63)		(9)
Net securities losses (gains)		—		(1)
Net decrease (increase) in loans held for sale excluding loan transfers from continuing operations		(5)		140
Net decrease (increase) in trading account assets		(57)		216
Other operating activities, net		(220)		412
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		235		1,454
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments		1,303		(3,219)
Purchases of securities available for sale		(10)		(619)
Proceeds from sales of securities available for sale		—		1,587
Proceeds from prepayments and maturities of securities available for sale		2,733		2,448
Proceeds from prepayments and maturities of held-to-maturity securities		238		—
Purchases of held-to-maturity securities		(2,481)		(2)
Purchases of other investments		(39)		(104)
Proceeds from sales of other investments		3		43
Proceeds from prepayments and maturities of other investments		72		41
Net decrease (increase) in loans, excluding acquisitions, sales and transfers		(217)		1,775
Proceeds from loan sales		135		94
Purchases of premises and equipment		(53)		(74)
Proceeds from sales of premises and equipment		1		—
Proceeds from sales of other real estate owned		45		94
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		1,730		2,064
FINANCING ACTIVITIES
Net increase (decrease) in deposits		211		(200)
Net increase (decrease) in short-term borrowings		30		(1,017)
Net proceeds from issuance of long-term debt		4		1,020
Payments on long-term debt		(2,019)		(684)
Repurchase of Treasury Shares		(82)		—
Net proceeds from issuance of common shares		—		604
Net proceeds from reissuance of common shares		1		—
Series B Preferred Stock - TARP redemption		—		(2,500)
Repurchase of common stock warrant		—		(70)
Cash dividends paid		(87)		(96)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(1,942)		(2,943)
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		23		575
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD		694		278
CASH AND DUE FROM BANKS AT END OF PERIOD	$	717	$	853
Additional disclosures relative to cash flows:
Interest paid	$	249	$	317
Income taxes paid (refunded)		26		(319)
Noncash items:
Loans transferred to portfolio from held for sale	$	93		—
Loans transferred to held for sale from portfolio		16	$	54
Loans transferred to other real estate owned		21		23

See Notes to Consolidated Financial Statements (Unaudited).

9

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

As used in these Notes, references to “Key,” “we,” “our,” “us” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. KeyCorp refers solely to the parent holding company, and KeyBank refers to KeyCorp’s subsidiary, KeyBank National Association.

The acronyms and abbreviations identified below are used in the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion & Analysis of Financial Condition & Results of Operations. You may find it helpful to refer back to this page as you read this report.

References to our “2011 Annual Report on Form 10-K” refer to our Annual Report on Form 10-K for the year ended December 31, 2011, that has been filed with the U.S. Securities and Exchange Commission and is available on its website (www.sec.gov) or on our website (www.key.com/ir).

ABO: Accumulated benefit obligation.	N/A: Not applicable.
AICPA: American Institute of Certified Public Accountants.	NASDAQ: National Association of Securities Dealers
ALCO: Asset/Liability Management Committee.	Automated Quotation System.
ALLL: Allowance for loan and lease losses.	N/M: Not meaningful.
A/LM: Asset/liability management.	NOW: Negotiable Order of Withdrawal.
AOCI: Accumulated other comprehensive income (loss).	NPR: Notice of proposed rulemaking.
APBO: Accumulated postretirement benefit obligation.	NYSE: New York Stock Exchange.
Austin: Austin Capital Management, Ltd.	OCC: Office of the Comptroller of the Currency.
BHCs: Bank holding companies.	OCI: Other comprehensive income (loss).
CCAR: Comprehensive Capital Analysis and Review.	OREO: Other real estate owned.
CMO: Collateralized mortgage obligation.	OTTI: Other-than-temporary impairment.
Common Shares: Common Shares, $1 par value.	QSPE: Qualifying special purpose entity.
CPP: Capital Purchase Program of the U.S. Treasury.	PBO: Projected Benefit Obligation.
DIF: Deposit Insurance Fund.	S&P: Standard and Poor’s Ratings Services, a Division of The
Dodd-Frank Act: Dodd-Frank Wall Street Reform and	McGraw-Hill Companies, Inc.
Consumer Protection Act of 2010.	SCAP: Supervisory Capital Assessment Program administered
ERISA: Employee Retirement Income Security Act of 1974.	by the Federal Reserve.
ERM: Enterprise risk management.	SEC: U.S. Securities & Exchange Commission.
EVE: Economic value of equity.	Series A Preferred Stock: KeyCorp’s 7.750% Noncumulative
FASB: Financial Accounting Standards Board.	Perpetual Convertible Preferred Stock, Series A.
FDIC: Federal Deposit Insurance Corporation.	Series B Preferred Stock: KeyCorp’s Fixed-Rate Cumulative
Federal Reserve: Board of Governors of the Federal Reserve	Perpetual Preferred Stock, Series B issued to the U.S. Treasury
System.	under the CPP.
FHLMC: Federal Home Loan Mortgage Corporation.	SILO: Sale in, lease out transaction.
FNMA: Federal National Mortgage Association.	SPE: Special purpose entity.
FVA: Fair Value of pension plan assets.	TAG: Transaction Account Guarantee program of the FDIC.
GAAP: U.S. generally accepted accounting principles.	TARP: Troubled Asset Relief Program.
GNMA: Government National Mortgage Association.	TDR: Troubled debt restructuring.
IRS: Internal Revenue Service.	TE: Taxable equivalent.
ISDA: International Swaps and Derivatives Association.	TLGP: Temporary Liquidity Guarantee Program of the FDIC.
KAHC: Key Affordable Housing Corporation.	U.S. Treasury: United States Department of the Treasury.
LIBOR: London Interbank Offered Rate.	VAR: Value at risk.
LIHTC: Low-income housing tax credit.	VEBA: Voluntary Employee Beneficiary Association.
LILO: Lease in, lease out transaction.	VIE: Variable interest entity.
Moody’s: Moody’s Investor Services, Inc.	XBRL: eXtensible Business Reporting Language.

10

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly impact the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements and financial instruments. See Note 9 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% generally are carried at cost. Investments held by our registered broker-dealer and investment company subsidiaries (primarily principal investments) are carried at fair value.

We believe that the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2011 Annual Report on Form 10-K. See Note 11 (“Acquisition and Discontinued Operations”) for further information regarding an error correction that was made during the third quarter of 2011.

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

On August 1, 2012, we announced certain new strategic actions to further strengthen our consumer and commercial payments businesses. We have acquired Key-branded credit card assets from Elan Financial Services and will begin to self-issue credit cards. The acquired credit card portfolio of approximately 400,000 consumer and business accounts is comprised of current and former Key clients and has approximately $725 million in credit card assets. We also announced that we entered into a new third party processing agreement with Elavon, Inc. This new agreement continues the legacy arrangement with Elavon while providing Key the opportunity to more fully integrate merchant processing services into our overall payment solutions for business clients. This new arrangement with Elavon is expected to become effective in the first half of 2013.

Offsetting Derivative Positions

In accordance with the applicable accounting guidance, we take into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. Additional information regarding derivative offsetting is provided in Note 7 (“Derivatives and Hedging Activities”).

Accounting Guidance Adopted in 2012

Fair value measurement. In May 2011, the FASB issued accounting guidance that changed the wording used to describe many of the current accounting requirements for measuring fair value and disclosing information about fair value measurements. This accounting guidance clarified the FASB’s intent about the application of existing fair value measurement requirements. It was effective for the interim and annual periods beginning on or after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations. As required by this accounting guidance, additional information regarding the classification is provided in Note 5 (“Fair Value Measurements”).

Presentation of comprehensive income. In June 2011, the FASB issued new accounting guidance that required all nonowner changes in shareholders’ equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new accounting guidance did not change any of the components currently recognized in net income or comprehensive income. It was effective for public entities for interim and annual periods beginning after December 15, 2011 (effective January 1, 2012, for us) as well as interim and annual periods thereafter. As required by this accounting guidance, Consolidated Statements of Comprehensive Income (Unaudited) are now included as part of our financial statements.

11

Testing goodwill for impairment. In September 2011, the FASB issued new accounting guidance that simplified how an entity tests goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether additional goodwill impairment testing is required. This accounting guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.

Repurchase agreements. In April 2011, the FASB issued accounting guidance that changed the accounting for repurchase agreements and other similar arrangements by eliminating the collateral maintenance requirement when assessing effective control in these transactions. This change could result in more of these transactions being accounted for as secured borrowings instead of sales. This accounting guidance was effective for new transactions and transactions modified on or after the first interim or annual period beginning after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations since we do not account for these types of arrangements as sales.

Accounting Guidance Pending Adoption at June 30, 2012

Testing indefinite-lived intangible assets for impairment. In July 2012, the FASB issued new accounting guidance that simplifies how an entity tests indefinite-lived intangible assets other than goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether further testing for impairment of indefinite-lived intangible assets other than goodwill is required. This accounting guidance will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (January 1, 2013, for us). Early adoption is permitted. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Offsetting disclosures. In December 2011, the FASB issued new accounting guidance that requires an entity to disclose information about offsetting and related arrangements to enable financial statement users to understand the effect of those arrangements on the entity’s financial position. This new accounting guidance will be effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (effective January 1, 2013, for us).

12

2. Earnings Per Common Share

Our basic and diluted earnings per Common Share are calculated as follows:

		Three months ended June 30,				Six months ended June 30,
dollars in millions, except per share amounts		2012		2011		2012		2011
EARNINGS
Income (loss) from continuing operations		$	231	$	252	$	436	$	534
Less:	Net income (loss) attributable to noncontrolling interests		5		3		5		11
Income (loss) from continuing operations attributable to Key			226		249		431		523
Less:	Dividends on Series A Preferred Stock		5		6		11		12
	Cash dividends on Series B Preferred Stock (b)		—		—		—		31
	Amortization of discount on Series B Preferred Stock(b)		—		—		—		53
Income (loss) from continuing operations attributable to Key common shareholders			221		243		420		427
Income (loss) from discontinued operations, net of taxes(a)			10		(9)		5		(20)
Net income (loss) attributable to Key common shareholders		$	231	$	234	$	425	$	407
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)			944,648		947,565		946,995		914,911
Effect of dilutive convertible preferred stock, common share options and other stock awards (000)			3,439		4,568		4,034		5,251
Weighted-average common shares and potential common shares outstanding (000)			948,087		952,133		951,029		920,162
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders		$	.23	$	.26	$	.44	$	.47
Income (loss) from discontinued operations, net of taxes (a)			.01		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders(c)			.24		.25		.45		.44
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		$	.23	$	.26	$	.44	$	.46
Income (loss) from discontinued operations, net of taxes (a)			.01		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders — assuming dilution (c)			.24		.25		.45		.44

(a) In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of these decisions, we have accounted for these businesses as discontinued operations. The income from discontinued operations for the quarter ended June 30, 2012, and the six months ended June 30, 2012, was primarily attributable to fair value adjustments related to the education lending securitization trusts.

(b) Includes a $49 million deemed dividend recorded in the first quarter of 2011 related to the repurchase of the $2.5 billion Series B Preferred Stock.

(c) EPS may not foot due to rounding.

13

3. Loans and Loans Held for Sale

Our loans by category are summarized as follows:

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Commercial, financial and agricultural	$	20,386	$	19,378	$	16,883
Commercial real estate:
Commercial mortgage		7,409		8,037		8,069
Construction		1,172		1,312		1,631
Total commercial real estate loans		8,581		9,349		9,700
Commercial lease financing		5,636		6,055		6,105
Total commercial loans		34,603		34,782		32,688
Residential — prime loans:
Real estate — residential mortgage		2,016		1,946		1,838
Home equity:
Key Community Bank		9,601		9,229		9,431
Other		479		535		595
Total home equity loans		10,080		9,764		10,026
Total residential — prime loans		12,096		11,710		11,864
Consumer other — Key Community Bank		1,263		1,192		1,157
Consumer other:
Marine		1,542		1,766		1,989
Other		101		125		142
Total consumer other		1,643		1,891		2,131
Total consumer loans		15,002		14,793		15,152
Total loans (a)	$	49,605	$	49,575	$	47,840

(a) Excluded at June 30, 2012, December 31, 2011, and June 30, 2011, are loans in the amount of $5.5 billion, $5.8 billion and $6.3 billion, respectively, related to the discontinued operations of the education lending business.

Our loans held for sale are summarized as follows:

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Commercial, financial and agricultural	$	18	$	19	$	80
Real estate — commercial mortgage		523		567		198
Real estate — construction		12		35		39
Commercial lease financing		13		12		6
Real estate — residential mortgage		90		95		58
Total loans held for sale	$	656	$	728	$	381
Our quarterly summary of changes in loans held for sale as follows:
	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Balance at beginning of the period	$	511	$	479	$	426
New originations		1,308		1,235		914
Transfers from held to maturity, net		7		19		16
Loan sales		(1,165)		(932)		(1,039)
Loan draws (payments), net		(4)		(72)		73
Transfers to OREO / valuation adjustments		(1)		(1)		(9)
Balance at end of perod	$	656	$	728	$	381

14

4. Asset Quality

We manage our exposure to credit risk by closely monitoring loan performance trends and general economic conditions. A key indicator of the potential for future credit losses is the level of nonperforming assets and past due loans.

Our nonperforming assets and past due loans were as follows:

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Total nonperforming loans (a)	$	657	$	727	$	842
Nonperforming loans held for sale		38		46		42
OREO		28		65		52
Other nonperforming assets		28		21		14
Total nonperforming assets	$	751	$	859	$	950
Restructured loans included in nonperforming loans (b)	$	163	$	191	$	144
Restructured loans with an allocated specific allowance (c)		71		50		19
Specifically allocated allowance for restructured loans (d)		34		10		5
Accruing loans past due 90 days or more	$	131	$	164	$	118
Accruing loans past due 30 through 89 days		362		441		465

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are: subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January, 2012. This policy related to the classification of second lien home equity loans was implemented prospectively, and therefore prior periods were not presented.

(b) A loan is “restructured” (i.e., TDRs) when the borrower is experiencing financial difficulty and we grant a concession that we would not otherwise have considered to improve the collectability of the loan. Typical concessions include: reducing the interest rate, extending the maturity date, or reducing the principal balance.

(c) Included in individually impaired loans allocated a specific allowance.

(d) Included in allowance for individually evaluated impaired loans.

At June 30, 2012, the approximate carrying amount of our commercial nonperforming loans outstanding represented 59% of their original contractual amount, total nonperforming loans outstanding represented 70% of their original contractual amount owed, and nonperforming assets in total were carried at 64% of their original contractual amount.

At June 30, 2012, our twenty largest nonperforming loans totaled $220 million, representing 33% of total loans on nonperforming status from continuing operations. At June 30, 2011, the twenty largest nonperforming loans totaled $276 million, representing 33% of total loans on nonperforming status.

The amount by which nonperforming loans and loans held for sale reduced expected interest income was $12 million for the six months ended June 30, 2012, and $31 million for the year ended December 31, 2011.

15

The following tables set forth a further breakdown of individually impaired loans as of June 30, 2012, December 31, 2011 and June 30, 2011:

				Unpaid					Average
June 30, 2012	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	59		$	142			—	$	68
Commercial real estate:
Commercial mortgage		112			199			—		113
Construction		51			204			—		49
Total commercial real estate loans		163			403			—		162
Total commercial loans with no related allowance recorded		222			545			—		230
Real estate — residential mortgage		1			1			—		1
Total consumer loans		1			1			—		1
Total loans with no related allowance recorded		223			546			—		231
With an allowance recorded:
Commercial, financial and agricultural		43			53		$	12		46
Commercial real estate:
Commercial mortgage		56			98			15		63
Construction		4			4			3		4
Total commercial real estate loans		60			102			18		67
Total commercial loans with an allowance recorded		103			155			30		113
Real estate — residential mortgage		16			17			2		8
Home equity:
Key Community Bank		11			11			3		6
Other		6			6			1		3
Total home equity loans		17			17			4		9
Consumer other — Key Community Bank		2			2			1		1
Consumer other:
Marine		50			50			11		25
Other		—			—			—		—
Total consumer other		50			50			11		25
Total consumer loans		85			86			18		43
Total loans with an allowance recorded		188			241			48		156
Total	$	411		$	787		$	48	$	387

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

16

				Unpaid					Average
December 31, 2011	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	88		$	195			—	$	75
Commercial real estate:
Commercial mortgage		100			240			—		131
Construction		30			113			—		98
Total commercial real estate loans		130			353			—		229
Total loans with no related allowance recorded		218			548			—		304
With an allowance recorded:
Commercial, financial and agricultural		62			70		$	26		75
Commercial real estate:
Commercial mortgage		96			115			21		91
Construction		12			18			4		29
Total commercial real estate loans		108			133			25		120
Total loans with an allowance recorded		170			203			51		201
Total	$	388		$	751		$	51	$	505

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

				Unpaid					Average
June 30, 2011	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	116		$	217			—	$	89
Commercial real estate:
Commercial mortgage		123			207			—		143
Construction		83			226			—		124
Total commercial real estate loans		206			433			—		267
Total loans with no related allowance recorded		322			650			—		356
With an allowance recorded:
Commercial, financial and agricultural		43			71		$	14		66
Commercial real estate:
Commercial mortgage		89			174			21		88
Construction		34			73			11		39
Total commercial real estate loans		123			247			32		127
Commercial lease financing		—			—			—		6
Total loans with an allowance recorded		166			318			46		199
Total	$	488		$	968		$	46	$	555

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

For the six months ended June 30, 2012 and 2011, interest income recognized on the outstanding balances of accruing impaired loans totaled $2 million for each period presented.

At June 30, 2012, aggregate restructured loans (accrual, nonaccrual and held-for-sale loans) totaled $274 million, compared to $276 million at December 31, 2011, and $252 million at June 30, 2011. We added $109 million in restructured loans during the first six months of 2012, which were partially offset by $111 million in payments and charge-offs.

17

A further breakdown of restructured loans (TDRs) included in nonperforming loans by loan category as of June 30, 2012, follows:

				Pre-modification			Post-modification
				Outstanding			Outstanding
June 30, 2012	Number			Recorded			Recorded
dollars in millions	of loans			Investment			Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		95	$		108	$		59
Commercial real estate:
Real estate — commercial mortgage		16			47			31
Real estate — construction		11			60			43
Total commercial real estate loans		27			107			74
Total commercial loans		122			215			133
Real estate — residential mortgage		56			7			7
Home equity:
Key Community Bank		50			4			4
Other		74			2			1
Total home equity loans		124			6			5
Consumer other — Key Community Bank		11			1			1
Consumer other:
Marine		139			17			17
Other		11			1			—
Total consumer other		150			18			17
Total consumer loans		341			32			30
Total nonperforming TDRs		463			247			163
Prior-year accruing (a)
Commercial, financial and agricultural		115			8			6
Commercial real estate:
Real estate — commercial mortgage		7			71			48
Real estate — construction		1			15			1
Total commercial real estate loans		8			86			49
Total commercial loans		123			94			55
Real estate — residential mortgage		111			11			11
Home equity:
Key Community Bank		88			7			7
Other		101			3			3
Total home equity loans		189			10			10
Consumer other — Key Community Bank		20			1			—
Consumer other:
Marine		135			34			33
Other		53			2			2
Total consumer other		188			36			35
Total consumer loans		508			58			56
Total prior-year accruing TDRs		631			152			111
Total TDRs		1,094	$		399	$		274

(a) All TDRs that were restructured prior to January 1, 2012 and are fully accruing.

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession to the borrower without commensurate financial, structural, or legal consideration. All commercial and consumer loan TDRs, regardless of size, are evaluated for impairment individually to determine the probable loss content and are assigned a specific loan allowance if deemed appropriate. The financial effects of TDRs are reflected in the components that comprise the allowance for loan and lease losses in either the amount of charge-offs or loan loss provision and appropriately impact the ultimate allowance level.

Commercial and consumer loan TDRs are considered subsequently defaulted at 90 days past due and when they are greater than 60 days past due, respectively, for principal and interest payments. There were no significant commercial or consumer loans that were designated as TDRs during calendar year 2011, for which there was a payment default during the first six months of 2012.

Our loan modifications are handled on a case by case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet our client’s financial needs. A majority of our concessions granted to borrowers are in the form of interest rate reductions. Other concession types include forgiveness of principal and other modifications of loan terms. Consumer loan concessions include Home Affordable Modification Program (“HAMP”) loans of approximately $4

18

million as of June 30, 2012. These loan concessions have successfully completed the required trial period under HAMP and as a result have been permanently modified and are included in consumer TDRs.

The following table shows the concession types for our commercial accruing and nonaccruing TDRs.

	June 30,			December 31,			June 30,
dollars in millions	2012			2011			2011
Interest rate reduction	$	155		$	177		$	175
Forgiveness of principal		13			23			10
Other modification of loan terms		20			8			6
Total	$	188		$	208		$	191
Total commercial and consumer TDRs (a)	$	274		$	276		$	252
Total commercial TDRs to total commercial loans		.54	%		.60	%		.58	%
Total commercial TDRs to total loans		.38			.42			.40
Total commercial loans	$	34,603		$	34,782		$	32,688
Total loans		49,605			49,575			47,840

(a) Commitments outstanding to lend additional funds to borrowers whose terms have been modified in TDRs are $45 million, $25 million, and $45 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively.

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” on page 117 of our 2011 Annual Report on Form 10-K. Pursuant to regulatory guidance issued in January 2012, the above-mentioned policy for nonperforming loans was revised effective for the second quarter of 2012. As of June 30, 2012, any second lien home equity loan with an associated first lien that is: 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan. This policy was implemented prospectively, and, therefore, prior periods were not presented.

At June 30, 2012, approximately $48.5 billion, or 98%, of our total loans are current. At June 30, 2012, total past due loans and nonperforming loans of $1.2 billion represent approximately 2% of total loans.

The following aging analysis as of June 30, 2012 and 2011, of past due and current loans provides further information regarding Key’s credit exposure.

			30-59		60-89		90 and Greater				Total Past Due and
June 30, 2012			Days Past		Days Past		Days Past		Nonperforming		Nonperforming		Total
in millions	Current		Due		Due		Due		Loans (a)		Loans		Loans
LOAN TYPE
Commercial, financial and agricultural	$	20,148	$	60	$	13	$	24	$	141	$	238	$	20,386
Commercial real estate:
Commercial mortgage		7,182		15		16		24		172		227		7,409
Construction		1,033		12		24		35		68		139		1,172
Total commercial real estate loans		8,215		27		40		59		240		366		8,581
Commercial lease financing		5,581		22		8		7		18		55		5,636
Total commercial loans	$	33,944	$	109	$	61	$	90	$	399	$	659	$	34,603
Real estate — residential mortgage	$	1,895	$	24	$	10	$	9	$	78	$	121	$	2,016
Home equity:
Key Community Bank		9,361		56		26		17		141		240		9,601
Other		445		10		4		3		17		34		479
Total home equity loans		9,806		66		30		20		158		274		10,080
Consumer other — Key Community Bank		1,237		13		4		7		2		26		1,263
Consumer other:
Marine		1,478		31		10		4		19		64		1,542
Other		95		2		2		1		1		6		101
Total consumer other		1,573		33		12		5		20		70		1,643
Total consumer loans	$	14,511	$	136	$	56	$	41	$	258	$	491	$	15,002
Total loans	$	48,455	$	245	$	117	$	131	$	657	$	1,150	$	49,605

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January 2012.

19

			30-59		60-89		90 and Greater				Total Past Due and
June 30, 2011			Days Past		Days Past		Days Past		Nonperforming		Nonperforming		Total
in millions	Current		Due		Due		Due		Loans		Loans		Loans
LOAN TYPE
Commercial, financial and agricultural	$	16,599	$	35	$	17	$	19	$	213	$	284	$	16,883
Commercial real estate:
Commercial mortgage		7,743		34		51		11		230		326		8,069
Construction		1,437		11		24		28		131		194		1,631
Total commercial real estate loans		9,180		45		75		39		361		520		9,700
Commercial lease financing		5,983		20		40		21		41		122		6,105
Total commercial loans	$	31,762	$	100	$	132	$	79	$	615	$	926	$	32,688
Real estate — residential mortgage	$	1,713	$	24	$	14	$	8	$	79	$	125	$	1,838
Home equity:
Key Community Bank		9,216		66		32		16		101		215		9,431
Other		559		13		7		5		11		36		595
Total home equity loans		9,775		79		39		21		112		251		10,026
Consumer other — Key Community Bank		1,129		14		4		7		3		28		1,157
Consumer other:
Marine		1,898		42		14		3		32		91		1,989
Other		138		2		1		—		1		4		142
Total consumer other		2,036		44		15		3		33		95		2,131
Total consumer loans	$	14,653	$	161	$	72	$	39	$	227	$	499	$	15,152
Total loans	$	46,415	$	261	$	204	$	118	$	842	$	1,425	$	47,840

The risk characteristic prevalent to both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the assigned loan risk rating grades for the commercial loan portfolios and the regulatory risk ratings assigned for the consumer loan portfolios. This risk rating stratification assists in the determination of the ALLL. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically reevaluated thereafter.

Most extensions of credit are subject to loan grading or scoring. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk within the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Credit quality indicators for loans are updated on an ongoing basis. Bond rating classifications are indicative of the credit quality of our commercial loan portfolios and are determined by converting our internally assigned risk rating grades to bond rating categories. Payment activity and the regulatory classifications of pass and substandard are indicators of the credit quality of our consumer loan portfolios.

20

Credit quality indicators for our commercial and consumer loan portfolios based on bond rating, regulatory classification and payment activity as of June 30, 2012, and June 30, 2011, are as follows:

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category ^(a)

June 30,
in millions
	Commercial, financial and  agricultural				RE — Commercial				RE — Construction				Commercial Lease				Total
RATING (b) (c)	2012		2011		2012		2011		2012		2011		2012		2011		2012		2011
AAA — AA	$	165	$	100		—	$	2	$	1	$	3	$	605	$	655	$	771	$	760
A		680		671	$	64		63		1		1		992		1,245		1,737		1,980
BBB — BB		17,652		13,546		5,925		5,553		791		747		3,709		3,590		28,077		23,436
B		868		955		553		941		58		262		197		343		1,676		2,501
CCC — C		1,021		1,611		867		1,510		321		618		133		272		2,342		4,011
Total	$	20,386	$	16,883	$	7,409	$	8,069	$	1,172	$	1,631	$	5,636	$	6,105	$	34,603	$	32,688

(a)  Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)  Our bond rating to internal loan grade conversion system is as follows: AAA - AA = 1, A = 2, BBB - BB = 3 - 13, B = 14 - 16, and CCC - C = 17 - 20.

(c)  Our internal loan grade to regulatory-defined classification is as follows: Pass = 1-16, Special Mention = 17, Substandard = 18, Doubtful = 19, and Loss = 20.

Consumer Credit Exposure

Credit Risk Profile by Regulatory Classifications ^(a) (b)

June 30,
in millions
	Residential — Prime
GRADE	2012		2011
Pass	$	11,831	$	11,644
Substandard		265		220
Total	$	12,096	$	11,864

Credit Risk Profile Based on Payment Activity ^(a) (b)

June 30,	Consumer — Key Community  Bank				Consumer — Marine				Consumer — Other				Total
in millions	2012		2011		2012		2011		2012		2011		2012		2011
Performing	$	1,261	$	1,154	$	1,523	$	1,957	$	100	$	141	$	2,884	$	3,252
Nonperforming		2		3		19		32		1		1		22		36
Total	$	1,263	$	1,157	$	1,542	$	1,989	$	101	$	142	$	2,906	$	3,288

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) Our past due payment activity to regulatory classification conversion is as follows: pass = less than 90 days; and substandard = 90 days and greater plus nonperforming loans. As of June 30, 2012, any second lien home equity loan with an associated first lien: that is 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan in accordance with regulatory guidance issued in January 2012.

We determine the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 117 of our 2011 Annual Report on Form 10-K. We apply expected loss rates to existing loans with similar risk characteristics as noted in the credit quality indicator table above and exercise judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets.

For all commercial and consumer loan TDRs, regardless of size, as well as impaired commercial loans with an outstanding balance greater than $2.5 million, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan if deemed appropriate. We estimate the extent of impairment by comparing the recorded investment of the loan with the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. A specific allowance also may be assigned — even when sources of repayment appear sufficient — if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. The ALLL at June 30, 2012 represents our best estimate of the probable credit losses inherent in the loan portfolio at that date

21

While quantitative modeling factors such as default probability and expected recovery rates are constantly changing as the financial strength of the borrower and overall economic conditions change, there have been no changes to the accounting policies or methodology we used to estimate the ALLL.

Commercial loans generally are charged off in full or charged down to the fair value of the underlying collateral when the borrower’s payment is 180 days past due. Our charge-off policy for most consumer loans is similar but takes effect when payments are 120 days past due. Home equity and residential mortgage loans generally are charged down to the fair value of the underlying collateral when payment is 180 days past due.

At June 30, 2012, the ALLL was $888 million, or 1.79% of loans, compared to $1.2 billion, or 2.57% of loans, at June 30, 2011. At June 30, 2012, the ALLL was 135.16% of nonperforming loans compared to 146.08% at June 30, 2011.

A summary of the allowance for loan and lease losses for the periods indicated is presented in the table below:

		Three months ended  June 30,					Six months ended  June 30,
in millions		2012		2011			2012		2011
Balance at beginning of period — continuing operations	$		944	$	1,372	$		1,004	$	1,604
Charge-offs			(131)		(177)			(263)		(409)
Recoveries			54		43			85		82
Net loans charged off			(77)		(134)			(178)		(327)
Provision for loan and lease losses from continuing operations			21		(8)			63		(48)
Foreign currency translation adjustment			—		—			(1)		1
Balance at end of period — continuing operations	$		888	$	1,230	$		888	$	1,230

The changes in the ALLL by loan category for the periods indicated are as follows:

in millions	December 31,  2011		Provision			Charge-offs		Recoveries		June 30,  2012
Commercial, financial and agricultural	$	334	$	(12)		$	(49)	$	31	$	304
Real estate — commercial mortgage		272		8			(46)		16		250
Real estate — construction		63		6			(16)		2		55
Commercial lease financing		78		—			(20)		10		68
Total commercial loans		747		2			(131)		59		677
Real estate — residential mortgage		37		—			(13)		2		26
Home equity:
Key Community Bank		103		21			(48)		4		80
Other		29		9			(17)		3		24
Total home equity loans		132		30			(65)		7		104
Consumer other — Key Community Bank		41		10			(20)		3		34
Consumer other:
Marine		46		15			(30)		13		44
Other		1		5			(4)		1		3
Total consumer other:		47		20			(34)		14		47
Total consumer loans		257		60			(132)		26		211
Total ALLL — continuing operations		1,004		62	(a)		(263)		85		888
Discontinued operations		104		6			(39)		8		79
Total ALLL — including discontinued operations	$	1,108	$	68		$	(302)	$	93	$	967

(a) Includes $1 million of foreign currency translation adjustment.

22

in millions	December 31,  2010		Provision			Charge-offs		Recoveries		June 30,  2011
Commercial, financial and agricultural	$	485	$	(22)		$	(93)	$	25	$	395
Real estate — commercial mortgage		416		(18)			(62)		7		343
Real estate — construction		145		15			(62)		8		106
Commercial lease financing		175		(53)			(26)		11		107
Total commercial loans		1,221		(78)			(243)		51		951
Real estate — residential mortgage		49		7			(17)		2		41
Home equity:
Key Community Bank		120		30			(53)		2		99
Other		57		4			(26)		2		37
Total home equity loans		177		34			(79)		4		136
Consumer other — Key Community Bank		57		9			(23)		4		47
Consumer other:
Marine		89		(14)			(42)		19		52
Other		11		(5)			(5)		2		3
Total consumer other:		100		(19)			(47)		21		55
Total consumer loans		383		31			(166)		31		279
Total ALLL — continuing operations		1,604		(47)	(a)		(409)		82		1,230
Discontinued operations		114		62			(73)		6		109
Total ALLL — including discontinued operations	$	1,718	$	15		$	(482)	$	88	$	1,339

(a) Includes $1 million of foreign currency translation adjustment.

Our ALLL decreased by $342 million, or 28%, since the second quarter of 2011. This contraction was associated with the improvement in credit quality of our loan portfolios, which has trended more favorably over the past six quarters. Our asset quality metrics have showed continued improvement and, therefore, resulted in favorable risk rating migration and a reduction in our general allowance. Our general allowance encompasses the application of expected loss rates to our existing loans with similar risk characteristics and an assessment of factors such as changes in economic conditions and changes in credit policies or underwriting standards. Our delinquency trends showed continued improvement during 2011 and the first-half of 2012. We attribute this improvement to a more moderate level of lending activity, more favorable conditions in the capital markets, improvement in client income statements, and continued run off in our exit loan portfolio.

For continuing operations, the loans outstanding individually evaluated for impairment totaled $411 million, with a corresponding allowance of $48 million at June 30, 2012. Loans outstanding collectively evaluated for impairment totaled $49.2 billion, with a corresponding allowance of $840 million at June 30, 2012.

23

A breakdown of the individual and collective ALLL and the corresponding loan balances as of June 30, 2012 follows:

	Allowance (a)				Outstanding (a)
June 30, 2012	Individually Evaluated for		Collectively Evaluated for					Individually Evaluated for		Collectively  Evaluated for
in millions	Impairment		Impairment		Loans			Impairment		Impairment
Commercial, financial and agricultural	$	12	$	292	$	20,386		$	102	$	20,284
Commercial real estate:
Commercial mortgage		15		235		7,409			168		7,241
Construction		3		52		1,172			55		1,117
Total commercial real estate loans		18		287		8,581			223		8,358
Commercial lease financing		—		68		5,636			—		5,636
Total commercial loans		30		647		34,603			325		34,278
Real estate — residential mortgage		2		24		2,016			17		1,999
Home equity:
Key Community Bank		3		77		9,601			11		9,590
Other		1		23		479			6		473
Total home equity loans		4		100		10,080			17		10,063
Consumer other — Key Community Bank		1		33		1,263			2		1,261
Consumer other:
Marine		11		33		1,542			50		1,492
Other		—		3		101			—		101
Total consumer other		11		36		1,643			50		1,593
Total consumer loans		18		193		15,002			86		14,916
Total ALLL — continuing operations		48		840		49,605			411		49,194
Discontinued operations		—		79		5,483	(b)		—		5,483
Total ALLL — including discontinued operations	$	48	$	919	$	55,088		$	411	$	54,677

(a) There were no loans acquired with deteriorated credit quality at June 30, 2012.

(b) Amount includes $2.8 billion of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of June 30, 2011 follows:

	Allowance (a)				Outstanding (a)
June 30, 2011	Individually Evaluated for		Collectively Evaluated for				Individually Evaluated for		Collectively  Evaluated for
in millions	Impairment		Impairment		Loans		Impairment		Impairment
Commercial, financial and agricultural	$	14	$	381	$	16,883	$	159	$	16,724
Commercial real estate:
Commercial mortgage		21		322		8,069		213		7,856
Construction		11		95		1,631		116		1,515
Total commercial real estate loans		32		417		9,700		329		9,371
Commercial lease financing		—		107		6,105		—		6,105
Total commercial loans		46		905		32,688		488		32,200
Real estate — residential mortgage		—		41		1,838		—		1,838
Home equity:
Key Community Bank		—		99		9,431		—		9,431
Other		—		37		595		—		595
Total home equity loans		—		136		10,026		—		10,026
Consumer other — Key Community Bank		—		47		1,157		—		1,157
Consumer other:
Marine		—		52		1,989		—		1,989
Other		—		3		142		—		142
Total consumer other		—		55		2,131		—		2,131
Total consumer loans		—		279		15,152		—		15,152
Total ALLL — continuing operations		46		1,184		47,840		488		47,352
Discontinued operations		—		109		6,261		—		6,261
Total ALLL — including discontinued operations	$	46	$	1,293	$	54,101	$	488	$	53,613

(a) There were no loans acquired with deteriorated credit quality at June 30, 2011.

24

The liability for credit losses inherent in lending-related commitments, such as letters of credit and unfunded loan commitments, is included in “accrued expense and other liabilities” on the balance sheet. We establish the amount of this reserve by considering both historical trends and current market conditions quarterly, or more often if deemed necessary. Our liability for credit losses on lending-related commitments has decreased by $6 million since the second quarter of 2011 to $51 million at June 30, 2012. When combined with our ALLL, our total allowance for credit losses represented 1.89% of loans at June 30, 2012, compared to 2.69% at June 30, 2011.

Changes in the liability for credit losses on lending-related commitments are summarized as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Balance at beginning of period	$	45	$	69	$	45	$	73
Provision (credit) for losses on lending-related commitments		6		(12)		6		(16)
Balance at end of period	$	51	$	57	$	51	$	57

25

5. Fair Value Measurements

Fair Value Determination

As defined in the applicable accounting guidance, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants in our principal market. We have established and documented our process for determining the fair values of our assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, we determine the fair value of our assets and liabilities using valuation models or third-party pricing services. Both of these approaches rely on market-based parameters, when available, such as interest rate yield curves, option volatilities, and credit spreads, or unobservable inputs. Unobservable inputs may be based on our judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs.

Valuation adjustments, such as those pertaining to counterparty and our own credit quality and liquidity, may be necessary to ensure that assets and liabilities are recorded at fair value. Credit valuation adjustments are made when market pricing does not accurately reflect the counterparty’s credit quality. We make liquidity valuation adjustments to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when we are unable to observe recent market transactions for identical or similar instruments. Liquidity valuation adjustments are based on the following factors:

¿ the amount of time since the last relevant valuation;

¿ whether there is an actual trade or relevant external quote available at the measurement date; and

¿ volatility associated with the primary pricing components.

We ensure that our fair value measurements are accurate and appropriate by relying upon various controls, including:

¿ an independent review and approval of valuation models and assumptions;

¿ recurring detailed reviews of profit and loss; and

¿ a validation of valuation model components against benchmark data and similar products, where possible.

We recognize transfers between levels of the fair value hierarchy at the end of the reporting period. Quarterly, we review any changes to our valuation methodologies to ensure they are appropriate and justified, and refine our valuation methodologies if more market-based data becomes available. The Fair Value Committee, which is governed by ALCO, oversees the valuation process for all lines of business and support areas, as applicable. Various Working Groups that report to the Fair Value Committee analyze and approve the valuation methodologies used to fair value assets and liabilities managed within specific areas. The Working Groups are discussed in more detail in the qualitative disclosures within this footnote and in Note 11 (“Acquisition and Discontinued Operations”). Formal documentation in the form of fair value valuation methodologies are prepared by the lines of business and support areas as appropriate detailing the asset or liability class and related general ledger accounts, valuation techniques, fair value hierarchy level, market participants, accounting methods, valuation methodology, group responsible for valuations, and valuation inputs.

Additional information regarding our accounting policies for determining fair value is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” on page 122 of our 2011 Annual Report on Form 10-K.

Qualitative Disclosures of Valuation Techniques

Loans. Most loans recorded as trading account assets are valued based on market spreads for identical assets since they are actively traded. Therefore, these loans are classified as Level 2 because the fair value recorded is based on observable market data for similar assets.

26

Securities (trading and available for sale). We own several types of securities, requiring a range of valuation methods:

¿ Securities are classified as Level 1 when quoted market prices are available in an active market for the identical securities. Level 1 instruments include exchange-traded equity securities.

¿ Securities are classified as Level 2 if quoted prices for identical securities are not available, and fair value is determined using pricing models (either by a third-party pricing service or internally) or quoted prices of similar securities. These instruments include municipal bonds; bonds backed by the U.S. government; corporate bonds; certain mortgage-backed securities; securities issued by the U.S. Treasury; money markets; and certain agency and corporate CMOs. Inputs to the pricing models include actual trade data (i.e., spreads, credit ratings, and interest rates) for comparable assets, spread tables, matrices, high-grade scales, option-adjusted spreads, and standard inputs, such as yields, benchmark securities, bids, and offers.

¿ Securities are classified as Level 3 when there is limited activity in the market for a particular instrument. In such cases, we use internal models based on certain assumptions to determine fair value. Level 3 instruments consist of certain commercial mortgage-backed securities. Our Real Estate Capital line of business is responsible for the valuation process for these commercial mortgage-backed securities, which is conducted on a quarterly basis. The methodology incorporates a loan-by-loan credit review in combination with discounting the risk-adjusted bond cash flows. A detailed credit review of the underlying loans involves a screening process using a multitude of filters to identify the highest risk loans associated with these commercial mortgage-backed securities. Each of the highest risk loans identified is re-underwritten and loan specific defaults and recoveries are assigned. A matrix approach is used to assign an expected default and recovery percentage for the loans which are not individually re-underwritten. Bond classes will then be run through a discounted cash flow analysis, taking into account the expected default and recovery percentages as well as discount rates developed by our Finance area. Inputs for the Level 3 internal models include expected cash flows from the underlying loans, which take into account expected default and recovery percentages, market research, and discount rates commensurate with current market conditions. Changes in the credit quality of the underlying loans or market discount rate would impact the value of the bonds. An increase in the underlying loan credit quality or decrease in the market discount rate would positively impact the bond value. A decrease in the underlying loan credit quality or increase in the market discount rate would negatively impact the bond value.

The fair values of our Level 2 securities available for sale are determined by a third-party pricing service. The valuations provided by the third-party pricing service are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, and reference data obtained from market research publications. Inputs used by the third-party pricing service in valuing CMOs and other mortgage-backed securities also include new issue data, monthly payment information, whole loan collateral performance, and “To Be Announced” prices. In valuations of state and political subdivisions securities, inputs used by the third-party pricing service also include material event notices.

On a quarterly basis, we validate the pricing methodologies utilized by our third-party pricing service to ensure the fair value determination is consistent with the applicable accounting guidance and that our assets are properly classified in the fair value hierarchy. To perform this validation, we:

¿ review documentation received from our third-party pricing service regarding the inputs used in their valuations and determine a level assessment for each category of securities;

¿ substantiate actual inputs used for a sample of securities by comparing the actual inputs used by our third-party pricing service to comparable inputs for similar securities; and

¿ substantiate the fair values determined for a sample of securities by comparing the fair values provided by our third-party pricing service to prices from other independent sources for the same and similar securities. We analyze variances and conduct additional research with our third-party pricing service and take appropriate steps based on our findings.

Private equity and mezzanine investments. Private equity and mezzanine investments consist of investments in debt and equity securities through our Real Estate Capital line of business. They include direct investments made in specific properties, as well as indirect investments made in funds that pool assets of many investors to invest in properties. There is no active market for these investments, so we employ other valuation methods.

27

Private equity and mezzanine investments are classified as Level 3 assets since our judgment significantly influences the determination of fair value. Our Fund Management, Asset Management, and Accounting groups are responsible for reviewing the valuation models and determining the fair value of these investments on a quarterly basis. Direct investments in properties are initially valued based upon the transaction price. This amount is then adjusted to fair value based on current market conditions using the discounted cash flow method based on the expected investment exit date. The fair value of the assets are reviewed and adjusted quarterly. Periodically, a third-party appraisal is obtained for the investment to validate the specific inputs for determining fair value.

Inputs used in calculating future cash flows include the cost of build-out, future selling prices, current market outlook, and operating performance of the investment. Investment income and expense assumptions are based on market inputs, such as rental/leasing rates and vacancy rates for the geographic- and property type-specific markets. For investments under construction, investment income and expense assumptions are determined using expected future build-out costs and anticipated future rental prices based on current market conditions, discount rates, holding period, the terminal cap rate and sales commissions paid in the terminal cap year. For investments that are in lease-up or are fully leased, income and expense assumptions are based on the current geographic market lease rates, underwritten expenses, market lease terms, and historical vacancy rates. Asset Management validates these inputs on a quarterly basis through the use of industry publications, third-party broker opinions, and comparable property sales, where applicable. Changes in the significant inputs (rental/leasing rates, vacancy rates, valuation capitalization rate, discount rate, and terminal cap rate) would significantly affect the fair value measurement. Increases in rental/leasing rates would increase fair value while increases in the vacancy rates, the valuation capitalization rate, the discount rate, and the terminal cap rate would decrease fair value.

Indirect investments are valued using a methodology that is consistent with accounting guidance that allows us to use statements from the investment manager to calculate net asset value per share. A primary input used in estimating fair value is the most recent value of the capital accounts as reported by the general partners of the funds in which we invest. The calculation to determine the investment’s fair value is based on our percentage ownership in the fund multiplied by the net asset value of the fund, as provided by the fund manager.

Investments in real estate private equity funds are included within private equity and mezzanine investments. The main purpose of these funds is to acquire a portfolio of real estate investments that provides attractive risk-adjusted returns and current income for investors. Certain of these investments do not have readily determinable fair values and represent our ownership interest in an entity that follows measurement principles under investment company accounting. The following table presents the fair value of our indirect investments and related unfunded commitments at June 30, 2012:

June 30, 2012			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Passive funds (a)	$	18	$	3
Co-managed funds (b)		25		3
Total	$	43	$	6

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to seven years.

(b) We are a manager or co-manager of these funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. In addition, we receive management fees. We can sell or transfer our interest in any of these funds with the written consent of a majority of the fund’s investors. In one instance, the other co-manager of the fund must consent to the sale or transfer of our interest in the fund. The funds will mature over a period of two to five years.

Principal investments. Principal investments consist of investments in equity and debt instruments made by our principal investing entities. They include direct investments (investments made in a particular company), as well as indirect investments (investments made through funds that include other investors). During the first half of 2011, employees who managed our various principal investments formed two independent entities that serve as investment managers of these investments going forward. Under this new arrangement, which was mutually agreeable to both parties, these individuals are no longer employees of Key.

Each investment is adjusted to fair value with any net realized or unrealized gain/loss recorded in the current period’s earnings. This process is a coordinated and documented effort by the Principal Investing Entities Deal Team (comprised of individuals from one of the independent investment managers noted above), the Key Principal Partners (“KPP”) Controller and certain members of the KPP Controller’s staff, a member of Key’s senior management team, and the Investment

28

Committee (members comprised of individuals from Key and one of the independent investment managers). This process involves an in-depth review of the condition of each investment depending on the type of investment.

Our direct investments include investments in debt and equity instruments of both private and public companies. When quoted prices are available in an active market for the identical direct investment, we use the quoted prices in the valuation process, and the related investments are classified as Level 1 assets. However, in most cases, quoted market prices are not available for our direct investments, and we must perform valuations using other methods. These direct investment valuations are an in-depth analysis of the condition of each investment and are based on the unique facts and circumstances related to each individual investment. There is a certain amount of subjectivity surrounding the valuation of these investments due to the combination of quantitative and qualitative factors that are used in the valuation models. Therefore, these direct investments are classified as Level 3 assets. The specific inputs used in the valuations of each type of direct investment are described below.

Interest-bearing securities (i.e., loans) are valued on a quarterly basis. Valuation adjustments are determined by the Principal Investing Entities Deal Team and are subject to approval by the Investment Committee. Valuations of debt instruments are based on the Principal Investing Entities Deal Team’s knowledge of the current financial status of the subject company, which is regularly monitored throughout the term of the investment. Significant unobservable inputs used in the valuations of these investments include the company’s payment history, adequacy of cash flows from operations, and current operating results, including market multiples, and historical and forecast earnings before interest, taxation, depreciation, and amortization. Inputs can also include the seniority of the debt, the nature of any pledged collateral, the extent to which the security interest is perfected and the net liquidation value of collateral.

Valuations of equity instruments of private companies, which are prepared on a quarterly basis, are based on current market conditions and the current financial status of each company. A valuation analysis is performed to value each investment that is reviewed by the Principal Investing Entities Deal Team Member as well as reviewed and approved by the Chief Administrative Officer of one of the independent investment managers. Significant unobservable inputs used in these valuations include adequacy of the company’s cash flows from operations, any significant change in the company’s performance since the prior valuation and any significant equity issuances by the company. Equity instruments of public companies are valued using quoted prices in an active market for the identical security. If the instrument is restricted, the fair value is determined considering the number of shares traded daily, the number of the company’s total restricted shares, and price volatility.

Our indirect investments are classified as Level 3 assets since our significant inputs are not observable in the marketplace. Indirect investments include primary and secondary investments in private equity funds engaged mainly in venture- and growth-oriented investing. These investments do not have readily determinable fair values. Indirect investments are valued using a methodology that is consistent with accounting guidance that allows us to estimate fair value based upon net asset value per share (or its equivalent, such as member units or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed). The significant unobservable input used in estimating fair value is primarily the most recent value of the capital accounts as reported by the general partners of the funds in which we invest.

For indirect investments, management makes adjustments as deemed appropriate to the net asset value and only if it is determined that the net asset value does not properly reflect fair value. In determining the need for an adjustment to net asset value, management performs an analysis of the private equity funds based on the independent fund manager’s valuations as well as management’s own judgment. Significant unobservable inputs used in these analyses include current fund financial information provided by the fund manager, an estimate of future proceeds expected to be received on the investment, and market multiples. Management also considers whether the independent fund manager adequately marks down an impaired investment, maintains financial statements in accordance with GAAP, or follows a practice of holding all investments at cost.

The following table presents the fair value of our indirect investments and related unfunded commitments at June 30, 2012:

June 30, 2012			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Private equity funds (a)	$	478	$	106
Hedge fund(b)		4		—
Total	$	482	$	106

29

(a) Consists of buyout, venture capital, and fund of funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to ten years.

(b) Consists of a fund invested in long and short positions of “stressed and distressed” fixed income-oriented securities, with the goal of producing attractive risk-adjusted returns. The investments can be redeemed quarterly with 45 days notice. However, the fund’s general partners may impose quarterly redemption limits that may delay receipt of requested redemptions.

Derivatives. Exchange-traded derivatives are valued using quoted prices and, therefore, are classified as Level 1 instruments. However, only a few types of derivatives are exchange-traded. The majority of our derivative positions are valued using internally developed models based on market convention that use observable market inputs, such as interest rate curves, yield curves, LIBOR discount rates and curves, index pricing curves, foreign currency curves, and volatility surfaces (a three-dimensional graph of implied volatility against strike price and maturity). These derivative contracts, which are classified as Level 2 instruments, include interest rate swaps, certain options, cross currency swaps, and credit default swaps.

In addition, we have several customized derivative instruments and risk participations that are classified as Level 3 instruments. These derivative positions are valued using internally developed models, with inputs consisting of available market data, such as bond spreads and asset values, as well as unobservable internally-derived assumptions, such as loss probabilities and internal risk ratings of customers. These derivatives are priced monthly by our Market Risk Management group using a credit valuation adjustment methodology. Swap details with the customer and our related participation percentage, if applicable, are obtained from our derivatives accounting system, which is the system of record. Applicable customer rating information is obtained from the particular loan system and represents an unobservable input to this valuation process. Using these various inputs, a valuation of these Level 3 derivatives is performed using a model that was acquired from a third party. In summary, the fair value represents an estimate of the amount that the risk participation counterparty would need to pay/receive as of the measurement date based on the probability of customer default on the swap transaction and the fair value of the underlying customer swap. Therefore, a higher loss probability and a lower credit rating would negatively affect the fair value of the risk participations and a lower loss probability and higher credit rating would positively affect the fair value of the risk participations.

Market convention implies a credit rating of “AA” equivalent in the pricing of derivative contracts, which assumes all counterparties have the same creditworthiness. To reflect the actual exposure on our derivative contracts related to both counterparty and our own creditworthiness, we record a fair value adjustment in the form of a default reserve. The credit component is determined by individual counterparty based on the probability of default, and considers master netting and collateral agreements. The default reserve is classified as Level 3. Our Market Risk Management group is responsible for the valuation policies and procedure related to this default reserve. A weekly reconciliation process is performed to ensure that all applicable derivative positions are covered in the calculation, which includes transmitting customer exposures and reserve reports to trading management, derivative traders and marketers, derivatives middle office, and corporate accounting personnel. On a quarterly basis, Market Risk Management prepares the reserve calculation. A detailed reserve comparison with the previous quarter, an analysis for change in reserve and a reserve forecast are provided by Market Risk Management to ensure that the default reserve recorded at period end is sufficient.

Other assets and liabilities. The value of our repurchase and reverse repurchase agreements, trade date receivables and payables, and short positions is driven by the valuation of the underlying securities. The underlying securities may include equity securities, which are valued using quoted market prices in an active market for identical securities, resulting in a Level 1 classification. If quoted prices for identical securities are not available, fair value is determined by using pricing models or quoted prices of similar securities, resulting in a Level 2 classification. For the interest rate-driven products, such as government bonds, U.S. Treasury bonds and other products backed by the U.S. government, inputs include spreads, credit ratings and interest rates. For the credit-driven products, such as corporate bonds and mortgage-backed securities, inputs include actual trade data for comparable assets, and bids and offers.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. The following tables present these assets and liabilities at June 30, 2012 and December 31, 2011.

30

June 30, 2012
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short-term investments:
Securities purchased under resale agreements		—	$	338		—	$	338
Trading account assets:
U.S. Treasury, agencies and corporations		—		438		—		438
States and political subdivisions		—		27	$	57		84
Collateralized mortgage obligations		—		16		—		16
Other mortgage-backed securities		—		100		1		101
Other securities	$	3		37		—		40
Total trading account securities		3		618		58		679
Commercial loans		—		—		—		—
Total trading account assets		3		618		58		679
Securities available for sale:
States and political subdivisions		—	$	56		—	$	56
Collateralized mortgage obligations		—		12,477		—		12,477
Other mortgage-backed securities		—		652		—		652
Other securities	$	20		—		—		20
Total securities available for sale		20		13,185		—		13,205
Other investments:
Principal investments:
Direct	$	11		—	$	231	$	242
Indirect		—		—		482		482
Total principal investments		11		—		713		724
Equity and mezzanine investments:
Direct		—		—	$	18	$	18
Indirect		—		—		43		43
Total equity and mezzanine investments		—		—		61		61
Total other investments		11		—		774		785
Derivative assets:
Interest rate		—	$	1,824	$	35	$	1,859
Foreign exchange	$	81		26		—		107
Energy and commodity		—		209		—		209
Credit		—		19		6		25
Equity		—		—		—		—
Derivative assets		81		2,078		41		2,200
Netting adjustments(a)		—		—		—		(1,382)
Total derivative assets		81		2,078		41		818
Accrued income and other assets		2		134		—		136
Total assets on a recurring basis at fair value	$	117	$	16,353	$	873	$	15,961
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	481		—	$	481
Bank notes and other short-term borrowings:
Short positions	$	3		360		—		363
Derivative liabilities:
Interest rate		—		1,310		—		1,310
Foreign exchange		81		24		—		105
Energy and commodity		—		203	$	1		204
Credit		—		23		1		24
Equity		—		—		—		—
Derivative liabilities		81		1,560		2		1,643
Netting adjustments(a)		—		—		—		(880)
Total derivative liabilities		81		1,560		2		763
Accrued expense and other liabilities		—		4		—		4
Total liabilities on a recurring basis at fair value	$	84	$	2,405	$	2	$	1,611

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

31

December 31, 2011
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short term investments:
Securities purchased under resale agreements		—	$	236		—	$	236
Trading account assets:
U.S. Treasury, agencies and corporations		—		353		—		353
States and political subdivisions		—		81		—		81
Collateralized mortgage obligations		—		19		—		19
Other mortgage-backed securities		—		27	$	35		62
Other securities	$	79		29		—		108
Total trading account securities		79		509		35		623
Commercial loans		—		—		—		—
Total trading account assets		79		509		35		623
Securities available for sale:
States and political subdivisions		—		63		—		63
Collateralized mortgage obligations		—		15,162		—		15,162
Other mortgage-backed securities		—		778		—		778
Other securities		9		—		—		9
Total securities available for sale		9		16,003		—		16,012
Other investments:
Principal investments:
Direct		11		—		225		236
Indirect		—		—		473		473
Total principal investments		11		—		698		709
Equity and mezzanine investments:
Direct		—		—		15		15
Indirect		—		—		36		36
Total equity and mezzanine investments		—		—		51		51
Total other investments		11		—		749		760
Derivative assets:
Interest rate		—		1,915		38		1,953
Foreign exchange		86		65		—		151
Energy and commodity		—		253		—		253
Credit		—		30		7		37
Equity		—		3		—		3
Derivative assets		86		2,266		45		2,397
Netting adjustments (a)		—		—		—		(1,452)
Total derivative assets		86		2,266		45		945
Accrued income and other assets		7		105		—		112
Total assets on a recurring basis at fair value	$	192	$	19,119	$	829	$	18,688
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	292		—	$	292
Bank notes and other short-term borrowings:
Short positions		—		337		—		337
Derivative liabilities:
Interest rate		—		1,398		—		1,398
Foreign exchange	$	79		209		—		288
Energy and commodity		—		252	$	1		253
Credit		—		34		28		62
Equity		—		3		—		3
Derivative liabilities		79		1,896		29		2,004
Netting adjustments (a)		—		—		—		(978)
Total derivative liabilities		79		1,896		29		1,026
Accrued expense and other liabilities		23		22		—		45
Total liabilities on a recurring basis at fair value	$	102	$	2,547	$	29	$	1,700

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

32

Changes in Level 3 Fair Value Measurements

The following table shows the change in the fair values of our Level 3 financial instruments for the three and six months ended June 30, 2012 and 2011. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.

	Trading Account Assets						Other Investments												Derivative Instruments							(a)
in millions	Other Mortgage- Backed Securities			Other Securities			Principal Investments						Equity and Mezzanine Investments						Interest Rate			Energy and Commodity			Credit
							Direct			Indirect			Direct			Indirect
Balance at December 31, 2011	$	35			—		$	225		$	473		$	15		$	36		$	38		$	(1)		$    (21)
Gains (losses) included in earnings		2	(b)	$	(2	)  (b)		8	(c)		43	(c)		3	(c)		6	(c)		(3)	(b)		—	(b)	(7)	(b)
Purchases		—			—			10			20			—			4			1			—		—
Sales		(32)			—			(12)			(54)			—			—			(1)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			2			—			—			—			(3)			—			—		33
Transfers into Level 3		—			57	(d)		—			—			—			—			4	(d)		—		—
Transfers out of Level 3		(4)	(d)		—			—			—			—			—			(4)	(d)		—		—
Balance at June 30, 2012	$	1			57		$	231		$	482		$	18		$	43		$	35		$	(1)		$       5
Unrealized gains (losses) included in earnings		—	(b)	$	(2)	(b)	$	8	(c)	$	28	(c)	$	10	(c)	$	6	(c)		—	(b)		—	(b)	—	(b)
Balance at March 31, 2012	$	1		$	—		$	226		$	485		$	15		$	42		$	36			(1)		$       5
Gains (losses) included in earnings		—	(b)		(5)	(b)		7	(c)		20	(c)		3	(c)		5	(c)		2	(b)		—	(b)	(2)	(b)
Purchases		—			—			9			10			—			1			—			—		—
Sales		—			—			(11)			(33)			—			—			—			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			5			—			—			—			(2)			—			—		2
Transfers into Level 3		—			57	(d)		—			—			—			(3)	(d)		—			—		—
Transfers out of Level 3		—			—			—			—			—			—			(3)	(d)		—		—
Balance at June 30, 2012	$	1			57		$	231		$	482		$	18		$	43		$	35			(1)		$       5
Unrealized gains (losses) included in earnings		—	(b)		(5)	(b)	$	7	(c)	$	9	(c)	$	4	(c)	$	2	(c)		—	(b)		—	(b)	—	(b)
Balance at December 31, 2010	$	1		$	21		$	372		$	526		$	20		$	30		$	75		$	1		$     11
Gains (losses) included in earnings		—	(b)		—	(b)		2	(c)		43	(c)		13	(c)		—	(c)		14	(b)		(1)	(b)	(10)	(b)
Purchases		—			3			30			46			—			9			11			—		—
Sales		—			—			(9)			(36)			—			—			(20)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			(24)			—			—			(19)			(3)			—			—		7
Transfers into Level 3		—			—			—			—			—			—			10			—		—
Transfers out of Level 3		—			—			(125)	(e)		(109)	(e)		—			(3)			(9)			—		—
Balance at June 30, 2011	$	1		$	—		$	270		$	470		$	14		$	33		$	81		$	—		$       8
Unrealized gains (losses) included in earnings		—	(b)	$	3	(b)	$	8	(c)	$	28	(c)	$	32	(c)	$	(3)	(c)		—	(b)		—	(b)	—	(b)
Balance at March 31, 2011	$	1			—		$	395		$	548		$	25		$	27		$	81			—		$       4
Gains (losses) included in earnings		—	(b)	$	3	(b)		—	(c)		10	(c)		8	(c)		1	(c)		10	(b)		—	(b)	(9)	(b)
Purchases		—			—			2			32			—			7			11			—		6
Sales		—			—			(2)			(11)			—			—			(18)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			(3)			—			—			(19)			(2)			—			—		7
Transfers into Level 3		—			—			—			—			—			—			3			—		—
Transfers out of Level 3		—			—			(125)	(e)		(109)	(e)		—			—			(6)			—		—
Balance at June 30, 2011	$	1			—		$	270		$	470		$	14		$	33		$	81			—		$       8
Unrealized gains (losses) included in earnings		—	(b)	$	3	(b)	$	6	(c)	$	4	(c)	$	22	(c)	$	1	(c)		—	(b)		—	(b)	—	(b)

(a) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(b) Realized and unrealized gains and losses on trading account assets and derivative instruments are reported in “investment banking and capital markets income (loss)” on the income statement.

(c) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized gains and losses on private equity and mezzanine investments are reported in “investment banking and capital markets income (loss)” on the income statement.

(d) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

33

(e) Transfers out of Level 3 for principal investments represent investments that were deconsolidated during the second quarter of 2011 when employees who managed our various principal investments left Key and formed two independent entities that will serve as investment managers of these investments.

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. The following table presents our assets measured at fair value on a nonrecurring basis at June 30, 2012 and December 31, 2011:

	June 30, 2012								December 31, 2011
in millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	81	$	81		—		—	$	149	$	149
Loans held for sale (a)		—		—		15		15		—		—		15		15
Accrued income and other assets		—	$	17		25		42		—	$	19		25		44
Total assets on a nonrecurring basis at fair value		—	$	17	$	121	$	138		—	$	19	$	189	$	208

(a) During the first half of 2012, we transferred $38 million of commercial and consumer loans and leases from held-for-sale status to the held-to-maturity portfolio at their current fair value.

Impaired loans. We typically adjust the carrying amount of our impaired loans when there is evidence of probable loss and the expected fair value of the loan is less than its contractual amount. The amount of the impairment may be determined based on the estimated present value of future cash flows, the fair value of the underlying collateral or the loan’s observable market price. Impaired loans with a specifically allocated allowance based on cash flow analysis or the value of the underlying collateral are classified as Level 3 assets, while those with a specifically allocated allowance based on an observable market price that reflects recent sale transactions for similar loans and collateral are classified as Level 2.

The evaluations for impairment are prepared by the responsible relationship managers in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. The Asset Recovery Group is part of the Risk Management Group and reports to our Chief Credit Officer. These evaluations are performed in conjunction with the quarterly ALLL process.

Subject loans are evaluated for impairment on a quarterly basis. Loans included in the previous quarter’s review are reevaluated and if their values are materially different from the prior quarter evaluation, the underlying information (loan balance and in most cases, collateral value) are compared. Material differences are evaluated for reasonableness, and discussions are held between the relationship manager and their senior manager to understand the difference and determine if any adjustment is necessary. The inputs are developed and substantiated on a quarterly basis, based on current borrower developments, market conditions and collateral values.

The following two internal methods are used to value impaired loans:

¿ Cash flow analysis considers internally developed inputs, such as discount rates, default rates,

 costs of foreclosure and changes in collateral values.

¿ The fair value of the collateral, which may take the form of real estate or personal property, is based on internal estimates, field observations and assessments provided by third-party appraisers. We perform or reaffirm appraisals of collateral-dependent impaired loans at least annually. Appraisals may occur more frequently if the most recent appraisal does not accurately reflect the current market, the debtor is seriously delinquent or chronically past due, or there has been a material deterioration in the performance of the project or condition of the property. Adjustments to outdated appraisals that result in an appraisal value less than the carrying amount of a collateral-dependent impaired loan are reflected in the ALLL.

Impairment valuations are back-tested each quarter, based on a look-back of actual incurred losses on closed deals previously evaluated for impairment. The overall percent variance of actual net charge-offs on closed deals as compared to the specific allocations on such deals is considered in determining each quarter’s specific allocations.

34

Loans held for sale. Through a quarterly analysis of our loan portfolios held for sale, which include both performing and nonperforming loans, we determined that adjustments were necessary to record some of the portfolios at the lower of cost or fair value in accordance with GAAP. Loans held for sale portfolios adjusted to fair value totaled $15 million at June 30, 2012 and $15 million at December 31, 2011.

Current market conditions, including updated collateral values, and reviews of our borrowers’ financial condition influenced the inputs used in our internal models and other valuation methodologies, resulting in these adjustments. The valuations are prepared by the responsible relationship managers or analysts in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. Actual gains or losses realized on the sale of various loans held for sale provide a back-testing mechanism for determining the appropriateness of our valuations of these loans held for sale that are adjusted to fair value.

Valuations of performing commercial mortgage and construction loans held for sale are conducted using internal models that rely on market data from sales or nonbinding bids on similar assets, including credit spreads, treasury rates, interest rate curves and risk profiles, as well as our own assumptions about the exit market for the loans and details about individual loans within the respective portfolios. Therefore, we have classified these loans as Level 3 assets. The inputs related to our assumptions and other internal loan data include changes in real estate values, costs of foreclosure, prepayment rates, default rates and discount rates.

Valuations of nonperforming commercial mortgage and construction loans held for sale are based on current agreements to sell the loans or approved discounted payoffs. If a negotiated value is not available, we use third-party appraisals, adjusted for current market conditions. Since valuations are based on unobservable data, these loans have been classified as Level 3 assets.

Direct financing leases and operating lease assets held for sale. Our Key Equipment Finance (KEF) Accounting and Capital Markets groups are responsible for the valuation policies and procedures related to these assets. The Managing Director of the KEF Capital Markets group reports to the President of our Equipment Finance line of business. A weekly report is distributed to both groups that lists all Equipment Finance deals booked in the warehouse portfolio. On a quarterly basis, the KEF Accounting group prepares a detailed held for sale roll forward schedule that is reconciled to the general ledger and the above mentioned weekly report. The held for sale roll forward schedule is used by KEF management to determine if an impairment adjustment is necessary in accordance with lower of cost or fair value guidelines.

Valuations of direct financing leases and operating lease assets held for sale are performed using an internal model that relies on market data, such as swap rates and bond ratings, as well as our own assumptions about the exit market for the leases and details about the individual leases in the portfolio. The inputs based on our assumptions include changes in the value of leased items and internal credit ratings. These leases have been classified as Level 3 assets. Leases also may be valued using current nonbinding bids when they are available. These leases are classified as Level 2 assets. In a distressed market where market data is not available, an estimate of the fair value of the leased asset may be used to value the lease, resulting in a Level 3 classification. In an inactive market, the market value of the assets held for sale is determined as the present value of the future cash flows discounted at the current buy rate. Equipment Finance Accounting calculates an estimated fair value buy rate based on the credit premium inherent in the relevant bond index and the appropriate swap rate on the measurement date. The amount of the adjustment is calculated as book value minus the present value of future cash flows discounted at the calculated buy rate.

Goodwill and other intangible assets. On a quarterly basis, we review impairment indicators to determine whether we need to evaluate the carrying amount of the goodwill and other intangible assets assigned to Key Community Bank and Key Corporate Bank. We also perform an annual impairment test for goodwill. Fair value of our reporting units is determined using both an income approach (discounted cash flow method) and a market approach (using publicly traded company and recent transactions data), which are weighted equally.

Inputs used include market-available data, such as industry, historical and expected growth rates, and peer valuations, as well as internally driven inputs, such as forecasted earnings and market participant insights. Since this valuation relies on a significant number of unobservable inputs, we have classified goodwill as Level 3. We use a third party valuation services provider to perform the annual, and if necessary, any interim, Step 1 valuation process, and to perform a Step 2 analysis, if needed, on our reporting units. Annual and any interim valuations prepared by the third-party valuation service provider are reviewed by the appropriate individuals within Key to ensure that the assumptions used in preparing the analysis are appropriate and properly supported. For additional information on the results of recent goodwill impairment testing, see Note 10 (“Goodwill and Other Intangible Assets”) on page 161 of our 2011 Annual Report on Form 10-K.

35

The fair value of other intangible assets is calculated using a cash flow approach. While the calculation to test for recoverability uses a number of assumptions that are based on current market conditions, the calculation is based primarily on unobservable assumptions. Accordingly, these assets are classified as Level 3. Our lines of business, with oversight from our Accounting group are responsible for routinely, at least quarterly, assessing whether impairment indicators are present. All indicators that signal impairment may exist are appropriately considered in this analysis. An impairment loss is only recognized for a held and used long lived asset if the sum of its estimated future undiscounted cash flows used to test for recoverability is less than its carrying value.

Our primary assumptions include attrition rates, alternative costs of funds and rates paid on deposits. For additional information on the results of other intangible assets impairment testing, see Note 10 (“Goodwill and Other Intangible Assets”) on page 161 of our 2011 Annual Report on Form 10-K.

Other assets.  OREO and other repossessed properties are valued based on inputs such as appraisals and third-party price opinions, less estimated selling costs. Generally, we classify these assets as Level 3, but OREO and other repossessed properties for which we receive binding purchase agreements are classified as Level 2. Returned lease inventory is valued based on market data for similar assets and is classified as Level 2. Assets that are acquired through, or in lieu of, loan foreclosures are recorded initially as held for sale at fair value less estimated selling costs at the date of foreclosure. After foreclosure, valuations are updated periodically, and current market conditions may require the assets to be marked down further to a new cost basis.

¿ Commercial Real Estate Valuation Process:  When a loan is reclassified from loan status to OREO due to our taking possession of the collateral, the Asset Recovery Group Loan Officer, in consultation with our OREO group, obtains a broker price opinion or a third-party appraisal, which is used to establish the fair value of the underlying collateral. The determined fair value of the underlying collateral less estimated selling costs becomes the carrying value of the OREO asset. In addition to valuations from independent third party sources, our OREO group also writes down the carrying balance of OREO assets once a bona fide offer is contractually accepted, through execution of a Purchase and Sale Agreement, where the accepted price is lower than the current balance of the particular OREO asset. The fair value of OREO property is re-evaluated every 90 days and the OREO asset is adjusted as necessary.

¿ Consumer Real Estate Valuation Process:  The Asset Management team within our Risk Operations group is responsible for valuation policies and procedures in this area. The current vendor partner provides monthly reporting of all broker price opinion evaluations, appraisals and the monthly market plans. Market plans are reviewed monthly, and valuations are reviewed and tested monthly to ensure proper pricing has been established and guidelines are being met. Risk Operations Compliance validates and provides periodic testing of the valuation process. The Asset Management team reviews changes in fair value measurements. The current vendor partner managed brokers review pricing monthly, while third-party broker price opinions are reviewed every 90 days, and the fair value is written down based on changes to the valuation. External factors are documented and monitored as appropriate.

Mortgage servicing assets are valued based on inputs such as prepayment speeds, earn rates, credit default rates, discount rates and servicing advances. We classify these assets as Level 3. Additional information regarding the valuation of mortgage servicing assets is provided in Note 8 (“Mortgage Servicing Assets”).

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted-average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets during the second quarter of 2012, along with the valuation techniques used, are shown in the following table:

36

June 30, 2012 dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	220	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple		4.8 - 8.2% (6.1%)
Equity instruments of private companies				EBITDA multiple (where applicable)		5.5 - 12.0% (4.8%)
				Revenue multiple (where applicable)		0.2 - 4.4% (0.6%)
Nonrecurring
Impaired loans		81	Fair value of underlying collateral	Discount		0.00 - 100.00% (32%)
Goodwill		917	Discounted cash flow and market data	Earnings multiple of peers		8.30 - 11.90 (10.01)
				Equity multiple of peers		1.21 - 1.32 (1.27)
				Control premium		N/A (32.00%)
				Weighted-average cost of capital		N/A (15.00%)
Mortgage servicing assets		237	Discounted cash flow	Prepayment speed		0.00 - 25.00% (11.70%)
				Expected credit losses		1.00 - 3.00% (2.40%)
				Residual cash flows discount rate		7.00 - 15.00% (9.40%)
				Value assigned to escrow funds		0.50 - 3.75% (1.80%)
				Servicing cost		700 - 17,000 (2,512)
				Loan assumption rate		0.00 - 3.00% (2.18%)
				Percentage late		0.00 - 2.00% (0.22%)

Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments at June 30, 2012, along with the related carrying amounts and fair values at June 30, 2012 and December 31, 2011, are shown in the following table.

		June 30, 2012													December 31, 2011
				Fair Value
in millions		Carrying Amount		Level 1		Level 2		Level 3		Netting Adjustment			Total		Carrying Amount		Fair Value
ASSETS
Cash and short-term investments (a)	$		2,933	$	2,595	$	338		—		—		$	2,933	$	4,213	$	4,213
Trading account assets (e)			679		3		618	$	58		—			679		623		623
Securities available for sale (e)			13,205		20		13,185		—		—			13,205		16,012		16,012
Held-to-maturity securities (b)			4,352		—		4,396		—		—			4,396		2,109		2,133
Other investments (e)			1,186		11		401		774		—			1,186		1,163		1,163
Loans, net of allowance (c)			48,717		—		—		47,912		—			47,912		48,571		47,561
Loans held for sale (e)			656		—		—		656		—			656		728		728
Mortgage servicing assets (d)			186		—		—		237		—			237		173		245
Derivative assets (e)			818		81		2,078		41	$	(1,382	)    (f)		818		945		945
LIABILITIES
Deposits with no stated maturity (a)	$		52,495		—	$	52,495		—		—		$	52,495	$	51,014	$	51,014
Time deposits (d)			9,672	$	617		9,271		—		—			9,888		10,942		11,253
Short-term borrowings (a)			2,078		3		2,075		—		—			2,078		2,048		2,048
Long-term debt (d)			7,521		3,890		3,955		—		—			7,845		9,520		9,792
Derivative liabilities (e)			763		81		1,560	$	2	$	(880	)    (f)		763		1,026		1,026

37

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities and certain prepayment assumptions. We review the valuations derived from the models to ensure they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(c) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(d) Fair values of mortgage servicing assets, time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(e) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets Measured at Fair Value on a Nonrecurring Basis” in this note.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

We use valuation methods based on exit market prices in accordance with applicable accounting guidance. We determine fair value based on assumptions pertaining to the factors a market participant would consider in valuing the asset. A substantial portion of our fair value adjustments are related to liquidity. During 2011 and into 2012, the fair values of our loan portfolios improved, primarily due to increasing liquidity in the loan markets. If we were to use different assumptions, the fair values shown in the preceding table could change significantly. If a nonexit price methodology were used for valuing our loan portfolio for continuing operations, it would result in a premium of .4%. Also, because the applicable accounting guidance for financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, the fair value amounts shown in the table above do not, by themselves, represent the underlying value of our company as a whole.

Education lending business.  The discontinued education lending business consists of assets and liabilities (recorded at fair value) in the securitization trusts, as well as loans in portfolio (recorded at fair value), loans in portfolio (recorded at carrying value with appropriate valuation reserves) and loans held for sale (prior to the second quarter of 2011), all of which are outside the trusts. The fair value of loans held for sale was identical to the aggregate carrying amount of the loans. All of these loans were excluded from the table above as follows:

• Loans at carrying value, net of allowance, of $2.8 billion ($2.4 billion at fair value) at June 30, 2012 and $2.9 billion ($2.5 billion at fair value) at December 31, 2011;

• Portfolio loans at fair value of $73 million at June 30, 2012 and $76 million at December 31, 2011;

• There were no loans held for sale at June 30, 2012 or December 31, 2011; and

• Loans in the trusts at fair value of $2.6 billion at June 30, 2012 and $2.7 billion at December 31, 2011.

Securities issued by the education lending securitization trusts, which are the primary liabilities of the trusts, totaling $2.4 billion in fair value at June 30, 2012, and $2.5 billion in fair value at December 31, 2011, are also excluded from the above table.

These loans and securities are classified as Level 3 because we rely on unobservable inputs when determining fair value since observable market data is not available. Additional information regarding the consolidation of the education lending securitization trusts is provided in Note 11 (“Acquisition and Discontinued Operations”).

Residential real estate mortgage loans.  Residential real estate mortgage loans with carrying amounts of $2 billion at June 30, 2012 and $1.9 billion at December 31, 2011 are included in “Loans, net of allowance” in the above table.

Short-term financial instruments.  For financial instruments with a remaining average life to maturity of less than six months, carrying amounts were used as an approximation of fair values.

38

6. Securities

Securities available for sale.  These are securities that we intend to hold for an indefinite period of time; they may, however be sold in response to changes in interest rates, prepayment risk, liquidity needs or other factors. Securities available for sale are reported at fair value. Unrealized gains and losses (net of income taxes) deemed temporary are recorded in equity as a component of AOCI on the balance sheet. Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “net securities gains (losses)” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “net securities gains (losses)” on the income statement or AOCI in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

“Other securities” held in the available-for-sale portfolio are primarily marketable equity securities that are traded on a public exchange such as the NYSE or NASDAQ.

Held-to-maturity securities.  These are debt securities that we have the intent and ability to hold until maturity. Debt securities are carried at cost and adjusted for amortization of premiums and accretion of discounts using the interest method. This method produces a constant rate of return on the adjusted carrying amount.

“Other securities” held in the held-to-maturity portfolio consist of foreign bonds, capital securities and preferred equity securities.

Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “net securities gains (losses)” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “net securities gains (losses)” on the income statement or AOCI in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.

The increase in our held-to-maturity securities is invested in Federal Agency CMOs as we increased this portfolio in response to potential future changes in regulatory capital rules.

39

		June 30, 2012
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$		53	$	3		—	$	56
Collateralized mortgage obligations			12,098		379		—		12,477
Other mortgage-backed securities			597		55		—		652
Other securities			20		1	$	1		20
Total securities available for sale	$		12,768	$	438	$	1	$	13,205
HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$		4,334	$	44		—	$	4,378
Other securities			18		—		—		18
Total held-to-maturity securities	$		4,352	$	44		—	$	4,396
		December 31, 2011
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$		60	$	3		—	$	63
Collateralized mortgage obligations			14,707		455		—		15,162
Other mortgage-backed securities			715		63		—		778
Other securities			8		1		—		9
Total securities available for sale	$		15,490	$	522		—	$	16,012
HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$		2,091	$	24		—	$	2,115
Other securities			18		—		—		18
Total held-to-maturity securities	$		2,109	$	24		—	$	2,133
		June 30, 2011
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations	$		9		—		—	$	9
States and political subdivisions			126	$	3		—		129
Collateralized mortgage obligations			17,124		485		—		17,609
Other mortgage-backed securities			845		72		—		917
Other securities			13		3		—		16
Total securities available for sale	$		18,117	$	563		—	$	18,680
HELD-TO-MATURITY SECURITIES
States and political subdivisions	$		1		—		—	$	1
Other securities			18		—		—		18
Total held-to-maturity securities	$		19		—		—	$	19

40

The following table summarizes our securities that were in an unrealized loss position as of June 30, 2012, December 31, 2011, and June 30, 2011.

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
in millions	Fair Value		Gross   Unrealized   Losses		Fair Value		Gross   Unrealized   Losses		Fair Value		Gross Unrealized Losses
June 30, 2012
Securities available for sale:
Collateralized mortgage obligations	$	1		—		—		—	$	1		—
Other securities		12	$	1		—		—		12	$	1
Held-to-maturity:
Collateralized mortgage obligations		200		—		—		—		200		—
Total temporarily impaired securities	$	213	$	1		—		—	$	213	$	1
December 31, 2011
Securities available for sale:
Collateralized mortgage obligations	$	1		—		—		—	$	1		—
Other securities		3		—		—		—		3		—
Total temporarily impaired securities	$	4		—		—		—	$	4		—
June 30, 2011
Securities available for sale:
Collateralized mortgage obligations	$	126		—		—		—	$	126		—
Total temporarily impaired securities	$	126		—		—		—	$	126		—

We had $1 million of gross unrealized losses at June 30, 2012 that related to one fixed-rate CMO, which we had invested in as part of an overall A/LM strategy. Since this security has a fixed interest rate, its fair value is sensitive to movements in market interest rates. This unrealized loss is considered temporary since we expect to collect all contractually due amounts from this security. Accordingly, this investment has been reduced to its fair value through OCI, not earnings. This security had a weighted-average maturity of .2 years at June 30, 2012.

We regularly assess our securities portfolio for OTTI. The assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery.

The debt securities identified to have OTTI are written down to their current fair value. For those debt securities that we intend to sell, or more-likely-than-not will be required to sell, prior to the expected recovery of the amortized cost, the entire impairment (i.e., the difference between amortized cost and the fair value) is recognized in earnings. For those debt securities that we do not intend to sell, or more-likely-than-not will not be required to sell, prior to expected recovery, the credit portion of OTTI is recognized in earnings, while the remaining OTTI is recognized in equity as a component of AOCI on the balance sheet. As shown in the following table, we did not have any impairment losses recognized in earnings for the three months ended June 30, 2012.

Three months ended June 30, 2012

in millions
Balance at March 31, 2012	$	4
Impairment recognized in earnings		—
Balance at June 30, 2012	$	4

41

Realized gains and losses related to securities available for sale were as follows:

Six months ended June 30, 2012

in millions
Realized gains	—
Realized losses	—
Net securities gains (losses)	—

At June 30, 2012, securities available for sale and held-to-maturity securities totaling $10 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

The following table shows securities by remaining maturity. CMOs and other mortgage-backed securities — both of which are included in the securities available-for-sale portfolio — are presented based on their expected average lives. The remaining securities, including all of those in the held-to-maturity portfolio, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

	Securities         Available for Sale				Held-to-Maturity          Securities
June 30, 2012 in millions	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	950	$	966	$	5	$	5
Due after one through five years		11,748		12,163		4,347		4,391
Due after five through ten years		66		72		—		—
Due after ten years		4		4		—		—
Total	$	12,768	$	13,205	$	4,352	$	4,396

42

7.  Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require a small or no net investment, and allow for the net settlement of positions. A derivative’s notional amount serves as the basis for the payment provision of the contract, and takes the form of units, such as shares or dollars. A derivative’s underlying variable is a specified interest rate, security price, commodity price, foreign exchange rate, index, or other variable. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the fair value of the derivative contract.

The primary derivatives that we use are interest rate swaps, caps, floors, and futures; foreign exchange contracts; energy derivatives; credit derivatives; and equity derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in the loan portfolio, hedge against changes in foreign currency exchange rates, and meet client financing and hedging needs. As further discussed in this note:

• interest rate risk represents the possibility that the EVE or net interest income will be adversely affected by fluctuations in interest rates;

• credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms; and

• foreign exchange risk is the risk that an exchange rate will adversely affect the fair value of a financial instrument.

Derivative assets and liabilities are recorded at fair value on the balance sheet, after taking into account the effects of bilateral collateral and master netting agreements. These agreements allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. As a result, we could have derivative contracts with negative fair values included in derivative assets on the balance sheet and contracts with positive fair values included in derivative liabilities.

At June 30, 2012, after taking into account the effects of bilateral collateral and master netting agreements, we had $183 million of derivative assets and a negative $61 million of derivative liabilities that relate to contracts entered into for hedging purposes. Our hedging derivative liabilities are in an asset position largely due to contracts with positive fair values as a result of master netting agreements. As of the same date, after taking into account the effects of bilateral collateral and master netting agreements and a reserve for potential future losses, we had derivative assets of $635 million and derivative liabilities of $824 million that were not designated as hedging instruments.

The Dodd-Frank Act, which is currently being implemented, may limit the types of derivative activities that KeyBank and other insured depository institutions may conduct. As a result, we may not continue to use all of the types of derivatives noted above in the future.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives” on page 121 of our 2011 Annual Report on Form 10-K.

Derivatives Designated in Hedge Relationships

Net interest income and the EVE change in response to changes in the mix of assets, liabilities, and off-balance sheet instruments; associated interest rates tied to each instrument; differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities; and changes in interest rates. We utilize derivatives that have been designated as part of a hedge relationship in accordance with the applicable accounting guidance to minimize the exposure and volatility of net interest income and EVE to interest rate fluctuations. The primary derivative instruments used to manage interest rate risk are interest rate swaps, which convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index.

We designate certain “receive fixed/pay variable” interest rate swaps as fair value hedges. These swaps are used primarily to modify our consolidated exposure to changes in interest rates. These contracts convert certain fixed-rate long-term debt into variable-rate obligations. As a result, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts.

43

Similarly, we designate certain “receive fixed/pay variable” interest rate swaps as cash flow hedges. These contracts effectively convert certain floating-rate loans into fixed-rate loans to reduce the potential adverse effect of interest rate decreases on future interest income. Again, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts. We also designate certain “pay fixed/receive variable” interest rate swaps as cash flow hedges. These swaps convert certain floating-rate debt into fixed-rate debt.

We also use interest rate swaps to hedge the floating-rate debt that funds fixed-rate leases entered into by our Equipment Finance line of business. These swaps are designated as cash flow hedges to mitigate the interest rate mismatch between the fixed-rate lease cash flows and the floating-rate payments on the debt.

The derivatives used for managing foreign currency exchange risk are cross currency swaps. During 2011 and prior years, Key had outstanding issuances of medium-term notes that were denominated in foreign currencies. The notes were subject to translation risk, which represented the possibility that the fair value of the foreign-denominated debt would change based on movement of the underlying foreign currency spot rate. It has been our practice to hedge against potential fair value volatility caused by changes in foreign currency exchange rates and interest rates. The hedge converted the notes to a variable-rate U.S. currency-denominated debt, which was designated as a fair value hedge of foreign currency exchange risk. As of June 30, 2012, Key has no debt being hedged in this manner.

Derivatives Not Designated in Hedge Relationships

On occasion, we enter into interest rate swap contracts to manage economic risks but do not designate the instruments in hedge relationships. Excluding contracts addressing customer exposures, the amount of derivatives hedging risks on an economic basis at June 30, 2012, was not significant.

Like other financial services institutions, we originate loans and extend credit, both of which expose us to credit risk. We actively manage our overall loan portfolio and the associated credit risk in a manner consistent with asset quality objectives. This process entails the use of credit derivatives — primarily credit default swaps. Credit default swaps enable us to transfer to a third party a portion of the credit risk associated with a particular extension of credit, and to manage portfolio concentration and correlation risks. Occasionally, we also provide credit protection to other lenders through the sale of credit default swaps. This objective is accomplished primarily through the use of an investment-grade diversified dealer-traded basket of credit default swaps. These transactions may generate fee income, and diversify and reduce overall portfolio credit risk volatility. Although we use credit default swaps for risk management purposes, they are not treated as hedging instruments.

We also enter into derivative contracts for other purposes, including:

¿ interest rate swap, cap, and floor contracts entered into generally to accommodate the needs of commercial loan clients;

¿ energy swap and options contracts entered into to accommodate the needs of clients;

¿ futures contracts and positions with third parties that are intended to offset or mitigate the interest rate or market risk related to client positions discussed above; and

¿ foreign exchange forward contracts and options entered into primarily to accommodate the needs of clients.

These contracts are not designated as part of hedge relationships.

Fair Values, Volume of Activity and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross basis as of June 30, 2012, December 31, 2011, and June 30, 2011. The change in the notional amounts of these derivatives by type from December 31, 2011, to June 30, 2012, indicates the volume of our derivative transaction activity during the first half of 2012. The notional amounts are not affected by bilateral collateral and master netting agreements. Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:

44

	June 30, 2012						December 31, 2011						June 30, 2011
			Fair Value						Fair Value						Fair Value
in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	15,903	$	586	$	32	$	15,067	$	589	$	27	$	9,713	$	459	$	1
Foreign exchange		431		2		8		554		—		147		1,188		—		150
Total		16,334		588		40		15,621		589		174		10,901		459		151
Derivatives not designated as hedging instruments:
Interest rate		58,222		1,273		1,278		48,537		1,364		1,371		46,355		1,149		1,180
Foreign exchange		5,579		105		97		5,549		151		141		6,001		178		169
Energy and commodity		1,691		209		204		1,610		253		253		1,896		295		303
Credit		2,613		25		24		3,210		37		62		2,934		34		31
Equity		18		—		—		17		3		3		32		4		4
Total		68,123		1,612		1,603		58,923		1,808		1,830		57,218		1,660		1,687
Netting adjustments (a)		—		(1,382)		(880)		—		(1,452)		(978)		—		(1,219)		(847)
Total derivatives	$	84,457	$	818	$	763	$	74,544	$	945	$	1,026	$	68,119	$	900	$	991

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral.

Fair value hedges. Instruments designated as fair value hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. The effective portion of a change in the fair value of an instrument designated as a fair value hedge is recorded in earnings at the same time as a change in fair value of the hedged item, resulting in no effect on net income. The ineffective portion of a change in the fair value of such a hedging instrument is recorded in “other income” on the income statement with no corresponding offset. During the six-month period ended June 30, 2012, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some ineffectiveness in our hedging relationships, all of our fair value hedges remained “highly effective” as of June 30, 2012.

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the six-month periods ended June 30, 2012 and 2011, and where they are recorded on the income statement.

	Six months ended June 30, 2012
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains     (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on     Hedged Item
Interest rate	Other income	$	(13)	Long-term debt	Other income	$	10	(a)
Interest rate	Interest expense – Long-term debt		89
Foreign exchange	Other income		5	Long-term debt	Other income		(6)	(a)
Foreign exchange	Interest expense – Long-term debt		1	Long-term debt	Interest expense – Long-term debt		(1)	(b)
Total		$	82			$	3
	Six months ended June 30, 2011
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains     (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on     Hedged Item
Interest rate	Other income	$	(12)	Long-term debt	Other income	$	8	(a)
Interest rate	Interest expense – Long-term debt		112
Foreign exchange	Other income		90	Long-term debt	Other income		(95)	(a)
Foreign exchange	Interest expense – Long-term debt		5	Long-term debt	Interest expense – Long-term debt		(8)	(b)
Total		$	195			$	(95)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Cash flow hedges. Instruments designated as cash flow hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a cash flow hedge is recorded as a component of AOCI on the balance sheet and is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we pay variable-rate interest on debt, receive variable-rate interest on commercial loans or sell commercial real estate loans). The ineffective portion of cash flow hedging transactions is included in “other income” on the income statement. During the six-month period ended June 30, 2012, we did not exclude any portion of these

45

hedging instruments from the assessment of hedge effectiveness. While there is some ineffectiveness in our hedging relationships, all of our cash flow hedges remained “highly effective” as of June 30, 2012.

Net Investment Hedges. In May 2012, we entered into foreign currency forward contracts to hedge our exposure to changes in the carrying value of our investments as a result of changes in the related foreign exchange rates. Instruments designated as net investment hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a net investment hedge is recorded as a component of AOCI on the balance sheet when the terms of the derivative match the notional and currency risk being hedged. The effective portion is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we dispose of a foreign subsidiary). At June 30, 2012, AOCI reflected unrecognized after-tax losses totaling $6 million related to cumulative changes in the fair value of our net investment hedge, which offset the unrecognized after-tax gains on net investment balances. The ineffective portion of net investment hedging transactions is included in “other income” on the income statement. However, there was no net investment hedge ineffectiveness as of June 30, 2012. We did not exclude any portion of our hedging instruments from the assessment of hedge effectiveness while these hedges were outstanding during the second quarter of 2012.

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the six-month periods ended June 30, 2012 and 2011, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

	Six months ended June 30, 2012
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified     From OCI Into Income (Effective  Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income     (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	50	Interest income – Loans	$	29		Other income		—
Interest rate		(7)	Interest expense – Long-term debt		(5)		Other income		—
Interest rate		—	Net gains (losses) from loan sales		—		Other income		—
Net Investment Hedges
Foreign exchange contracts		(6)	Other Income		—		Other income		—
Total	$	37		$	24				—
	Six months ended June 30, 2011
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified     From OCI Into Income (Effective Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income     (Ineffective Portion)
Interest rate	$	42	Interest income – Loans	$	27		Other income		—
Interest rate		(9)	Interest expense – Long-term debt		(5)		Other income		—
Interest rate		—	Net gains (losses) from loan sales		—		Other income		—
Total	$	33		$	22				—

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

in millions		December 31, 2011				2012 Hedging Activity			Reclassification of Gains to Net Income				June 30, 2012
AOCI resulting from cash flow and net investment hedges	$		(2	)	$		23	$		(15	)	$		6

Considering the interest rates, yield curves, and notional amounts as of June 30, 2012, we would expect to reclassify an estimated $5 million of net losses on derivative instruments from AOCI to income during the next twelve months. In addition, we expect to reclassify approximately $11 million of net gains related to terminated cash flow hedges from AOCI to income during the next twelve months. The maximum length of time over which we hedge forecasted transactions is 17 years.

Nonhedging instruments. Our derivatives that are not designated as hedging instruments are recorded at fair value in “derivative assets” and “derivative liabilities” on the balance sheet. Adjustments to the fair values of these instruments, as

46

well as any premium paid or received, are included in “investment banking and capital markets income (loss)” on the income statement.

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the six-month periods ended June 30, 2012 and 2011, and where they are recorded on the income statement.

		Six months ended June 30,
in millions		2012		2011
NET GAINS (LOSSES) (a)
Interest rate	$		10	$	6
Foreign exchange			19		20
Energy and commodity			6		2
Credit			(9)		(10)
Total net gains (losses)	$		26	$	18

(a) Recorded in “investment banking and capital markets income (loss)” on the income statement.

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected positive replacement value of the contracts. We use several means to mitigate and manage exposure to credit risk on derivative contracts. We generally enter into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. Additionally, we monitor counterparty credit risk exposure on each contract to determine appropriate limits on our total credit exposure across all product types. We review our collateral positions on a daily basis and exchange collateral with our counterparties in accordance with ISDA and other related agreements. We generally hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises or GNMA. The collateral netted against derivative assets on the balance sheet totaled $513 million at June 30, 2012, $486 million at December 31, 2011, and $354 million at June 30, 2011. The collateral netted against derivative liabilities totaled $11 million at June 30, 2012, $11 million at December 31, 2011 and $19 million at June 30, 2011.

The following table summarizes our largest exposure to an individual counterparty at the dates indicated.

in millions	June 30,   2012		December 31,   2011		June 30,   2011
Largest gross exposure (derivative asset) to an individual counterparty	$	196	$	194	$	147
Collateral posted by this counterparty		70		64		33
Derivative liability with this counterparty		217		250		250
Collateral pledged to this counterparty		93		127		137
Net exposure after netting adjustments and collateral		2		7		2
The following table summarizes the fair value of our derivative assets by type. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.
in millions	June 30,   2012		December 31,   2011		June 30,   2011
Interest rate	$	1,221	$	1,257	$	1,026
Foreign exchange		22		64		110
Energy and commodity		82		96		105
Credit		6		12		10
Equity		—		2		3
Derivative assets before collateral		1,331		1,431		1,254
Less:  Related collateral		513		486		354
Total derivative assets	$	818	$	945	$	900

We enter into derivative transactions with two primary groups: broker-dealers and banks, and clients. Since these groups have different economic characteristics, we have different methods for managing counterparty credit exposure and credit risk.

We enter into transactions with broker-dealers and banks for various risk management purposes. These types of transactions generally are high dollar volume. We generally enter into bilateral collateral and master netting agreements with these

47

counterparties. At June 30, 2012, for derivatives that have associated bilateral collateral and master netting agreements, we had gross exposure of $1 billion to broker-dealers and banks. We had net exposure of $244 million after the application of master netting agreements and collateral; our net exposure to broker-dealers and banks at June 30, 2012, was reduced to $13 million with $231 million of additional collateral held in the form of securities.

We enter into transactions with clients to accommodate their business needs. These types of transactions generally are low dollar volume. We generally enter into master netting agreements with these counterparties. In addition, we mitigate our overall portfolio exposure and market risk by buying and selling U.S. Treasuries and Eurodollar futures, and entering into offsetting positions and other derivative contracts. Due to the smaller size and magnitude of the individual contracts with clients, collateral generally is not exchanged in connection with these derivative transactions. To address the risk of default associated with the uncollateralized contracts, we have established a default reserve (included in “derivative assets”) in the amount of $24 million at June 30, 2012, which we estimate to be the potential future losses on amounts due from client counterparties in the event of default. At December 31, 2011, the default reserve was $22 million. At June 30, 2012, for derivatives that have associated master netting agreements, we had gross exposure of $625 million to client counterparties. We had net exposure of $574 million on our derivatives with clients after the application of master netting agreements, collateral and the related reserve.

Credit Derivatives

We are both a buyer and seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations. We also sell credit derivatives, mainly index credit default swaps, to diversify the concentration risk within our loan portfolio.

The following table summarizes the fair value of our credit derivatives purchased and sold by type. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.

	June 30, 2012						December 31, 2011						June 30, 2011
in millions	Purchased		Sold		Net		Purchased		Sold		Net		Purchased		Sold		Net
Single name credit default swaps	$	(4)	$	1	$	(3)	$	3	$	(1)	$	2	$	(10)	$	9	$	(1)
Traded credit default swap indices		—		3		3		6		(6)		—		—		2		2
Other		1		(1)		—		1		(1)		—		3		—		3
Total credit derivatives	$	(3)	$	3	$	—	$	10	$	(8)	$	2	$	(7)	$	11	$	4

Single name credit default swaps are bilateral contracts whereby the seller agrees, for a premium, to provide protection against the credit risk of a specific entity (the “reference entity”) in connection with a specific debt obligation. The protected credit risk is related to adverse credit events, such as bankruptcy, failure to make payments, and acceleration or restructuring of obligations, identified in the credit derivative contract. As the seller of a single name credit derivative, we would be required to pay the purchaser the difference between the par value and the market price of the debt obligation (cash settlement) or receive the specified referenced asset in exchange for payment of the par value (physical settlement) if the underlying reference entity experiences a predefined credit event. For a single name credit derivative, the notional amount represents the maximum amount that a seller could be required to pay. If we effect a physical settlement and receive our portion of the related debt obligation, we will join other creditors in the liquidation process, which may enable us to recover a portion of the amount paid under the credit default swap contract. We also may purchase offsetting credit derivatives for the same reference entity from third parties that will permit us to recover the amount we pay should a credit event occur.

A traded credit default swap index represents a position on a basket or portfolio of reference entities. As a seller of protection on a credit default swap index, we would be required to pay the purchaser if one or more of the entities in the index had a credit event. For a credit default swap index, the notional amount represents the maximum amount that a seller could be required to pay. Upon a credit event, the amount payable is based on the percentage of the notional amount allocated to the specific defaulting entity.

The majority of transactions represented by the “other” category shown in the above table are risk participation agreements. In these transactions, the lead participant has a swap agreement with a customer. The lead participant (purchaser of protection) then enters into a risk participation agreement with a counterparty (seller of protection), under which the counterparty receives a fee to accept a portion of the lead participant’s credit risk. If the customer defaults on the swap contract, the counterparty to the risk participation agreement must reimburse the lead participant for the counterparty’s percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, the counterparty has no reimbursement requirements. The notional amount represents the maximum amount that the seller could be required to pay. If the customer defaults on the swap contract and the seller fulfills its payment obligations

48

under the risk participation agreement, the seller is entitled to a pro rata share of the lead participant’s claims against the customer under the terms of the swap agreement.

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at June 30, 2012, December 31, 2011, and June 30, 2011. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	June 30, 2012							December 31, 2011							June 30, 2011
dollars in millions	Notional Amount		Average Term (Years)		Payment /     Performance Risk			Notional Amount		Average Term (Years)		Payment /     Performance Risk			Notional Amount		Average Term (Years)		Payment /     Performance Risk
Single name credit default swaps	$	550		2.42		4.40	%	$	878		2.18		4.98	%	$	844		2.40		4.45	%
Traded credit default swap indices		478		2.76		1.87			343		3.20		4.58			318		3.88		3.47
Other		23		5.48		9.74			18		5.74		10.89			17		5.56		9.04
Total credit derivatives sold	$	1,051		—		—		$	1,239		—		—		$	1,179		—		—

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties also have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At June 30, 2012, KeyBank’s ratings with Moody’s and S&P were “A3” and “A-,” respectively, and KeyCorp’s ratings with Moody’s and S&P were “Baa1” and “BBB+,” respectively. If there were a downgrade of our ratings, we could be required to post additional collateral under those ISDA Master Agreements where we are in a net liability position. As of June 30, 2012, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) held by KeyBank that were in a net liability position totaled $589 million, which includes $542 million in derivative assets and $1.1 billion in derivative liabilities. We had $537 million in cash and securities collateral posted to cover those positions as of June 30, 2012. The aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) as of June 30, 2012, held by KeyCorp that were in a net liability position totaled $29 million, which is comprised solely of $29 million in derivative liabilities. We had $29 million in cash and securities collateral posted to cover those positions as of June 30, 2012.

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of June 30, 2012, December 31, 2011, and June 30, 2011. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two or three ratings as of June 30, 2012, and take into account all collateral already posted. A similar calculation was performed for KeyCorp and additional collateral of $3 million would have been required as of June 30, 2012. No additional collateral was required in prior periods.

		June 30, 2012				December 31, 2011				June 30, 2011
in millions		Moody’s		S&P		Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings			A3		A-		A3		A-		A3		A-
One rating downgrade	$		6	$	6	$	11	$	11	$	11	$	11
Two rating downgrades			11		11		16		16		16		16
Three rating downgrades			17		17		16		16		16		16

KeyBank’s long-term senior unsecured credit rating currently is four ratings above noninvestment grade at Moody’s and S&P. If KeyBank’s ratings had been downgraded below investment grade as of June 30, 2012, payments of up to $18 million would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted. If KeyCorp’s ratings had been downgraded below investment grade as of June 30, 2012, payments of up to $3 million would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted.

49

8.  Mortgage Servicing Assets

We originate and periodically sell commercial mortgage loans but continue to service those loans for the buyers. We also may purchase the right to service commercial mortgage loans for other lenders. A servicing asset is recorded if we purchase or retain the right to service loans in exchange for servicing fees that exceed the going market rate. Changes in the carrying amount of mortgage servicing assets are summarized as follows:

	Six months ended June  30,
in millions	2012		2011
Balance at beginning of period	$	173	$	196
Servicing retained from loan sales		20		11
Purchases		24		2
Amortization		(29)		(29)
Impairments		(2)		—
Balance at end of period	$	186	$	180
Fair value at end of period	$	237	$	247

The fair value of mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The primary economic assumptions used to measure the fair value of our mortgage servicing assets at June 30, 2012, and 2011, generally are:

¿ prepayment speed at an annual rate of 0.00% to 25.00%;

¿ expected credit losses at a static rate of 1.00% to 3.00%;

¿ residual cash flows discount rate of 7.00% to 15.00%; and

¿ value assigned to escrow funds at an interest rate of .50% to 3.75%.

If these economic assumptions change or prove incorrect, the fair value of mortgage servicing assets may as a result change in the future. The volume of loans serviced, expected credit losses, and the value assigned to escrow deposits are critical to the valuation of servicing assets. At June 30, 2012, a 1.00% decrease in the value assigned to the escrow deposits would cause a $36 million decrease in the fair value of our mortgage servicing assets. An increase in the assumed default rate of commercial mortgage loans of 1.00% would cause a $7 million decrease in the fair value of our mortgage servicing assets.

Contractual fee income from servicing commercial mortgage loans totaled $45 million for the six-month period ended June 30, 2012 and $48 million for the six-month period ended June 30, 2011. We have elected to account for servicing assets using the amortization method. The amortization of servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of servicing assets for each period, as shown in the preceding table, is recorded as a reduction to fee income. Both the contractual fee income and the amortization are recorded in “other income” on the income statement.

Subsequent to its January 19, 2011, publicly issued announcement, Moody’s, a credit rating agency that rates KeyCorp and KeyBank debt securities, indicated to KeyBank that certain escrow deposits associated with our mortgage servicing operations had to be moved to another financial institution that meets Moody’s minimum ratings threshold. As a result of this decision by Moody’s, during the first quarter of 2011, KeyBank transferred approximately $1.5 billion of these escrow deposit balances to an acceptably-rated institution resulting in an immaterial impairment of the related mortgage servicing assets. We funded this movement of the escrow deposits by selling a similar amount of securities available for sale at the time of the transfer. KeyBank had ample liquidity reserves to offset the loss of these deposits.

Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” on page 119 of our 2011 Annual Report on Form 10-K and Note 11 (“Acquisition and Discontinued Operations”) under the heading “Education lending” in this report.

50

9.  Variable Interest Entities

A VIE is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria:

¿ The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

¿ The entity’s investors lack the power to direct the activities that most significantly impact the entity’s economic performance.

¿ The entity’s equity at risk holders do not have the obligation to absorb losses or the right to receive residual returns.

¿ The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

Our VIEs are summarized below. We define a “significant interest” in a VIE as a subordinated interest that exposes us to a significant portion, but not the majority, of the VIE’s expected losses or residual returns, even though we do not have the power to direct the activities that most significantly impact the entity’s economic performance.

		Consolidated VIEs					Unconsolidated VIEs
in millions		Total         Assets		Total             Liabilities			Total     Assets		Total               Liabilities		Maximum       Exposure to Loss
June 30, 2012
LIHTC funds	$		91		84	$		119		—		—
Education loan securitization trusts			2,611	$	2,401			N/A		N/A		N/A
LIHTC investments			N/A		N/A			1,012		—	$	494

Our involvement with VIEs is described below.

Consolidated VIEs

LIHTC guaranteed funds. KAHC formed limited partnerships, known as funds, that invested in LIHTC operating partnerships. Interests in these funds were offered in syndication to qualified investors who paid a fee to KAHC for a guaranteed return. We also earned syndication fees from the funds and continue to earn asset management fees. The funds’ assets primarily are investments in LIHTC operating partnerships, which totaled $52 million at June 30, 2012. These investments are recorded in “accrued income and other assets” on the balance sheet and serve as collateral for the funds’ limited obligations.

We have not formed new funds or added LIHTC partnerships since October 2003. However, we continue to act as asset manager and to provide occasional funding for existing funds under a guarantee obligation. As a result of this guarantee obligation, we have determined that we are the primary beneficiary of these funds. Additional information on return guarantee agreements with LIHTC investors is presented in Note 12 (“Contingent Liabilities and Guarantees”) under the heading “Guarantees.”

In accordance with the applicable accounting guidance for distinguishing liabilities from equity, third-party interests associated with our LIHTC guaranteed funds are considered mandatorily redeemable instruments and are recorded in “accrued expense and other liabilities” on the balance sheet. However, the FASB has indefinitely deferred the measurement and recognition provisions of this accounting guidance for mandatorily redeemable third-party interests associated with finite-lived subsidiaries, such as our LIHTC guaranteed funds. We adjust our financial statements each period for the third-party investors’ share of the funds’ profits and losses. At June 30, 2012, we estimated the settlement value of these third-party interests to be between $12 million and $21 million, while the recorded value, including reserves, totaled $84 million. The partnership agreement for each of our guaranteed funds requires the fund to be dissolved by a certain date.

Education loan securitization trusts. In September 2009, we decided to exit the government-guaranteed education lending business. Therefore, we have accounted for this business as a discontinued operation. In the past, as part of our education lending business model, we originated and securitized education loans. As the transferor, we retained a portion of the risk in the form of a residual interest and also retained the right to service the securitized loans and receive servicing fees. We have not securitized any education loans since 2006.

51

We consolidated our ten outstanding education loan securitization trusts as of January 1, 2010, and made a corresponding $45 million cumulative effect adjustment. We were required to consolidate these trusts because we hold the residual interests and, as the master servicer we have the power to direct the activities that most significantly influence the trusts’ economic performance. We elected to consolidate these trusts at fair value. The trust assets can be used only to settle the obligations or securities that the trusts issue; we cannot sell the assets or transfer the liabilities. The security holders or beneficial interest holders do not have recourse to us, and we do not have any liability recorded related to their securities. During the third quarter of 2011, we determined that the $45 million adjustment was incorrect. Further information regarding this error and how we corrected it as well as additional information about these education loan securitization trusts is generally provided in Note 11 (“Acquisition and Discontinued Operations”) under the heading “Education lending.”

Unconsolidated VIEs

LIHTC nonguaranteed funds. Although we hold significant interests in certain nonguaranteed funds that we formed and funded, we have determined that we are not the primary beneficiary because we do not absorb the majority of the funds’ expected losses and do not have the power to direct activities that most significantly influence the economic performance of these entities. At June 30, 2012, assets of these unconsolidated nonguaranteed funds totaled $119 million. Our maximum exposure to loss in connection with these funds is minimal, and we do not have any liability recorded related to the funds. We have not formed nonguaranteed funds since October 2003.

LIHTC investments. Through Key Community Bank, we have made investments directly in LIHTC operating partnerships formed by third parties. As a limited partner in these operating partnerships, we are allocated tax credits and deductions associated with the underlying properties. We have determined that we are not the primary beneficiary of these investments because the general partners have the power to direct the activities that most significantly influence the economic performance of their respective partnerships and have the obligation to absorb expected losses and the right to receive benefits.

At June 30, 2012, assets of these unconsolidated LIHTC operating partnerships totaled approximately $1 billion. At June 30, 2012, our maximum exposure to loss in connection with these partnerships is the unamortized investment balance of $399 million plus $95 million of tax credits claimed but subject to recapture. We do not have any liability recorded related to these investments because we believe the likelihood of any loss is remote. During the first six months of 2012, we did not obtain significant direct investments (either individually or in the aggregate) in LIHTC operating partnerships.

We have additional investments in unconsolidated LIHTC operating partnerships that are held by the consolidated LIHTC guaranteed funds. Total assets of these operating partnerships were approximately $987 million at June 30, 2012. The tax credits and deductions associated with these properties are allocated to the funds’ investors based on their ownership percentages. We have determined that we are not the primary beneficiary of these partnerships because the general partners have the power to direct the activities that most significantly impact their economic performance and the obligation to absorb expected losses and right to receive residual returns. Information regarding our exposure to loss in connection with these guaranteed funds is included in Note 12 under the heading “Return guarantee agreement with LIHTC investors.”

Commercial and residential real estate investments and principal investments. Our Principal Investing unit and the Real Estate Capital line of business make equity and mezzanine investments, some of which are in VIEs. These investments are held by nonregistered investment companies subject to the provisions of the AICPA Audit and Accounting Guide, “Audits of Investment Companies.” We are not currently applying the accounting or disclosure provisions in the applicable accounting guidance for consolidations to these investments, which remain unconsolidated. The FASB has indefinitely deferred the effective date of this guidance for such nonregistered investment companies.

52

10.  Income Taxes

Income Tax Provision

In accordance with the applicable accounting guidance, the principal method established for computing the provision for income taxes in interim periods requires us to make our best estimate of the effective tax rate expected to be applicable for the full year. This estimated effective tax rate is then applied to interim consolidated pre-tax operating income to determine the interim provision for income taxes. Additionally, the accounting guidance allows for an alternative method to computing the effective tax rate and, thus the interim provision for income taxes, when a taxpayer is unable to calculate a reliable estimate of the effective tax rate for the entire year. For the second quarter of 2012, we applied an estimated annual effective rate to the interim period’s consolidated pre-tax operating income. For the interim periods during 2011, we applied the alternative method allowed under the accounting guidance. The provision for the quarters during 2011 was calculated by applying the statutory federal income tax rate to the quarter’s consolidated operating income before taxes after modifications. These items included modifications for nontaxable items recognized in the quarter, which were comprised of income from corporate-owned life insurance, tax credits related to investments in low-income housing projects, and state taxes. During those periods, we concluded that the uncertainty of the economic environment made the alternative method more reliable in determining the tax provision for those periods.

The effective tax rate, which is the provision for income taxes as a percentage of income from continuing operations before income taxes, was 19.8% for the second quarter of 2012, 27.0% for the first quarter of 2012, and 27.1% for the second quarter of 2011. The effective tax rates are below our combined federal and state statutory tax rate of 37.2%, due primarily to income from investments in tax-advantaged assets such as corporate-owned life insurance and credits associated with investments in low-income housing projects. In addition, during the second quarter and the first six months of 2012, our effective tax rate was lower due to the early termination of certain leveraged leases that resulted in nontaxable gains pursuant to a prior settlement with the IRS.

Deferred Tax Asset

At June 30, 2012, from continuing operations, we had a federal deferred tax asset of $119 million and a state deferred tax liability of $22 million compared to a federal deferred tax asset of $111 million and a state deferred tax liability of $19 million at December 31, 2011, and a combined federal and state deferred tax asset of $208 million at June 30, 2011, included in “accrued income and other assets” on the balance sheet. To determine the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded, we conduct a quarterly assessment of all available evidence. This evidence includes, but is not limited to, taxable income in prior periods, projected future taxable income, and projected future reversals of deferred tax items. Based on these criteria, and in particular our expectations for future taxable income, we currently believe that it is more-likely-than-not that we will realize the net deferred tax asset in future periods.

Unrecognized Tax Benefits

As permitted under the applicable accounting guidance for income taxes, it is our policy to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

53

11.  Acquisition and Discontinued Operations

Acquisition

HSBC Branches. As previously reported, in January 2012, Key signed a purchase and assumption agreement to acquire 37 retail banking branches in Buffalo and Rochester, New York, owned by HSBC Bank NA (“HSBC”). On July 13, 2012, KeyBank completed this acquisition. The acquisition, which adds approximately $2.1 billion in deposits, approximately $260 million in loans, and approximately $70 million in credit card receivables in September of 2012, strengthens Key’s ability to provide exceptional service to consumer, business banking, and wealth management clients in these markets while growing our presence and acquiring new customers.

Under the terms of the transaction, KeyBank paid a 4.4% premium on deposits, or approximately $95 million. The assumed deposits consist primarily of transaction and savings accounts and the purchased loans consist of in-market performing loans, primarily residential real estate loans.

Discontinued operations

Education lending. In September 2009, we decided to exit the government-guaranteed education lending business. As a result, we have accounted for this business as a discontinued operation.

“Income (loss) from discontinued operations, net of taxes” on the income statement includes (i) the changes in fair value of the assets and liabilities of the education loan securitization trusts and the loans at fair value in portfolio (discussed later in this note), and (ii) the interest income and expense from the loans and the securities of the trusts and the loans in portfolio at both amortized cost and fair value. These amounts are shown separately in the following table. Gains and losses attributable to changes in fair value are recorded as a component of noninterest income or expense. Interest income and expense related to the loans and securities are shown as a component of “Net interest income.”

The components of “income (loss) from discontinued operations, net of taxes” for the education lending business are as follows:

		Three months ended June 30,					Six months ended June 30,
in millions		2012		2011			2012		2011
Net interest income	$		30	$	35	$		61	$	71
Provision for loan and lease losses			2		30			6		62
Net interest income (expense) after provision for loan and lease losses			28		5			55		9
Noninterest income			(2)		(11)			(20)		(21)
Noninterest expense			9		9			18		20
Income (loss) before income taxes			17		(15)			17		(32)
Income taxes			6		(6)			6		(12)
Income (loss) from discontinued operations, net of taxes (a)	$		11	$	(9)	$		11	$	(20)

(a) Includes after-tax charges of $12 million and $12 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $26 million and $25 million for the six-month periods ended June 30, 2012 and June 30, 2011, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

54

The discontinued assets and liabilities of our education lending business included on the balance sheet are as follows:

in millions	June 30,  2012		December 31,  2011		June 30,  2011
Trust loans at fair value	$	2,580	$	2,726	$	3,100
Portfolio loans at fair value		73		76		—
Loans, net of unearned income of ($2), ($2) and $1		2,830		3,010		3,161
Less: Allowance for loan and lease losses		79		104		109
Net loans		5,404		5,708		6,152
Trust accrued income and other assets at fair value		31		34		34
Accrued income and other assets		76		87		110
Total assets	$	5,511	$	5,829	$	6,296
Trust accrued expense and other liabilities at fair value	$	28	$	28	$	30
Trust securities at fair value		2,373		2,522		2,919
Total liabilities	$	2,401	$	2,550	$	2,949

In the past, as part of our education lending business model, we originated and securitized education loans. The process of securitization involves taking a pool of loans from our balance sheet and selling them to a bankruptcy-remote QSPE, or trust. This trust then issues securities to investors in the capital markets to raise funds to pay for the loans. The interest generated on the loans pays holders of the securities issued. As the transferor, we retain a portion of the risk in the form of a residual interest and also retain the right to service the securitized loans and receive servicing fees.

As of January 1, 2010, we consolidated our ten outstanding securitization trusts since we hold the residual interests and are the master servicer with the power to direct the activities that most significantly influence the economic performance of the trusts.

The trust assets can be used only to settle the obligations or securities the trusts issue; we cannot sell the assets or transfer the liabilities. The loans in the consolidated trusts consist of both private and government-guaranteed loans. The security holders or beneficial interest holders do not have recourse to Key. Our economic interest or risk of loss associated with these education loan securitization trusts is approximately $210 million as of June 30, 2012. We record all income and expense (including fair value adjustments) through the “income (loss) from discontinued operations, net of tax” line item in our income statement.

We elected to consolidate these trusts at fair value. Carrying the assets and liabilities of the trusts at fair value better depicts our economic interest. The fair value of the assets and liabilities of the trusts is determined by calculating the present value of the future expected cash flows. We rely on unobservable inputs (Level 3) when determining the fair value of the assets and liabilities of the trusts because observable market data is not available. See further discussion regarding our valuation process later in this note.

A cumulative effect adjustment of approximately $45 million, which increased our beginning balance of retained earnings at January 1, 2010, was recorded when the trusts were consolidated. The amount of this cumulative effect adjustment was driven primarily by derecognizing the residual interests and servicing assets related to these trusts and consolidating the assets and liabilities at fair value.

During the third quarter of 2011, we corrected an error related to the $45 million cumulative effect adjustment recorded to beginning retained earnings upon consolidation of the education loan securitization trusts on January 1, 2010. Deferred taxes had not been appropriately recognized for the assets and liabilities of the trusts consolidated which were accounted for at fair value for book purposes but not for tax. We assessed the materiality of the error in accordance with the applicable SEC guidance and concluded that the error was not material, individually or in the aggregate, to our financial position for any prior period or the quarter ending September 30, 2011, to trends for those periods affected, or to a fair presentation of our financial statements for those periods. The error had no impact on our results of operations. Accordingly, results for periods prior to the quarter ending September 30, 2011 were not restated. Instead, accrued income and other assets and retained earnings were reduced by $30 million to correct this error in the third quarter of 2011.

On September 27, 2011, we purchased the government-guaranteed loans from one of the education loan securitization trusts pursuant to the legal terms of the particular trust. The trust used the cash proceeds from the sale of these loans to retire the

55

outstanding securities related to these government-guaranteed loans. This particular trust remains in existence and continues to maintain the private education loan portfolio and has securities related to these loans outstanding. The government-guaranteed loans we purchased are held as portfolio loans and continue to be accounted for at fair value. The portfolio loans were valued using an internal discounted cash flow model, which was affected by assumptions for defaults, expected credit losses, discount rates and prepayments. The portfolio loans are considered to be Level 3 assets since we rely on unobservable inputs when determining fair value. See following discussion regarding our valuation process for these loans as well as the trust loans and securities.

Corporate Treasury, within our Finance area, is responsible for the quarterly valuation process that determines the fair value of the loans and securities in our education loan securitization trusts as well as our student loans held in portfolio that are accounted for at fair value. Corporate Treasury provides these fair values to a Working Group Committee (“the Working Group”) that is comprised of representatives from the line of business, Credit and Market Risk Management, Accounting, Business Finance (part of our Finance area), and Corporate Treasury. The Working Group is a subcommittee of the Fair Value Committee that is discussed in more detail in Note 5 (“Fair Value Measurements”). The Working Group reviews all significant inputs and assumptions and approves the resulting fair values.

The Working Group reviews actual performance trends of the loans and securities on a quarterly basis and uses statistical analysis and qualitative measures to determine assumptions for future performance. Predictive models that incorporate delinquency and charge-off trends along with economic outlooks assist the Working Group to forecast future defaults. The Working Group uses this information to formulate the credit outlook for each of the securitization trusts. Higher projected defaults, fewer expected recoveries, elevated prepayment speeds and higher discount rates would be expected to result in a lower fair value of the loans and securities in these securitization trusts as well as the portfolio loans at fair value. Default expectations and discount rate changes have the most significant impact on the fair values of the loans and securities. It is important to note that increased cash flow uncertainty, whether through higher defaults and prepayments or fewer recoveries, can result in higher discount rates for use in the fair value process for these loans and securities.

The valuation process for the education loan securitization trust and portfolio loans that are accounted for at fair value is based on a discounted cash flow analysis using a model purchased from a third party that is maintained by Corporate Treasury. The market for student loans, either whole-loan purchases or securitization, is relatively illiquid and has not recovered from the effects of the financial crisis. The valuation process begins with loan-by-loan-level data that is aggregated into pools, based on underlying loan structural characteristics (i.e., current unpaid principal balance, contractual term, interest rate, etc.). Cash flows for these loan pools are developed using a financial model that reflects certain assumptions for defaults, recoveries, status change and prepayments.

A net earnings stream, taking into account cost of funding, is calculated and discounted back to the measurement date using an appropriate discount rate. This resulting amount is used to determine the present value of the loans which represents their fair value to a market participant.

The unobservable inputs set forth in the following table are reviewed and approved by the Working Group on a quarterly basis. The Working Group determines these assumptions based on available data, discussions with appropriate individuals internal and external to Key, as well as the knowledge and experience of the individuals on the Working Group.

A similar discounted cash flow approach to that described above is used on a quarterly basis by Corporate Treasury to fair value the trust securities. In valuing these securities, the discount rates used are provided by a third-party valuation consultant. These discount rates are based primarily on secondary market spread indices for similar student loans and asset-backed securities and are developed by the consultant using market-based data. On a quarterly basis, the Working Group reviews the discount rate inputs used in the valuation process for reasonableness based on the historical and current market knowledge of the Working Group members.

A quarterly variance analysis reconciles valuation changes in the model used to calculate the fair value of the trust loans and securities and the portfolio loans at fair value. This quarterly analysis considers loan and securities runoff, yields, future default and recovery changes, and the timing of cash releases to us from the trusts. Back testing for expected defaults to actual experience is also performed as the impact of future defaults has a significant impact on the fair value of these loans and securities over time. In addition, our internal model risk review group periodically performs a review to ensure the accuracy and validity of the model for determining the fair value of these loans and securities.

56

At June 30, 2012, the significant unobservable inputs used to measure the fair value of the education loan securitization trust loans and securities and the portfolio loans accounted for at fair value are shown in the following table:

June 30, 2012 dollars in millions	Fair Value of Level 3         Assets and  Liabilities		Valuation    Technique	Significant Unobservable Input	Range (Weighted-Average)
Trust loans and	$	2,653	Discounted cash flow	Prepayment speed		4.00 - 26.00% (10.22%)
portfolio loans				Expected credit losses		2.00 - 80.00% (52.34%)
accounted for at fair				Discount rate		3.00 - 8.10% (5.30%)
value				Expected defaults		8.00 - 20.64% (12.40%)
Trust securities		2,373	Discounted cash flow	Discount rate		2.10 - 6.90% (4.80%)

The following table shows the consolidated trusts’ assets and liabilities at fair value and the portfolio loans at fair value and their related contractual values as of June 30, 2012. At June 30, 2012, loans held by the trusts with unpaid principal balances of $39 million ($37 million on a fair value basis) and portfolio loans at fair value with unpaid principal balances of $2 million ($2 million on a fair value basis) were 90 days or more past due. Loans held by the trusts aggregating $16 million ($15 million on a fair value basis) were in nonaccrual status, while portfolio loans at fair value in nonaccrual status aggregated to less than $1 million on both a contractual amount and fair value basis.

June 30, 2012 in millions	Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	70	$	73
Trust loans		2,712		2,580
Trust other assets		31		31
LIABILITIES
Trust securities	$	2,772	$	2,373
Trust other liabilities		28		28

The following table presents the assets and liabilities of the trusts that were consolidated and are measured at fair value, as well as the portfolio loans that are measured at fair value on a recurring basis.

June 30, 2012 in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	73	$	73
Trust loans		—		—		2,580		2,580
Trust other assets		—		—		31		31
Total assets on a recurring basis at fair value		—		—	$	2,684	$	2,684
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities		—		—	$	2,373	$	2,373
Trust other liabilities		—		—		28		28
Total liabilities on a recurring basis at fair value		—		—	$	2,401	$	2,401

57

The following table shows the change in the fair values of the Level 3 consolidated education loan securitization trusts for the six-month period ended June 30, 2012.

in millions	Portfolio   Student   Loans		Trust   Student   Loans		Trust   Other   Assets		Trust   Securities		Trust Other Liabilities
Balance at January 1, 2012	$	76	$	2,726	$	34	$	2,522	$	28
Gains (losses) recognized in earnings (a)		(1)		39		—		59		—
Purchases		—		—		—		—		—
Sales		—		—		—		—		—
Issuances		—		—		—		—		—
Settlements		(2)		(185)		(3)		(208)		—
Balance at June 30, 2012	$	73	$	2,580	$	31	$	2,373	$	28

(a) Gains (losses) on the Trust Student Loans and Trust Securities were driven primarily by fair value adjustments.

Austin Capital Management, Ltd. In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. As a result, we have accounted for this business as a discontinued operation.

The results of this discontinued business are included in “income (loss) from discontinued operations, net of taxes” on the income statement. The components of “income (loss) from discontinued operations, net of taxes” for Austin are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Noninterest income		—		—		—	$	1
Noninterest expense	$	1		—	$	9		1
Income (loss) before income taxes		(1)		—		(9)		—
Income taxes		—		—		(3)		—
Income (loss) from discontinued operations, net of taxes	$	(1)		—	$	(6)		—

The discontinued assets and liabilities of Austin included on the balance sheet are as follows:

in millions	June 30,   2012		December 31,   2011		June 30,  2011
Cash and due from banks	$	22	$	31	$	32
Total assets	$	22	$	31	$	32
Accrued expense and other liabilities		—		—	$	1
Total liabilities		—		—	$	1

58

Combined discontinued operations. The combined results of the discontinued operations are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Net interest income	$	30	$	35	$	61	$	71
Provision for loan and lease losses		2		30		6		62
Net interest income (expense) after provision for loan and lease losses		28		5		55		9
Noninterest income		(2)		(11)		(20)		(20)
Noninterest expense		10		9		27		21
Income (loss) before income taxes		16		(15)		8		(32)
Income taxes		6		(6)		3		(12)
Income (loss) from discontinued operations, net of taxes (a)	$	10	$	(9)	$	5	$	(20)

(a) Includes after-tax charges of $12 million and $12 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $26 million and $25 million for the six-month periods ended June 30, 2012 and 2011, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The combined assets and liabilities of the discontinued operations are as follows:

in millions	June 30,  2012		December 31,  2011		June 30,  2011
Cash and due from banks	$	22	$	31	$	32
Trust loans at fair value		2,580		2,726		3,100
Portfolio loans at fair value		73		76		—
Loans, net of unearned income of ($2), ($2) and $1		2,830		3,010		3,161
Less: Allowance for loan and lease losses		79		104		109
Net loans		5,404		5,708		6,152
Trust accrued income and other assets at fair value		31		34		34
Accrued income and other assets		76		87		110
Total assets	$	5,533	$	5,860	$	6,328
Trust accrued expense and other liabilities at fair value	$	28	$	28	$	31
Trust securities at fair value		2,373		2,522		2,919
Total liabilities	$	2,401	$	2,550	$	2,950

59

12.  Contingent Liabilities and Guarantees

Legal Proceedings

The following provides information on material developments in our legal proceedings during the quarter. Additional information on our legal proceedings is available in our 2011 Annual Report on Form 10-K, Note 16 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Legal Proceedings” on pages 175-177, and in our Form 10-Q for the period ended March 31, 2012, Note 12 (“Contingent Liabilities and Guarantees”) under the heading “Legal Proceedings” on page 60.

Austin Related Claims.

Acquisition-related claim. KeyCorp was named as a defendant in an action filed in June 2011 by the former owners of Austin in the United States District Court for the Northern District of Ohio. This acquisition-related lawsuit concerned an alleged breach of contract by KeyCorp under the purchase and sale agreement between the plaintiffs and KeyCorp, which related to our original purchase of Austin. The parties settled and, on April 30, 2012, the court entered a stipulation of dismissal of the litigation. The settlement amount was immaterial and paid out of existing reserves.

Monday litigation. As previously reported, KeyCorp and certain current and former directors and officers were named as defendants in the shareholder derivative lawsuit captioned Warren Monday, et al., v. Henry L. Meyer III, et al. (“Monday”), filed in the United States District Court for the Northern District of Ohio. As previously reported, plaintiffs filed a notice of appeal after the court dismissed the lawsuit in late 2011. While the matter was pending on appeal, the parties agreed to a settlement, subject to the approval of the court. On June 20, 2012, the court entered an order preliminarily approving the settlement and providing for notice to shareholders. The “Notice of Proposed Settlement in Monday v. Meyer Shareholder Derivative Action,” which sets forth the terms of the proposed settlement, is available at www.key.com/ir by clicking on “corporate governance.” A fairness hearing is scheduled for August 6, 2012.

Taylor and Metyk litigation. As previously reported, KeyCorp and certain of its directors and employees were named as defendants in two putative class actions filed in Ohio federal court styled Taylor v. KeyCorp, et al., and Wildes v. KeyCorp, et al. The plaintiffs in these cases sought to represent a class of all participants in our 401(k) Savings Plan and alleged that the defendants in the lawsuit breached fiduciary duties owed to them under ERISA. These cases were substantively consolidated with each other and proceeded styled Taylor v. KeyCorp, et al. (“Taylor”). Plaintiffs’ consolidated complaint continued to name certain employees as defendants but no longer named any outside directors. On May 25, 2012, the federal court of appeals affirmed the trial court’s decision dismissing Taylor for lack of standing. The court of appeals did not address Key’s cross-appeal.

Following the trial court’s dismissal of Taylor on August 12, 2010, two putative class actions with similar allegations and causes of action were filed, on September 21, 2010, in Ohio federal court. These two putative class action lawsuits were substantively consolidated with each other and are proceeding styled Thomas Metyk, et al. v. KeyCorp, et al. (“Metyk”). Metyk had been stayed due to the pendency of the appeals in Taylor. On June 25, 2012, the court lifted the stay. We strongly disagree with the allegations asserted against us and intend to vigorously defend against them.

Other litigation. In the ordinary course of business, we are subject to various other litigation, investigations and administrative proceedings. These other matters may involve claims for substantial monetary relief. Due to the complex nature of these various other matters, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information presently known to us, we do not believe there is any other matter to which we are a party, or involving any of our properties that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on our financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operation for a particular period, depending upon the size of the loss or our income for that particular period.

Guarantees

We are a guarantor in various agreements with third parties. The following table shows the types of guarantees that we had outstanding at June 30, 2012. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Guarantees” on page 177 of our 2011 Annual Report on Form 10-K.

60

June 30, 2012 in millions	Maximum Potential  Undiscounted  Future Payments		Liability  Recorded
Financial guarantees:
Standby letters of credit	$	10,137	$	52
Recourse agreement with FNMA		973		9
Return guarantee agreement with LIHTC investors		55		55
Written put options (a)		1,993		60
Default guarantees		3		1
Total	$	13,161	$	177

(a) The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

We determine the payment/performance risk associated with each type of guarantee described below based on the probability that we could be required to make the maximum potential undiscounted future payments shown in the preceding table. We use a scale of low (0-30% probability of payment), moderate (31-70% probability of payment) or high (71-100% probability of payment) to assess the payment/performance risk, and have determined that the payment/performance risk associated with each type of guarantee outstanding at June 30, 2012, is low.

Standby letters of credit. KeyBank issues standby letters of credit to address clients’ financing needs. These instruments obligate us to pay a specified third party when a client fails to repay an outstanding loan or debt instrument or fails to perform some contractual nonfinancial obligation. Any amounts drawn under standby letters of credit are treated as loans to the client; they bear interest (generally at variable rates) and pose the same credit risk to us as a loan. At June 30, 2012, our standby letters of credit had a remaining weighted-average life of 3.0 years, with remaining actual lives ranging from less than one year to as many as eleven years.

Recourse agreement with FNMA. We participate as a lender in the FNMA Delegated Underwriting and Servicing program. FNMA delegates responsibility for originating, underwriting, and servicing mortgages, and we assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan that we sell to FNMA. We maintain a reserve for such potential losses in an amount that we believe approximates the fair value of our liability. At June 30, 2012, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of six years, and the unpaid principal balance outstanding of loans sold by us as a participant was $3.0 billion. As shown in the preceding table, the maximum potential amount of undiscounted future payments that we could be required to make under this program is equal to approximately one-third of the principal balance of loans outstanding at June 30, 2012. If we are required to make a payment, we would have an interest in the collateral underlying the related commercial mortgage loan; any loss we incur could be offset by the amount of any recovery from the collateral.

Return guarantee agreement with LIHTC investors. KAHC, a subsidiary of KeyBank, offered limited partnership interests to qualified investors. Partnerships formed by KAHC invested in low-income residential rental properties that qualify for federal low income housing tax credits under Section 42 of the Internal Revenue Code. In certain partnerships, investors paid a fee to KAHC for a guaranteed return that is based on the financial performance of the property and the property’s confirmed LIHTC status throughout a fifteen-year compliance period. Typically, KAHC fulfills these guaranteed returns by distributing tax credits and deductions associated with the specific properties. If KAHC defaults on its obligation to provide the guaranteed return, KeyBank is obligated to make any necessary payments to investors. No recourse or collateral is available to offset our guarantee obligation other than the underlying income stream from the properties and the residual value of the operating partnership interests.

As shown in the previous table, KAHC maintained a reserve in the amount of $55 million at June 30, 2012, which we believe will be sufficient to cover estimated future obligations under the guarantees. The maximum exposure to loss reflected in the table represents undiscounted future payments due to investors for the return on and of their investments. A majority of these payments are due and payable within the next twelve months.

These guarantees have expiration dates that extend through 2018, but KAHC has not formed any new partnerships under this program since October 2003. Additional information regarding these partnerships is included in Note 9 (“Variable Interest Entities”).

61

Written put options. In the ordinary course of business, we “write” interest rate caps and floors for commercial loan clients that have variable and fixed rate loans, respectively, with us and wish to mitigate their exposure to changes in interest rates. At June 30, 2012, our written put options had an average life of 1.8 years. These instruments are considered to be guarantees, as we are required to make payments to the counterparty (the commercial loan client) based on changes in an underlying variable that is related to an asset, a liability, or an equity security that the client holds (i.e., the commercial loan client). We are obligated to pay the client if the applicable benchmark interest rate is above or below a specified level (known as the “strike rate”). These written put options are accounted for as derivatives at fair value, as further discussed in Note 7 (“Derivatives and Hedging Activities”). We typically mitigate our potential future payment obligations by entering into offsetting positions with third parties.

Written put options where the counterparty is a broker-dealer or bank are accounted for as derivatives at fair value but are not considered guarantees since these counterparties typically do not hold the underlying instruments. In addition, we are a purchaser and seller of credit derivatives, which are further discussed in Note 7.

Default guarantees. Some lines of business participate in guarantees that obligate us to perform if the debtor (typically a client) fails to satisfy all of its payment obligations to third parties. We generally undertake these guarantees for one of two possible reasons: either the risk profile of the debtor should provide an investment return, or we are supporting our underlying investment in the debtor. The terms of these default guarantees range from less than one year to as many as seven years; some default guarantees do not have a contractual end date. Although no collateral is held, we would receive a pro rata share should the third party collect some or all of the amounts due from the debtor.

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in the applicable accounting guidance, and from other relationships.

Liquidity facilities that support asset-backed commercial paper conduits. At June 30, 2012, we did not have any liquidity facilities remaining outstanding with any unconsolidated third-party commercial paper conduit. The liquidity facility, which expired during the second quarter of 2012, obligated us to provide aggregate funding of up to a certain amount in the event that a credit market disruption or other factors prevented the conduit from issuing commercial paper.

Indemnifications provided in the ordinary course of business. We provide certain indemnifications, primarily through representations and warranties in contracts that we execute in the ordinary course of business in connection with loan sales and other ongoing activities, as well as in connection with purchases and sales of businesses. We maintain reserves, when appropriate, with respect to liability that reasonably could arise as a result of these indemnities.

Intercompany guarantees. KeyCorp and certain of our affiliates are parties to various guarantees that facilitate the ongoing business activities of other affiliates. These business activities encompass issuing debt, assuming certain lease and insurance obligations, purchasing or issuing investments and securities, and engaging in certain leasing transactions involving clients.

62

13.  Trust Preferred Securities Issued by Unconsolidated Subsidiaries

We own the outstanding common stock of business trusts formed by us that issued corporation-obligated mandatorily redeemable trust preferred securities. The trusts used the proceeds from the issuance of their trust preferred securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the mandatorily redeemable trust preferred securities.

We unconditionally guarantee the following payments or distributions on behalf of the trusts:

¿ required distributions on the trust preferred securities;

¿ the redemption price when a capital security is redeemed; and

¿ the amounts due if a trust is liquidated or terminated.

The Dodd-Frank Act changes the regulatory capital standards that apply to BHCs by requiring the phase-out of the treatment of trust preferred securities and cumulative preferred securities as Tier 1 eligible capital. This three-year phase-out period, which commences January 1, 2013, ultimately will require us to treat our mandatorily redeemable trust preferred securities as Tier 2 capital. On June 12, 2012, the Federal Reserve, the FDIC, and the OCC jointly announced three notices of proposed rulemaking (each an “NPR”) that would revise and replace the agencies’ current capital rules in a manner consistent with implementing the final framework for strengthening international capital and liquidity regulation (“Basel III”) adopted by the Basel Committee on Banking Supervision (the “Basel Committee”). One NPR proposes rules implementing the phase-out of trust preferred securities as Tier 1 capital, consistent with the Dodd-Frank Act, as part of the implementation of Basel III. A more thorough discussion of current rulemaking underway in the U.S. to implement Basel III is in the “Supervision and Regulation” portion of this report.

As of June 30, 2012, the trust preferred securities issued by the KeyCorp capital trusts represent $339 billion or 3.5% of our total qualifying Tier 1 capital, net of goodwill. During the quarter, the announcement of the redemptions of the trust preferred securities issued by KeyCorp Capital VII and KeyCorp Capital X resulted in such securities no longer qualifying as Tier 1 capital. On July 12, 2012, we completed the redemption in full of the securities issued by KeyCorp Capital VII and X, with an aggregate liquidation preference of $707 million.

63

The trust preferred securities, common stock and related debentures are summarized as follows:

dollars in millions	Trust Preferred Securities, Net of Discount		(a)	Common Stock		Principal Amount of Debentures, Net of Discount		(b)	Interest Rate         of Trust Preferred Securities and Debentures			(c)	Maturity         of Trust Preferred Securities and Debentures
June 30, 2012
KeyCorp Capital I	$	156		$	6	$	162			1.208	%			2028
KeyCorp Capital II		116			4		120			6.875				2029
KeyCorp Capital III		151			4		155			7.750				2029
KeyCorp Capital VII(e)		189			5		194			5.700				2035
KeyCorp Capital X (d), (e)		589			—		589			8.000				2068
Total	$	1,201		$	19	$	1,220			6.616	%			—
December 31, 2011	$	1,206		$	19	$	1,225			6.610	%			—
June 30, 2011	$	1,912		$	26	$	1,935			6.570	%			—

(a) The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $155 million at June 30, 2012, $160 million at December 31, 2011, and $121 million at June 30, 2011. See Note 7 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b) We have the right to redeem these debentures: (i) in whole or in part, on or after July 1, 2008 (for debentures owned by KeyCorp Capital I); March 18, 1999 (for debentures owned by KeyCorp Capital II); and July 16, 1999 (for debentures owned by KeyCorp Capital III). If the debentures purchased by KeyCorp Capital I are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (a) the principal amount, plus any accrued but unpaid interest or (b) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points (25 basis points or 50 basis points in the case of redemption upon either a tax event or a capital treatment event for KeyCorp Capital III), plus any accrued but unpaid interest. When debentures are redeemed in response to tax or capital treatment events, the redemption price for KeyCorp Capital II and KeyCorp Capital III generally is slightly more favorable to us. The principal amount of debentures shown above includes adjustments related to hedging with financial instruments totaling $155 million at June 30, 2012, $160 million at December 31, 2011, and $118 million at June 30, 2011.

(c) The interest rates for the trust preferred securities issued by KeyCorp Capital II, KeyCorp Capital III, KeyCorp Capital VII, and KeyCorp Capital X are fixed. KeyCorp Capital I has a floating interest rate equal to three-month LIBOR plus 74 basis points that reprices quarterly. The total interest rates are weighted-average rates.

(d) In connection with the issuances of these trust preferred securities, KeyCorp entered into a replacement capital covenant. On April 16, 2012, KeyCorp commenced a consent solicitation from the holders of record as of April 10, 2012, of the outstanding 5.70% trust preferred securities of KeyCorp Capital VII to terminate the Replacement Capital Covenant, dated as of February 27, 2008, as amended (the “RCC”) by KeyCorp in favor of and for the benefit of each Covered Debt holder (as defined in such RCC). On April 27, 2012, KeyCorp announced that, effective as of April 26, 2012, a majority of the holders of record of the trust preferred securities in liquidation amount of KeyCorp Capital VII consented to terminate the RCC. Pursuant to the terms of the consent solicitation, the termination of the RCC became effective on April 26, 2012.

(e) On June 12, 2012, KeyCorp announced the redemption, in full, of 5.70% trust preferred securities of KeyCorp Capital VII and 8.000% enhanced trust preferred securities of KeyCorp Capital X. On July 12, 2012, KeyCorp completed such redemptions.

64

14.  Employee Benefits

Pension Plans

Effective December 31, 2009, we amended our cash balance pension plan and other defined benefit plans to freeze all benefit accruals and close the plans to new employees. We will continue to credit participants’ existing account balances for interest until they receive their plan benefits. We changed certain pension plan assumptions after freezing the plans.

The components of net pension cost for all funded and unfunded plans are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Interest cost on PBO	$	12	$	14	$	24	$	28
Expected return on plan assets		(18)		(20)		(36)		(40)
Amortization of losses		4		3		8		6
Net pension cost	$	(2)	$	(3)	$	(4)		(6)

Other Postretirement Benefit Plans

We sponsor a retiree healthcare plan in which all employees age 55 with five years of service (or employees age 50 with 15 years of service who are terminated under conditions that entitle them to a severance benefit) are eligible to participate. Participant contributions are adjusted annually. Key may provide a subsidy towards the cost of coverage for certain employees hired before 2001 with a minimum of 15 years of service at the time of termination. We also maintain a death benefit plan that provides a death benefit for a very limited number of (i) former Key employees who retired from their employment with Key prior to 1994; (ii) former Key employees who elect a grandfathered pension benefit under the KeyCorp Cash Balance Pension Plan; and (iii) Key employees who otherwise were provided a historical death benefit at the time of their termination. The death benefit plan is noncontributory. We use separate VEBA trusts to fund the healthcare plan and the death benefit plan.

The components of net postretirement benefit cost for all funded and unfunded plans are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Interest cost on APBO	$	1	$	1	$	2	$	2
Expected return on plan assets		(1)		(1)		(2)		(2)
Net postretirement benefit cost		—		—		—		—

The “Patient Protection and Affordable Care Act” and “Education Reconciliation Act of 2010,” which were both signed into law in March 2010, changed the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide a benefit that is at least “actuarially equivalent” to the benefits under Medicare Part D. As a result of these laws, these subsidy payments become taxable in tax years beginning after December 31, 2012. The accounting guidance applicable to income taxes requires the impact of a change in tax law to be immediately recognized in the period that includes the enactment date. The changes to the tax law regarding these subsidies did not affect us as we did not have a deferred tax asset recorded for Medicare Part D subsidies received.

65

15.  Shareholders’ Equity

Comprehensive Capital Plan

On January 9, 2012, we submitted to the Federal Reserve and provided to the OCC under the annual CCAR process our 2012-2013 Comprehensive Capital Plan. At its March 2012 meeting, our Board authorized the purchase in the open market or through privately negotiated transactions of up to $312 million of our Common Shares. This authorization was expressly in addition to any amounts remaining under preexisting authority. Pursuant to our 2012 capital plan submitted to the Federal Reserve as part of CCAR and not objected to by the Federal Reserve, KeyCorp had authority to purchase up to $344 million of our Common Shares, including $312 million for general repurchase and up to $32 million for repurchase in connection with employee elections under our compensation and benefit programs.

During the second quarter of 2012, we completed $82 million of Common Share repurchases from shareholders on the open market, and $3 million of Common Share repurchases from employees in connection with employee elections under our compensation and benefit programs, pursuant to this plan. Following completion of these repurchases, we have remaining authority to repurchase up to $259 million of our Common Shares, including up to $230 million for general repurchase and up to $29 million for repurchase in connection with employee elections under our compensation and benefit programs. Our existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.

Repurchase of TARP CPP Preferred Stock, Warrant and Completion of Equity and Debt Offerings

During the first half of 2011, we completed the repurchase of the $2.5 billion of Series B Preferred Stock and corresponding warrant issued to the U.S. Treasury Department. As a result of the repurchase, we recorded a $49 million one-time deemed dividend in the first quarter of 2011 related to the remaining difference between the repurchase price and the carrying value of the preferred shares at the time of repurchase. On April 20, 2011 we repurchased the warrant directly from the U.S. Treasury for $70 million. Beginning with the second quarter of 2011, the repurchase resulted in the elimination of quarterly dividends of $31 million and discount amortization of $4 million, or $140 million on an annual basis, related to these preferred shares. In total, we paid $2.867 billion to the U.S. Treasury during the investment period in the form of dividends, principal and repurchase of the warrant, resulting in a return to the U.S. Treasury of $367 million above the initial investment of $2.5 billion on November 14, 2008.

66

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.

67

The table on the following pages shows selected financial data for our two major business segments for the three- and six- month periods ended June 30, 2012 and June 30, 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.

68

Three months ended June 30,	Key Community Bank						Key Corporate Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	348		$	374		$	182		$	176
Noninterest income		189			185			210			215
Total revenue (TE) (a)		537			559			392			391
Provision (credit) for loan and lease losses		11			79			4			(76)
Depreciation and amortization expense		9			10			13			19
Other noninterest expense		467			437			205			188
Income (loss) from continuing operations before income taxes (TE)		50			33			170			260
Allocated income taxes and TE adjustments		9			(1)			62			95
Income (loss) from continuing operations		41			34			108			165
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		41			34			108			165
Less: Net income (loss) attributable to noncontrolling interests		—			—			3			1
Net income (loss) attributable to Key	$	41		$	34		$	105		$	164
AVERAGE BALANCES (b)
Loans and leases	$	27,043		$	26,242		$	18,532		$	17,168
Total assets (a)		30,638			29,687			22,715			21,468
Deposits		48,253			47,719			12,409			10,195
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	50		$	79		$	9		$	29
Return on average allocated equity (b)		5.73	%		4.22	%		23.61	%		28.26 %
Return on average allocated equity		5.73			4.22			23.61			28.26
Average full-time equivalent employees (c)		8,757			8,504			2,257			2,191
Six months ended June 30,	Key Community Bank						Key Corporate Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	701		$	752		$	369		$	362
Noninterest income		365			371			424			434
Total revenue (TE) (a)		1,066			1,123			793			796
Provision (credit) for loan and lease losses		13			90			17			(97)
Depreciation and amortization expense		19			19			26			39
Other noninterest expense		914			874			423			396
Income (loss) from continuing operations before income taxes (TE)		120			140			327			458
Allocated income taxes and TE adjustments		21			25			119			168
Income (loss) from continuing operations		99			115			208			290
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		99			115			208			290
Less: Net income (loss) attributable to noncontrolling interests		—			—			3			—
Net income (loss) attributable to Key	$	99			115		$	205			290
AVERAGE BALANCES (b)
Loans and leases	$	26,830			26,277		$	18,558			17,421
Total assets (a)		30,416			29,713			22,789			21,607
Deposits		48,011			47,912			11,982			10,736
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	99		$	155		$	34		$	104
Return on average allocated equity (b)		6.82	%		7.11	%		22.30	%		23.78 %
Return on average allocated equity		6.82			7.11			22.30			23.78
Average full-time equivalent employees (c)		8,738			8,441			2,256			2,173

(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.

69

Other Segments						Total Segments						Reconciling Items						Key
2012			2011			2012			2011			2012			2011			2012			2011
$	12		$	13		$	542		$	563		$	2		$	7		$	544		$	570
	87			55			486			455			(1	)		(1)			485			454
	99			68			1,028			1,018			1			6			1,029			1,024
	6			(10)			21			(7)			—			(1)			21			(8)
	2			5			24			34			35			35			59			69
	19			20			691			645			(36	)		(34)			655			611
	72			53			292			346			2			6			294			352
	16			9			87			103			(24	)		(3)			63			100
	56			44			205			243			26			9			231			252
	—			—			—			—			10			(9)			10			(9)
	56			44			205			243			36			—			241			243
	2			2			5			3			—			—			5			3
$	54		$	42		$	200		$	240		$	36		$	—		$	236		$	240
$	3,804		$	4,985		$	49,379		$	48,395		$	67		$	59		$	49,446		$	48,454
	26,862			28,965			80,215			80,120			705			1,266			80,920			81,386
	510			801			61,172			58,715			(109	)		(174)			61,063			58,541
$	18		$	26		$	77		$	134			—			—		$	77		$	134
	31.57	%		20.82	%		15.02	%		15.12	%		2.20	%		1.13	%		9.00	%		10.45	%
	31.57			20.82			15.02			15.12			3.05			—			9.40			10.07
	6			23			11,020			10,718			4,435			4,631			15,455			15,349
Other Segments						Total Segments						Reconciling Items						Key
2012			2011			2012			2011			2012			2011			2012			2011
$	27		$	46		$	1,097		$	1,160		$	6		$	14		$	1,103		$	1,174
	176			115			965			920			(8	)		(9)			957			911
	203			161			2,062			2,080			(2	)		5			2,060			2,085
	33			(35)			63			(42)			—			(6)			63			(48)
	5			10			50			68			69			75			119			143
	40			44			1,377			1,314			(79	)		(76)			1,298			1,238
	125			142			572			740			8			12			580			752
	24			32			164			225			(20	)		(7)			144			218
	101			110			408			515			28			19			436			534
	—			—			—			—			5			(20)			5			(20)
	101			110			408			515			33			(1)			441			514
	2			11			5			11			—			—			5			11
$	99		$	99		$	403		$	504		$	33		$	(1)		$	436		$	503
$	3,997		$	5,139		$	49,385		$	48,837		$	53		$	44		$	49,438		$	48,881
	26,723			30,157			79,928			81,477			765			1,355			80,693			82,832
	498			786			60,491			59,434			(144	)		(148)			60,347			59,286
$	45		$	69		$	178		$	328			—		$	(1)		$	178		$	327
	28.73	%		24.29	%		14.83	%		15.54	%		1.23	%		1.00	%		8.63	%		10.16	%
	28.73			24.29			14.83			15.54			1.45			(.05)			8.73			9.77
	5			43			10,999			10,657			4,431			4,669			15,430			15,326

70

Supplementary information (Key Corporate Bank lines of business)

		Real Estate Capital and																Institutional and
Three months ended June 30,		Corporate Banking Services								Equipment Finance								Capital Markets
dollars in millions		2012				2011				2012				2011				2012				2011
Total revenue (TE)	$		176		$		156		$		57		$		63		$		159		$		172
Provision (credit) for loan and lease losses			5				(49)				6				(30)				(7)				3
Noninterest expense			63				50				37				45				118				112
Net income (loss) attributable to Key			65				97				9				30				31				37
Average loans and leases			7,343				7,713				4,886				4,545				6,303				4,910
Average loans held for sale			337				229				23				—				154				73
Average deposits			9,190				7,371				7				12				3,212				2,812
Net loan charge-offs			7				26				4				2				(2)				1
Net loan charge-offs to average loans			.38	%			1.35	%			.33	%			.18	%			(.13)	%			.08	%
Nonperforming assets at period end	$		186		$		245		$		33		$		39		$		29		$		55
Return on average allocated equity			30.90	%			31.13	%			14.48	%			35.81	%			17.99	%			20.00	%
Average full-time equivalent employees			950				902				464				511				843				778
		Real Estate Capital and																Institutional and
Six months ended June 30,		Corporate Banking Services								Equipment Finance								Capital Markets
dollars in millions		2012				2011				2012				2011				2012				2011
Total revenue (TE)	$		337		$		324		$		122		$		126		$		334		$		346
Provision (credit) for loan and lease losses			4				(39)				4				(56)				9				(2)
Noninterest expense			122				118				75				98				252				219
Net income (loss) attributable to Key			129				154				27				53				49				83
Average loans and leases			7,521				8,146				4,833				4,583				6,204				4,692
Average loans held for sale			314				185				23				2				174				102
Average deposits			8,705				7,987				7				9				3,270				2,740
Net loan charge-offs			23				91				9				12				2				1
Net loan charge-offs to average loans			.61	%			2.25	%			.37	%			.53	%			.06	%			.04
Nonperforming assets at period end	$		186		$		245		$		33		$		39		$		29		$		55
Return on average allocated equity			29.15	%			22.72	%			20.88	%			31.34	%			14.10	%			22.29	%
Average full-time equivalent employees			951				892				466				516				839				765

71

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

KeyCorp

We have reviewed the consolidated balance sheets of KeyCorp and subsidiaries (“Key”) as of June 30, 2012 and 2011, the related consolidated statements of income and comprehensive income for the three- and six-month periods ended June 30, 2012 and 2011, and the related consolidated statements of changes in equity and cash flows for the six-month periods ended June 30, 2012 and 2011. These financial statements are the responsibility of Key’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Key as of December 31, 2011, and the related consolidated statements of income, changes in equity, and cash flows for the year then ended not presented herein, and in our report dated February 27, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2011, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Cleveland, Ohio	/s/ Ernst & Young LLP
August 2, 2012

72

Item 2.  Management’s Discussion & Analysis of Financial Condition & Results of Operations

Introduction

This section reviews the financial condition and results of operations of KeyCorp and its subsidiaries for the quarterly and year to date periods ended June 30, 2012 and 2011. Some tables may include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. When you read this discussion, you should also refer to the consolidated financial statements and related notes in this report. The page locations of specific sections and notes that we refer to are presented in the table of contents.

References to our “2011 Annual Report on Form 10-K” refer to our Annual Report on Form 10-K for the year ended December 31, 2011, which has been filed with the SEC and is available on its website (www.sec.gov) or on our website (www.key.com/ir).

Terminology

Throughout this discussion, references to “Key,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. “KeyCorp” refers solely to the parent holding company, and “KeyBank” refers to KeyCorp’s subsidiary bank, KeyBank National Association.

We want to explain some industry-specific terms at the outset so you can better understand the discussion that follows.

¿ We use the phrase continuing operations in this document to mean all of our businesses other than the education lending business and Austin. The education lending business and Austin have been accounted for as discontinued operations since 2009.

¿ Our exit loan portfolios are separate from our discontinued operations. These portfolios, which are in a run-off mode, stem from product lines we decided to cease because they no longer fit with our corporate strategy. These exit loan portfolios are included in Other Segments.

¿ We engage in capital markets activities primarily through business conducted by our Key Corporate Bank segment. These activities encompass a variety of products and services. Among other things, we trade securities as a dealer, enter into derivative contracts (both to accommodate clients’ financing needs and for proprietary trading purposes), and conduct transactions in foreign currencies (both to accommodate clients’ needs and to benefit from fluctuations in exchange rates).

¿ For regulatory purposes, capital is divided into two classes. Federal regulations currently prescribe that at least one-half of a bank or BHC’s total risk-based capital must qualify as Tier 1 capital. Both total and Tier 1 capital serve as bases for several measures of capital adequacy, which is an important indicator of financial stability and condition. As described in the section entitled “Economic Overview” that begins on page 38 of our 2011 Annual Report on Form 10-K, the regulators conduct a review of capital adequacy for each of the country’s nineteen largest banking institutions, including KeyCorp. This regulatory assessment began in 2009 and continued during 2010, 2011 and into 2012. As part of this capital adequacy review, banking regulators evaluated a component of Tier 1 capital, known as Tier 1 common equity. For a detailed explanation of total capital, Tier 1 capital and Tier 1 common equity and how they are calculated see the section entitled “Capital.”

Additionally, a comprehensive list of the acronyms and abbreviations used throughout this discussion is included in Note 1 (“Basis of Presentation”).

73

Selected financial data

Our financial performance for each of the last five quarters is summarized in Figure 1.

Figure 1. Selected Financial Data

	2012						2011									Six months ended June 30,
dollars in millions, except per share amounts	Second			First			Fourth			Third			Second			2012			2011
FOR THE PERIOD
Interest income	$	662		$	684		$	698		$	705		$	726		$	1,346		$	1,486
Interest expense		124			131			141			156			162			255			325
Net interest income		538			553			557			549			564			1,091			1,161
Provision (credit) for loan and lease losses		21			42			(22)			10			(8)			63			(48)
Noninterest income		485			472			414			483			454			957			911
Noninterest expense		714			703			717			692			680			1,417			1,381
Income (loss) from continuing operations before income taxes		288			280			276			330			346			568			739
Income (loss) from continuing operations attributable to Key		226			205			207			234			249			431			523
Income (loss) from discontinued operations, net of taxes(a)		10			(5)			(7)			(17)			(9)			5			(20)
Net income (loss) attributable to Key		236			200			200			217			240			436			503
Income (loss) from continuing operations attributable to Key common shareholders		221			199			201			229			243			420			427
Income (loss) from discontinued operations, net of taxes(a)		10			(5)			(7)			(17)			(9)			5			(20)
Net income (loss) attributable to Key common shareholders		231			194			194			212			234			425			407
PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders	$	.23		$	.21		$	.21		$	.24		$	.26		$	.44		$	.47
Income (loss) from discontinued operations, net of taxes(a)		.01			(.01)			(.01)			(.02)			(.01)			.01			(.02)
Net income (loss) attributable to Key common shareholders(d)		.24			.20			.20			.22			.25			.45			.44
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution	$	.23		$	.21		$	.21		$	.24		$	.26		$	.44		$	.46
Income (loss) from discontinued operations, net of taxes — assuming dilution(a)		.01			(.01)			(.01)			(.02)			(.01)			.01			(.02)
Net income (loss) attributable to Key common shareholders — assuming dilution(d)		.24			.20			.20			.22			.25			.45			.44
Cash dividends paid		.05			.03			.03			.03			.03			.08			.04
Book value at period end		10.43			10.26			10.09			10.09			9.88			10.43			9.88
Tangible book value at period end		9.45			9.28			9.11			9.10			8.90			9.45			8.90
Market price:
High		8.54			8.82			7.89			8.48			9.10			8.82			9.77
Low		6.80			7.26			5.59			5.63			7.82			6.80			7.82
Close		7.74			8.50			7.69			5.93			8.33			7.74			8.33
Weighted-average common shares outstanding (000)		944,648			949,342			948,658			948,702			947,565			946,995			914,911
Weighted-average common shares and potential common shares outstanding (000)		948,087			953,971			951,684			950,686			952,133			951,029			920,162
AT PERIOD END
Loans	$	49,605		$	49,226		$	49,575		$	48,195		$	47,840		$	49,605		$	47,840
Earning assets		71,899			72,796			73,729			74,167			73,447			71,899			73,447
Total assets		86,523			87,431			88,785			89,262			88,782			86,523			88,782
Deposits		62,167			61,494			61,956			61,032			60,410			62,167			60,410
Long-term debt		7,521			8,898			9,520			10,717			10,997			7,521			10,997
Key common shareholders’ equity		9,864			9,808			9,614			9,610			9,428			9,864			9,428
Key shareholders’ equity		10,155			10,099			9,905			9,901			9,719			10,155			9,719
PERFORMANCE RATIOS — FROM CONTINUING OPERATIONS
Return on average total assets		1.12	%		1.02	%		1.01	%		1.14	%		1.23	%		1.07	%		1.27	%
Return on average common equity		9.06			8.25			8.26			9.52			10.51			8.66			9.67
Net interest margin (TE)		3.06			3.16			3.13			3.09			3.19			3.11			3.22
PERFORMANCE RATIOS — FROM CONSOLIDATED OPERATIONS
Return on average total assets		1.10	%		.93	%		.91	%		.98	%		1.10	%		1.01	%		1.14	%
Return on average common equity		9.47			8.04			7.97			8.82			10.12			8.76			9.22
Net interest margin (TE)		2.99			3.08			3.04			3.02			3.11			3.03			3.14
Loan to Deposit(c)		86.38			86.97			87.00			85.71			86.10			86.38			86.10
CAPITAL RATIOS AT PERIOD END
Key shareholders’ equity to assets		11.74	%		11.55	%		11.16	%		11.09	%		10.95	%		11.74	%		10.95	%
Tangible Key shareholders’ equity to tangible assets		10.78			10.60			10.21			10.15			10.00			10.78			10.00
Tangible common equity to tangible assets(b)		10.44			10.26			9.88			9.82			9.67			10.44			9.67
Tier 1 common equity(b)		11.63			11.55			11.26			11.28			11.14			11.63			11.14
Tier 1 risk-based capital		12.45			13.29			12.99			13.49			13.93			12.45			13.93
Total risk-based capital		15.83			16.68			16.51			17.05			17.88			15.83			17.88
Leverage		11.35			12.12			11.79			11.93			12.13			11.35			12.13
TRUST AND BROKERAGE ASSETS
Assets under management	$	49,149		$	52,633		$	51,732		$	51,584		$	59,253		$	49,149		$	59,253
Nonmanaged and brokerage assets		23,912			33,021			30,639			28,007			29,472			23,912			28,472
OTHER DATA
Average full-time-equivalent employees		15,455			15,404			15,381			15,490			15,349			15,430			15,326
Branches		1,062			1,059			1,058			1,063			1,048			1,062			1,048

(a) In April 2009, we decided to wind down the operations of Austin, an investment subsidiary that specialized in managing hedge fund investments for its institutional customer base. In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank.

(b) See Figure 5 entitled “GAAP to Non-GAAP Reconciliations,” which presents the computations of certain financial measures related to “tangible common equity” and “Tier 1 common equity.” The table reconciles the GAAP performance measures to the corresponding non-GAAP measures, which provides a basis for period-to-period comparisons.

(c) Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitizations trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).

(d) EPS may not foot due to rounding.

74

Forward-looking Statements

From time to time, we have made or will make forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements usually can be identified by the use of words such as “goal,” “objective,” “plan,” “expect,” “anticipate,” “intend,” “project,” “believe,” “estimate,” or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, circumstances, results, or aspirations. Our disclosures in this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in our other documents filed with or furnished to the SEC. In addition, we may make forward-looking statements orally to analysts, investors, representatives of the media, and others.

Forward-looking statements by their nature, are subject to assumptions, risks, and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. Factors that could cause actual results to differ from those described in our forward-looking statements include, but are not limited to:

• the economic recovery could lose momentum or face challenges resulting in a further recession, and we, in turn, could face difficulties effectively dealing with an economic slowdown or uncertainty in the markets;

• the Dodd-Frank Act and other reforms will subject us to a variety of new and more stringent legal and regulatory requirements, including increased scrutiny from our regulators;

• changes in local, regional, and international business, economic or political conditions in the regions where we operate or have significant assets;

• changes in trade, monetary and fiscal policies of various governmental bodies and central banks could affect the economic environment in which we operate;

• adverse changes in credit quality trends;

• our ability to determine accurate values of certain assets and liabilities;

• adverse behaviors in foreign exchange rates, securities, public debt, and capital markets, including changes in market liquidity and volatility;

• our ability to anticipate interest rate changes correctly and manage interest rate risk presented through unanticipated changes in our interest rate risk position and/or short- and long-term interest rates;

• unanticipated changes in our liquidity position, including but not limited to our ability to enter the financial markets to manage and respond to any changes to our liquidity position;

• adequacy of our risk management program;

• reduction of the credit ratings assigned to KeyCorp and KeyBank;

• increased competitive pressure due to industry consolidation;

• our ability to timely and effectively implement our strategic initiatives;

• changes in investor sentiment, consumer spending, or saving behavior;

• unanticipated adverse affects of acquisitions and dispositions of assets, business units, or affiliates;

• our ability to attract and/or retain talented executives and employees;

• operational or risk management failures due to technological, cybersecurity threats, including any denial of service attacks, or our ability to effectively respond and mitigate such threats, or other factors;

• changes in accounting principles or in tax laws, rules, and regulations;

• adverse judicial proceedings;

• occurrence of natural or man-made disasters or conflicts or terrorist attacks disrupting the economy or our ability to operate; and

75

• other risks and uncertainties summarized in Part 1, Item 1A: Risk Factors in our 2011 Annual Report on Form 10-K.

Any forward-looking statements made by us or on our behalf speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances. Before making an investment decision, you should carefully consider all risks and uncertainties disclosed in our SEC filings, including our reports on Forms 8-K, 10-K and 10-Q and our registration statements under the Securities Act of 1933, as amended, all of which are accessible on the SEC’s website at www.sec.gov and at www.key.com/IR.

Economic overview

During the second quarter of 2012, the economic recovery slowed considerably after a robust first quarter. Job creation in the U.S. weakened as employers were reluctant to add workers amidst several economic uncertainties. The U.S. added only 225,000 jobs in the second quarter of 2012, compared to the 677,000 jobs created in the first quarter of 2012. This addition was the weakest quarter of job creation since the third quarter of 2010. The average unemployment rate for the second quarter of 2012 fell to 8.2%, a slight decrease from the first quarter of 2012 average of 8.3%, but fairly elevated from the 10-year historical average of 6.6%. Employer confidence in the economic recovery had been stable through May 2012, but edged down to a new low in June 2012.

The uncertainty in the macroeconomic environment and weakness in the labor market contributed to a slowdown of consumer spending during the second quarter of 2012. The average monthly rate of consumer spending was unchanged in the second quarter of 2012, compared to an average increase of 0.5% in the first quarter of 2012. However, inflationary pressures have softened as consumer prices increased 1.9% for the second quarter of 2012, down slightly from the 2.8% increase seen in the first quarter 2012. Gasoline prices, which had been one of the major contributors to elevated prices, fell 15.3% in June 2012, from levels seen in March 2012, and 6.7% from a year earlier.

Despite the weakness in the job market and consumer spending, the real estate market was resilient in the second quarter of 2012. New home sales in June 2012 were up 15.1% from the same month last year, while the median price of new homes declined by 3.2% over the same period. Foreclosures continue to fall from historically high levels, relieving pressure off existing home sales. Foreclosures are down 11.2% since the second quarter of last year. Existing home sales in June 2012, were up 4.5% from the same month last year, while the median price of existing homes rose by 7.9% over the same period. Building activity also picked up as housing starts at the end of the second quarter of 2012 rose 23.6% from one year ago.

The Federal Reserve acknowledged the slowing of the economy and kept the federal funds target rate near zero in the second quarter of 2012 while maintaining its stance that the current economic conditions warrant keeping the rate at an exceptionally low level for an extended period. The Federal Open Market Committee also decided to extend its program known as “Operation Twist” through the end of the calendar year 2012. This program involves the Federal Reserve purchasing U.S. Treasury securities with longer maturities while selling U.S. Treasury securities with shorter maturities, in an attempt to lower longer-term borrowing rates to businesses and consumers. The continuation of the maturity extension program, known as Operation Twist, put downward pressure on longer-term interest rates sending the ten-year Treasury yield down 0.56% from 2.21% at March 31, 2012 to 1.65% at June 30, 2012. The thirty-year Treasury yield, which began the quarter at 3.34%, declined 0.58% to close the quarter at 2.76%. The benchmark two-year Treasury yield fell 0.03% from 0.33% at March 31, 2012 to 0.30% at June 30, 2012. The Federal Open Market Committee has made it apparent they are prepared to take further action, as appropriate, to promote a stronger economic recovery.

Long-term financial goals

Our long-term financial goals are as follows:

¿ Target a loan to core deposit ratio range of 90% to 100%;

¿ Return to a moderate risk profile by targeting a net charge-off ratio range of .40% to .50%;

¿ Grow high quality and diverse revenue streams by targeting a net interest margin in excess of 3.50%, and ratio of noninterest income to total revenue of greater than 40%;

¿ Create positive operating leverage and target an efficiency ratio in the range of 60 to 65%; and

¿ Achieve a return on average assets in the range of 1.00% to 1.25%.

Figure 2 shows the evaluation of our long-term financial goals for the second quarter of 2012.

76

Figure 2. Evaluation of Our Long-Term Financial Goals

KEY Business Model	Key Metrics(a)	2Q12		Targets		Action Plans
Core funded	Loan to deposit ratio (b)		86  %		90-100%	•  Leverage integrated model to grow relationships and loans
						•  Improve deposit mix
Returning to a moderate	NCOs to average loans		.63  %		.40-.50%	•  Focus on relationship clients
risk profile						•  Exit noncore portfolios
						•  Limit concentrations
						•  Focus on risk-adjusted returns
Growing high quality, diverse revenue streams	Net interest margin		3.06  %		> 3.50%	•  Improve funding mix
						•  Focus on risk-adjusted returns
	Noninterest income		47  %		> 40%	•  Grow client relationships
	to total revenue					•  Leverage Key’s total client solutions and cross-selling capabilities
Creating positive operating leverage						•  Improve efficiency and effectiveness
	Efficiency ratio		69 %		60 - 65%	•  Leverage technology
						•  Change cost base to more variable from fixed
Executing our strategies	Return on average assets		1.12  %		1.00-1.25%	•  Execute our client insight-driven relationship model
						•  Focus on operating leverage
						•  Improved funding mix with lower cost core deposits

(a) Calculated from continuing operations, unless otherwise noted.

(b) Represents period-end consolidated total loans and loans held for sale (excluding education loans in the securitization trusts) divided by period-end consolidated total deposits (excluding deposits in foreign office).

Strategic developments

We initiated the following actions during the first six months of 2012 to support our corporate strategy described in the “Introduction” section under the “Corporate Strategy” heading on page 39 of our 2011 Annual Report on Form 10-K.

¿ We recently announced company-wide initiatives to improve efficiency. These initiatives have targeted $150 to $200 million in expense reductions by December 2013, which will be fully reflected in our run rate in 2014. We are changing our cost structure to be more variable and aligned with our operating environment by focusing on organizational design, strategic sourcing and branch rationalization. Using our current levels of revenue and expense, these initiatives are intended to move us to our long-term efficiency ratio target range of 60% to 65%.

¿ As previously reported, on July 13, 2012, we completed our acquisition of 37 retail banking branches in Buffalo and Rochester, NY. We added approximately $2.1 billion in deposits associated with these branches and loans of approximately $260 million. Additionally, as part of this acquisition, we will be adding credit card receivables of approximately $70 million in September 2012. This acquisition represents new opportunities for us to improve profitability by further leveraging our existing cost structure across a larger base. The liquidity provided by this acquisition can be used to pay maturing debt and fund organic growth.

¿ During the second quarter of 2012, we took advantage of the low interest rate environment and nontaxable treatment of gains – pursuant to a previous settlement with the IRS – through the early termination of leveraged leases. These terminations resulted in gains in noninterest income of $31 million, offset by $13 million in net interest income write-offs of fees and capitalized loan origination costs. We anticipate additional early termination activities in the second half of 2012.

¿ During the second quarter of 2012, we continued our commitment to disciplined capital management. We completed repurchases of $82 million Common Shares, representing 10.5 million shares from shareholders on the open market, and of $3 million of Common Shares, representing .4 million shares from employees in connection with employee elections under our compensation and benefit programs, pursuant to a repurchase program authorized by our Board of Directors. This program was also included in our 2012 capital plan submitted to the Federal Reserve as part of CCAR and not objected to by the Federal Reserve. With the repurchases completed during 2012, we have remaining authority to repurchase up to $259 million of our Common Shares, including up to $230 million for general repurchase and up to $29 million for repurchase in connection with employee elections under our compensation and benefit programs. Our

77

existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013. Additionally, at the regular May Board meeting the Board declared a quarterly cash dividend of $.05 per share, representing an increase from $.03 per share from the prior quarter, and subsequently, at the regular July Board meeting, the Board declared a third quarter cash dividend of $.05 per share payable on September 14, 2012 to shareholders of record on August 28, 2012.

¿ On July 12, 2012, KeyCorp redeemed trust preferred securities issued by KeyCorp Capital VII and KeyCorp Capital X totaling approximately $707 million.

We will continue to make investments that align with our growth strategy. At the same time we believe we will develop a cost structure that is more efficient and variable so we can adapt more readily to economic, regulatory and competitive changes.

Demographics

We have two major business segments: Key Community Bank and Key Corporate Bank.

Key Community Bank serves individuals and small to mid-sized businesses by offering a variety of deposit, investment, lending, and personalized wealth management products and business advisory services. These products and services are provided through our relationship managers and specialists working in our 14-state branch network, which is organized into three internally defined geographic regions: Rocky Mountains and Northwest, Great Lakes, and Northeast.

Figure 3 shows the geographic diversity of Key Community Bank’s average deposits, commercial loans, and home equity loans.

Figure 3. Key Community Bank Geographic Diversity

	Geographic Region
Three months ended June 30, 2012 dollars in millions	Rocky     Mountains and Northwest			Great Lakes			Northeast			Nonregion		(a)		Total
Average deposits	$	15,943		$	15,398		$	14,343		$	2,569			$	48,253
Percent of total		33.1	%		31.9	%		29.7	%		5.3		%		100.0	%
Average commercial loans	$	5,374		$	3,866		$	2,871		$	2,461			$	14,572
Percent of total		36.9	%		26.5	%		19.7	%		16.9		%		100.0	%
Average home equity loans	$	4,348		$	2,510		$	2,400		$	101			$	9,359
Percent of total		46.5	%		26.8	%		25.6	%		1.1		%		100.0	%

(a) Represents average deposits, commercial loan and home equity loan products centrally managed outside of our three Key Community Bank regions.

Key Corporate Bank includes three lines of business that operate nationally, within and beyond our 14-state branch network: Real Estate Capital and Corporate Banking Services; Equipment Finance; and Institutional and Capital Markets.

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

¿ Real Estate Capital professionals who are located in select markets across the country provide financial services for public and private owners, investors, and developers of nonowner-occupied commercial real estate properties. In addition to direct loans, this business unit is a Fannie Mae Delegated Underwriter and Servicer, Freddie Mac Program Plus Seller/Servicer, and FHA-approved mortgagee. KeyBank Real Estate Capital is also one of the nation’s largest and highest rated commercial mortgage servicers. Figure 17, which appears later in this report in the “Loans and loans held for sale” section, shows the diversity of our commercial real estate lending business based on industry type and location.

¿ Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to existing clients. 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 to 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 funding options for their clients. Equipment Finance specializes in the technology, healthcare, and renewable energy markets as well as other capital assets.

78

The Institutional and Capital Markets business consists of two business units.

¿ KeyBanc Capital Markets provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services, primarily to emerging and middle-market companies in the Industrial, Consumer, Real Estate, Energy, Technology, and Healthcare sectors. This business unit’s focused industry expertise and its consistent, integrated team approach help our clients achieve their strategic objectives.

¿ Victory Capital Management is an investment advisory firm that manages or offers advice regarding investment portfolios. This business unit’s national client base consists of both institutional and retail clients derived from four primary channels: public plans, Taft-Hartley plans, corporations, and endowments and foundations.

Additional information regarding the products and services offered by our Key Community Bank and Key Corporate Bank segments are described further in this report in Note 16 (“Line of Business Results”).

79

Supervision and Regulation

Regulatory reform developments

On July 21, 2010, the Dodd-Frank Act was signed into law. This Act is intended to address perceived deficiencies and gaps in the regulatory framework for financial services in the United States, reduce the risks of bank failures, and better equip the nation’s regulators to guard against or mitigate any future financial crises, and manage systemic risk through increased supervision of systemically important financial companies (including nonbank financial companies), such as KeyCorp and KeyBank. The Dodd-Frank Act implements numerous and far-reaching changes across the financial landscape affecting financial companies, including banks and BHCs such as Key. Further discussion concerning the Dodd-Frank Act and the risks that it presents to Key is available in our 2011 Annual Report on Form 10-K under the heading “II. Compliance Risks” beginning on page 15 in Item 1A “Risk Factors.” A number of proposed rules referenced in our prior reports continue to remain pending. The following provides a summary of pertinent regulatory developments relating to the Dodd-Frank Act or that relate to our results this quarter.

Stress Testing

On May 17, 2012, the Federal Reserve, the FDIC, and the OCC published final supervisory guidance on stress testing for banking organizations with more than $10 billion in total consolidated assets, including KeyCorp and KeyBank. Such tests are required by the Dodd-Frank Act. In addition to the annual stress testing requirement, under the proposal, these banks and BHCs would also be subject to certain reporting and disclosure requirements. KeyCorp and KeyBank will each be required to conduct their first stress test under this requirement and report results to our regulators in January 2013.

Interchange fees

As previously reported, the Federal Reserve approved Regulation II, Debit Card Interchange Fees and Routing (“Regulation II”), which limits debit card issuer interchange fees for electronic debit transactions and implements provisions of the Dodd-Frank Act. The relevant portions of Regulation II became effective on October 1, 2011. Our debit interchange revenue for the six months ended June 30, 2012 was $28 million, compared to $55 million for the same period in 2011, which is consistent with our expectations originally reported in our Form 10-Q for the period ended September 30, 2011.

Enhanced prudential standards and early remediation requirements

On January 5, 2012, the Federal Reserve published in the Federal Register its proposed rule on Enhanced Prudential Standards and Early Remediation Requirements for covered companies, as part of its efforts to implement a regulatory scheme pursuant to the Dodd-Frank Act applicable to systemically important financial companies. The proposed rule provides more specific requirements to complement the Federal Reserve’s existing efforts to enhance the supervisory framework for covered companies. The proposed rule applies to U.S. BHCs with consolidated assets of $50 billion or more, like KeyCorp, and includes a wide range of measures addressing issues such as capital, liquidity, credit exposure limits, stress testing, risk management and early remediation. Comments to this proposed rule were due by April 30, 2012.

U.S. Implementation of Basel III

On June 12, 2012, the Federal Reserve, FDIC, and OCC issued a joint release announcing three separate NPRs seeking comment on proposed rules that would revise and replace their current capital rules in a manner consistent both with relevant provisions of the Dodd-Frank Act as well as the implementation of Basel III. The comment period on these NPRs ends on September 7, 2012. Also on June 12, 2012, these agencies announced the finalization of their market risk capital rule proposed in 2011. This final rule becomes effective on January 1, 2013.

One NPR (the “Basel III NPR”) proposes the majority of the revisions to international capital standards in Basel III, including a more restrictive definition of regulatory capital (such as providing for the phase-out of trust preferred securities by January 1, 2016), higher minimum regulatory capital requirements, and the imposition of capital conservation and countercyclical capital buffers. It also proposes limitations on certain distributions and discretionary bonuses as well as revisions to the agencies’ prompt corrective action regulations. Another NPR (the “Standardized Approach NPR”) proposes new methodologies for determining risk-weighted assets, such as by expanding the number and type of exposure categories, providing a more comprehensive recognition of collateral and guarantees, and introducing or applying more risk-sensitive treatment for certain exposures (including certain high-volatility commercial real estate, corporate, equity, foreign, securitization, derivative, residential mortgage, and 90 day or more past due exposures). It also proposes detailed qualitative and quantitative public disclosure requirements relating to capital adequacy. The final NPR (the “Advanced Approaches

80

NPR”) proposes to revise the current advanced approaches risk-based capital rule to incorporate certain aspects of Basel III as well as certain other revisions to the Basel capital framework published by the Basel Committee between 2009-2011. While KeyCorp and KeyBank are subject to the Basel III and Standardized Approach NPRs, they are not subject to the Advanced Approaches NPR.

The NPRs are consistent with the discussion of the Basel III capital framework in our 2011 Annual Report on Form 10-K. The Basel III NPR provides that implementation of the Basel III final capital framework will commence January 1, 2013, with minimum capital ratios and prompt corrective action requirements implemented by January 1, 2015, and the capital conservation buffer phased-in from January 1, 2016 through January 1, 2019.

New Minimum Capital Requirements

Beginning January 2013, banking organizations subject to the Basel III and Standardized Approach NPRs, like KeyCorp and KeyBank, would be required to meet the following minimum capital and leverage ratios – 3.5% common equity Tier 1 to risk weighted assets, 4.5% Tier 1 capital to risk-weighted assets, 8.0% total capital to risk-weighted assets and 4% Tier 1 capital to average consolidated assets minus amounts deducted from Tier 1 capital. The implementation of a capital conservation buffer, effectively raising the minimum capital requirements, will begin on January 1, 2016, at 0.625% and be phased-in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).

When fully phased-in on January 1, 2019, the Basel III capital framework will require KeyCorp and KeyBank to maintain: (a) a minimum ratio of Tier 1 common equity to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”; (b) a Tier 1 capital to risk-weighted assets ratio of at least 6%, plus the capital conservation buffer; (c) a minimum ratio of total (that is, Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5% upon full implementation); and (d) a minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average consolidated assets minus amounts deducted from Tier 1 capital. Thus, when the capital conservation buffer is fully phased-in, minimum ratios will effectively be: 7% for Tier 1 common equity, 8.5% for Tier 1 capital, and 10.5% for total capital, with a 4% leverage ratio.

At June 30, 2012, we had a Tier 1 common equity ratio of 11.63% under current Basel I. A pro forma analysis at June 30, 2012, under the fully phased-in Basel III NPR and the Standardized Approach NPR, which include adjustments to eligible Tier 1 capital as well as modifications in the calculation of risk-weighted assets, determined that our pro forma capital ratios are as follows: Tier 1 common equity - 10.90%, Tier 1 - 11.20% and total capital ratio - 14.80%.

“Well-Capitalized” Standards

Pursuant to the Basel III and Standardized Approach NPRs, upon completion of the phase-in period of the new capital standards (but prior to the commencement of the phase-in of any of the capital conservation buffer), on January 1, 2015, a well-capitalized bank under the proposed prompt corrective action guidelines would be required to maintain a total risk-based capital ratio of at least 10.0%, a Tier 1 risk-based capital ratio of at least 8.0%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio of at least 5.0%.

Given our strong capital position, should the Basel III NPR and the Standardized Approach NPR be adopted as final rules, we expect to be able to satisfy such requirements.

Highlights of Our Performance

Financial performance

For the second quarter of 2012, we announced net income from continuing operations attributable to Key common shareholders of $221 million, or $.23 per Common Share. Our second quarter of 2012 results compare to net income from continuing operations attributable to Key common shareholders of $243 million, or $.26 per Common Share, for the second quarter of 2011. For the six months ended June 30, 2012, net income from continuing operations attributable to Key common shareholders was $420 million, or $.44 per common share, compared to $427 million or $.46 per common share for the same period one year ago. The results for the six months ended June 30, 2011, included a deemed dividend of $49 million, or $.06 per diluted Common Share, related to the accelerated amortization of the discount on the repurchased preferred shares from the U.S. Treasury.

81

The second quarter 2012 results reflect another quarter of loan growth, continued improvement in credit quality, and disciplined expense control.

Our taxable-equivalent net interest income was $544 million for the second quarter of 2012, and the net interest margin was 3.06%. These results compare to taxable-equivalent net interest income of $570 million and a net interest margin of 3.19% for the second quarter of 2011. This decrease was due in part to a $13 million reduction to net interest income from the write-off of fees as well as capitalized loan origination costs associated with the early termination of leveraged leases, resulting in a seven basis point decline in the net interest margin. Additionally, the decrease in net interest income and net interest margin resulted from the continuation of the low-rate environment contracting the spread between lending rates and funding costs.

Noninterest income was $485 million for the second quarter of 2012, compared to $454 million for the year-ago quarter. This increase was attributable to gains on leased equipment of $31 million compared to the same period one year ago, primarily related to the early terminations of leveraged leases.

Our noninterest expense was $714 million for the second quarter of 2012, compared to $680 million for the same period last year. The increase is due to an expense of $6 million in the provision (credit) for losses on lending-related commitments versus a credit of $12 million for the same period one year ago. OREO expense increased $10 million, and personnel expense increased $9 million due to increased hiring of client-facing personnel and annual merit increases. Business services and professional fees also increased $7 million, partially related to the company-wide efficiency initiatives, and marketing expense was $7 million higher as a result of the spring home equity loan campaign and Key’s acquisition of 37 branches in Upstate New York, which closed on July 13. These increases in noninterest expenses were partially offset by a $10 million decrease in operating lease expense compared to the same period one year ago.

Quarterly average loans were $49.4 billion for the second quarter of 2012, an increase of $992 million compared to the second quarter of 2011. Commercial, financial and agricultural average loans grew by $3.2 billion over the year-ago quarter, with nearly half of the growth in our Institutional Banking line of business. This growth was partially offset by declines in the commercial real estate portfolio, the equipment lease portfolios resulting from the early termination of certain leveraged leases in the exit portfolio, and run-off of consumer loans in the designated exit portfolio.

Our quarterly average deposits totaled $61.1 billion for the second quarter of 2012, an increase of $2.5 billion compared to the year-ago quarter. Most of the growth came from demand deposits, as increases in interest-bearing liquid deposits were largely offset by reductions in time deposit balances.

Our provision for loan and lease losses was a charge of $21 million for the second quarter of 2012, compared to a credit of $8 million for the year-ago quarter. Our allowance for loan and lease losses was $888 million, or 1.79% of total period-end loans at June 30, 2012, compared to 2.57% at June 30, 2011.

Nonperforming assets at June 30, 2012, totaled $751 million and represented 1.51% of portfolio loans and OREO and other nonperforming assets, compared to $950 million and 1.98%, respectively, at June 30, 2011. Nonperforming assets continued to decrease during the second quarter of 2012, representing the eleventh consecutive quarterly decline. Nonperforming home equity loans increased during the second quarter of 2012 due to additional information on the past due status of first mortgages serviced by others where we hold the home equity loan. Our nonperforming home equity loans increased by approximately $37 million during the second quarter of 2012, of which $36 million was attributable to performing home equity second liens at June 30, 2012, that are: subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown. We do not look for a similar increase in the future. Our outlook for credit quality during the second half of 2012 remains consistent from the first quarter of 2012. We continue to anticipate modest improvement in both asset quality and net charge-offs, with net charge-offs continuing to migrate to our long-term target of 40 to 50 basis points of average loans.

During the first half of 2012, we originated approximately $18.6 billion in new or renewed lending commitments to consumers and businesses, an increase of $2.2 billion from the same period one year ago.

Our capital ratios continue to remain strong. Our tangible common equity, Tier 1 common equity and Tier 1 risk-based capital ratios at June 30, 2012, are 10.44%, 11.63%, and 12.45%, respectively, compared to 9.67%, 11.14%, and 13.93%, respectively, at June 30, 2011. Our capital priorities remain as follows:

82

¿ maintain strong capital for organic growth;

¿ increase the dividend;

¿ return capital to our shareholders through share repurchases; and

¿ remain disciplined around opportunities to invest in our business model and our franchise.

On July 19, 2012, we announced a number of efficiency initiatives. These initiatives build upon our Keyvolution program and will enhance our competitive position by lowering our cost structure and aligning it with our current operating environment. We have set a target of reducing expenses in the amount of $150 to $200 million by the end of 2013 with the full run-rate benefit realized in 2014. This expense target will require us to look at the structural nature of our costs and is necessary to address the changing economics that we and others in the industry are facing from government pricing controls and the extended low rate environment. These initiatives should enable us to scale up and down to changes in customer demand and preferences. Additionally, we will continue to make investments for future growth and to ensure we can meet the ever changing regulatory demands.

Figure 4 shows our continuing and discontinued operating results for the current, past and year-ago quarters. Our financial performance for each of the past five quarters is summarized in Figure 1.

Figure 4. Results of Operations

	Three months ended						Six months ended
in millions, except per share amounts	6-30-12		3-31-12		6-30-11		6-30-12		6-30-11
Summary of operations
Income (loss) from continuing operations attributable to Key	$	226	$	205	$	249	$	431	$	523
Income (loss) from discontinued operations, net of taxes (a)		10		(5)		(9)		5		(20)
Net income (loss) attributable to Key	$	236	$	200	$	240	$	436	$	503
Income (loss) from continuing operations attributable to Key	$	226	$	205	$	249	$	431	$	523
Less:  Dividends on Series A Preferred Stock		5		6		6		11		12
Cash dividends on Series B Preferred Stock		—		—		—		—		31
Amortization of discount on Series B Preferred Stock (b)		—		—		—		—		53
Income (loss) from continuing operations attributable to Key common shareholders		221		199		243		420		427
Income (loss) from discontinued operations, net of taxes (a)		10		(5)		(9)		5		(20)
Net income (loss) attributable to Key common shareholders	$	231	$	194	$	234	$	425	$	407
Per common share — assuming dilution
Income (loss) from continuing operations attributable to Key common shareholders	$	.23	$	.21	$	.26	$	.44	$	.46
Income (loss) from discontinued operations, net of taxes (a)		.01		(.01)		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders (c)	$	.24	$	.20	$	.25	$	.45	$	.44

(a) In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of these decisions, we have accounted for these businesses as discontinued operations. The income (loss) from discontinued operations for the periods presented was primarily attributable to fair value adjustments related to the education lending securitization trusts.

(b) Includes a $49 million deemed dividend recorded in the first quarter of 2011 related to the repurchase of the $2.5 billion Series B Preferred Stock.

(c) Earnings per share may not foot due to rounding.

Figure 5 presents certain non-GAAP financial measures related to “tangible common equity” and “Tier 1 common equity.” Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations; this measure is considered to be a non-GAAP financial measure. Since analysts and banking regulators may assess our capital adequacy using tangible common equity and Tier 1 common equity, we believe it is useful to enable investors to assess our capital adequacy on these same bases. Figure 5 also reconciles the GAAP performance measures to the corresponding non-GAAP measures.

Traditionally, the banking regulators have assessed bank and BHC capital adequacy based on both the amount and the composition of capital, the calculation of which is prescribed in federal banking regulations. Since the commencement of the CCAR process in early 2009, the Federal Reserve has focused its assessment of capital adequacy on a component of Tier 1 risk-based capital known as Tier 1 common equity, a non-GAAP financial measure. Because the Federal Reserve has long indicated that voting common shareholders’ equity (essentially Tier 1 risk-based capital less preferred stock, qualifying capital securities and noncontrolling interests in subsidiaries) generally should be the dominant element in Tier 1 risk-based capital, this focus on Tier 1 common equity is consistent with existing capital adequacy categories. This increased focus on Tier 1 common equity is also present in the Basel Committee’s final Basel III framework for strengthening international

83

capital and liquidity regulation, which U.S. regulators have recently proposed to implement in the near future. The enactment of the Dodd-Frank Act also changes the regulatory capital standards that apply to BHCs by requiring regulators to create rules phasing out the treatment of capital securities and cumulative preferred securities as Tier 1 eligible capital. This three year phase-out period, which commences January 1, 2013, will ultimately result in our trust preferred securities being treated only as Tier 2 capital. The Supervision and Regulation section of this report contains information about the Basel III NPR, which provides for this three year phase-out period.

The table also shows the computation for pre-provision net revenue, which is not formally defined by GAAP. Management believes that eliminating the effects of the provision for loan and lease losses makes it easier to analyze our results by presenting them on a more comparable basis.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

84

Figure 5. GAAP to Non-GAAP Reconciliations

	Three months ended
dollars in millions, except per share amounts	6-30-12			3-31-12			6-30-11
Tangible common equity to tangible assets at period end
Key shareholders’ equity (GAAP)	$	10,155		$	10,099		$	9,719
Less:            Intangible assets		932			932			936
Preferred Stock, Series A		291			291			291
Tangible common equity (non-GAAP)	$	8,932		$	8,876		$	8,492
Total assets (GAAP)	$	86,523		$	87,431		$	88,782
Less:            Intangible assets		932			932			936
Tangible assets (non-GAAP)	$	85,591		$	86,499		$	87,846
Tangible common equity to tangible assets ratio (non-GAAP)		10.44	%		10.26	%		9.67	%
Tier 1 common equity at period end
Key shareholders’ equity (GAAP)	$	10,155		$	10,099		$	9,719
Qualifying capital securities		339			1,046			1,791
Less:            Goodwill		917			917			917
Accumulated other comprehensive income (loss) (a)		(109)			(70)			47
Other assets (b)		71			69			157
Total Tier 1 capital (regulatory)		9,615			10,229			10,389
Less:            Qualifying capital securities		339			1,046			1,791
Preferred Stock, Series A		291			291			291
Total Tier 1 common equity (non-GAAP)	$	8,985		$	8,892		$	8,307
Net risk-weighted assets (regulatory) (b)	$	77,236		$	76,956		$	74,578
Tier 1 common equity ratio (non-GAAP)		11.63	%		11.55	%		11.14	%
Pre-provision net revenue
Net interest income (GAAP)	$	538		$	553		$	564
Plus:            Taxable-equivalent adjustment		6			6			6
Noninterest income		485			472			454
Less:            Noninterest expense		714			703			680
Pre-provision net revenue from continuing operations (non-GAAP)	$	315		$	328		$	344

(a) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from the application of the applicable accounting guidance for defined benefit and other postretirement plans since its adoption.

(b) Other assets deducted from Tier 1 capital and risk-weighted assets consist of disallowed deferred tax assets of $75 million at June 30, 2011, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at June 30, 2012 and March 31, 2012.

Results of Operations

Net interest income

One of our principal sources of revenue is net interest income. Net interest income is the difference between interest income received on earning assets (such as loans and securities) and loan-related fee income, and interest expense paid on deposits and borrowings. There are several factors that affect net interest income, including:

¿ the volume, pricing, mix and maturity of earning assets, and interest-bearing liabilities;

¿ the volume and value of net free funds, such as noninterest-bearing deposits and equity capital;

¿ the use of derivative instruments to manage interest rate risk;

¿ interest rate fluctuations and competitive conditions within the marketplace; and

¿ asset quality.

To make it easier to compare results among several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in this discussion on a “taxable-equivalent basis” (i.e., as if it were all taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $154, an amount that — if taxed at the statutory federal income tax rate of 35% — would yield $100.

Figure 6 shows the various components of our balance sheet that affect interest income and expense, and their respective yields or rates over the past five quarters. This figure also presents a reconciliation of taxable-equivalent net interest income

85

to net interest income reported in accordance with GAAP for each of those quarters. The net interest margin is calculated by dividing annualized taxable-equivalent net interest income by average earning assets.

Our taxable-equivalent net interest income was $544 million for the second quarter of 2012, and the net interest margin was 3.06%. These results compare to taxable-equivalent net interest income of $570 million and a net interest margin of 3.19% for the second quarter of 2011. This decrease was due in part to a $13 million reduction to net interest income from the write-off of fees as well as capitalized loan origination costs associated with the early termination of leveraged leases, resulting in a seven basis point decline in the net interest margin. Additionally, the decrease in net interest income and net interest margin resulted from the continuation of the low-rate environment contracting the spread between lending rates and funding costs.

We expect the net interest margin to increase during the second half of 2012 to the 3.20% range as a result of our second quarter of 2012 debt maturities, scheduled third quarter of 2012 maturities of our higher costing certificates of deposit, and the July 12, 2012, redemption of trust preferred securities. Part of the benefit associated with lower funding costs will be offset by continuation of repricing of assets to current market rates.

Average earning assets for the second quarter of 2012, totaled $71.9 billion, compared to $72.0 billion for the second quarter of 2011. This slight decline was primarily due to decreases in our average available-for-sale securities offset by increases in our average held-to-maturity securities, average loans and average short-term investments. We held higher short-term investment balances in anticipation of the late second quarter of 2012 debt maturities.

As shown in Figure 6, the yield for the commercial lease financing was impacted by the early termination of leveraged leases, which resulted in the write off of $13 million of fees and capitalized loan origination costs.

86

Figure 6. Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates From Continuing Operations

	Second Quarter 2012									First Quarter 2012
dollars in millions	Average Balance		Interest		(a)	Yield/ Rate		(a)		Average Balance		Interest		(a)	Yield/ Rate		(a)
ASSETS
Loans (b), (c)
Commercial, financial and agricultural	$	20,132	$	190			3.80		%	$	19,638	$	194			3.98	%
Real estate — commercial mortgage		7,613		85			4.50				7,993		89			4.48
Real estate — construction		1,216		14			4.64				1,284		16			4.86
Commercial lease financing		5,700		51			3.55				5,846		58			3.97
Total commercial loans		34,661		340			3.94				34,761		357			4.12
Real estate — residential mortgage		1,990		24			4.91				1,950		25			5.04
Home equity:
Key Community Bank		9,359		94			4.04				9,173		93			4.08
Other		493		9			7.66				521		10			7.68
Total home equity loans		9,852		103			4.23				9,694		103			4.27
Consumer other — Key Community Bank		1,247		29			9.20				1,193		28			9.61
Consumer other:
Marine		1,595		26			6.29				1,714		27			6.28
Other		101		2			8.49				118		2			7.79
Total consumer other		1,696		28			6.42				1,832		29			6.38
Total consumer loans		14,785		184			4.99				14,669		185			5.07
Total loans		49,446		524			4.26				49,430		542			4.41
Loans held for sale		585		5			3.43				581		5			3.62
Securities available for sale (b), (e)		13,865		105			3.13				15,259		116			3.15
Held-to-maturity securities (b)		3,493		17			1.98				2,251		12			2.08
Trading account assets		768		5			3.01				808		6			2.72
Short-term investments		2,608		2			.29				1,898		1			.29
Other investments (e)		1,177		10			3.21				1,169		8			2.78
Total earning assets		71,942		668			3.74				71,396		690			3.91
Allowance for loan and lease losses		(928)									(968)
Accrued income and other assets		9,906									10,038
Discontinued assets — education lending business		5,633									5,757
Total assets	$	86,553								$	86,223
LIABILITIES
NOW and money market deposit accounts	$	29,106		13			.18			$	28,328		15			.21
Savings deposits		2,085		—			.03				1,997		—			.06
Certificates of deposit ($100,000 or more) (f)		3,858		27			2.85				4,036		29			2.91
Other time deposits		5,645		30			2.13				6,035		33			2.19
Deposits in foreign office		759		1			.24				769		—			.25
Total interest-bearing deposits		41,453		71			.69				41,165		77			.76
Federal funds purchased and securities sold under repurchase agreements		1,880		1			.20				1,850		1			.21
Bank notes and other short-term borrowings		468		2			1.80				490		2			1.53
Long-term debt (f), (g)		5,463		50			4.01				6,161		51			3.61
Total interest-bearing liabilities		49,264		124			1.02				49,666		131			1.07
Noninterest-bearing deposits		19,610									18,466
Accrued expense and other liabilities		1,927									2,325
Discontinued liabilities — education lending business (d), (g)		5,633									5,757
Total liabilities		76,434									76,214
EQUITY
Key shareholders’ equity		10,100									9,992
Noncontrolling interests		19									17
Total equity		10,119									10,009
Total liabilities and equity	$	86,553								$	86,223
Interest rate spread (TE)							2.72		%							2.84	%
Net interest income (TE) and net interest margin (TE)				544			3.06		%				559			3.16	%
TE adjustment (b)				6									6
Net interest income, GAAP basis			$	538								$	553

(a) Results are from continuing operations. Interest excludes the interest associated with the liabilities referred to in (d) below, calculated using a matched funds transfer pricing methodology.

(b) Interest income on tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

(c) For purposes of these computations, nonaccrual loans are included in average loan balances.

(d) Discontinued liabilities include the liabilities of the education lending business and the dollar amount of any additional liabilities assumed necessary to support the assets associated with this business.

87

Figure 6. Consolidated Average Balance Sheets, Net Interest Income and Yields/Rates From Continuing Operations

Fourth Quarter 2011									Third Quarter 2011									Second Quarter 2011
Average Balance		Interest		(a)	Yield/ Rate		(a)		Average Balance		Interest		(a)	Yield/ Rate		(a)		Average Balance		Interest		(a)	Yield/ Rate		(a)
$	18,323	$	179			3.88		%	$	17,381	$	175			3.98		%	$	16,922	$	174			4.13		%
	8,090		92			4.48				7,978		89			4.47				8,460		95			4.47
	1,380		16			4.68				1,545		18			4.46				1,760		19			4.44
	5,982		69			4.62				6,045		72			4.80				6,094		75			4.93
	33,775		356			4.19				32,949		354			4.27				33,236		363			4.38
	1,918		24			5.15				1,853		25			5.23				1,818		24			5.33
	9,280		96			4.10				9,388		97			4.12				9,441		97			4.13
	553		11			7.68				582		11			7.69				611		12			7.66
	9,833		107			4.30				9,970		108			4.33				10,052		109			4.35
	1,191		30			9.62				1,169		28			9.60				1,151		27			9.39
	1,820		29			6.35				1,928		30			6.29				2,051		32			6.20
	127		2			7.87				139		3			7.89				146		3			7.81
	1,947		31			6.44				2,067		33			6.40				2,197		35			6.31
	14,889		192			5.12				15,059		194			5.14				15,218		195			5.13
	48,664		548			4.47				48,008		548			4.54				48,454		558			4.61
	440		4			3.36				341		3			3.75				376		3			3.72
	16,790		128			3.16				18,165		141			3.16				19,005		149			3.19
	1,648		9			2.12				354		2			2.59				19		—			10.72
	736		5			2.72				869		5			2.45				893		9			3.96
	2,929		1			.26				3,348		3			.25				1,913		1			.23
	1,181		9			2.98				1,190		9			2.94				1,328		12			3.24
	72,388		704			3.90				72,275		711			3.93				71,988		732			4.09
	(1,057)									(1,176)									(1,279)
	9,942									10,360									10,677
	5,912									6,079									6,350
$	87,185								$	87,538								$	87,736
$	27,722		15			.22			$	26,917		18			.26			$	26,354		19			.29
	1,964		—			.06				1,980		—			.06				1,981		1			.06
	4,275		32			2.97				4,762		36			3.03				5,075		38			3.02
	6,505		37			2.24				6,942		40			2.28				7,330		42			2.31
	650		1			.25				675		1			.28				869		—			.34
	41,116		85			.82				41,276		95			.91				41,609		100			.97
	1,747		1			.25				1,724		1			.28				2,089		2			.27
	471		2			1.87				598		3			1.85				672		3			1.96
	7,020		53			3.21				7,777		57			3.14				7,576		57			3.26
	50,354		141			1.12				51,375		156			1.21				51,946		162			1.27
	18,464									17,624									16,932
	2,496									2,612									2,767
	5,912									6,079									6,350
	77,226									77,690									77,995
	9,943									9,831									9,561
	16									17									180
	9,959									9,848									9,741
$	87,185								$	87,538								$	87,736
						2.78		%							2.72		%							2.82		%
			563			3.13		%				555			3.09		%				570			3.19		%
			6									6									6
		$	557								$	549								$	564

(e) Yield is calculated on the basis of amortized cost.

(f) Rate calculation excludes basis adjustments related to fair value hedges.

(g) A portion of long-term debt and the related interest expense is allocated to discontinued liabilities as a result of applying our matched funds transfer pricing methodology to discontinued operations.

88

Figure 7 shows how the changes in yields or rates and average balances from the prior year affected net interest income. The section entitled “Financial Condition” contains additional discussion about changes in earning assets and funding sources.

Figure 7. Components of Net Interest Income Changes from Continuing Operations

	From three months ended June  30, 2011         to three months ended June 30, 2012							From six months ended June  30, 2011         to six months ended June 30, 2012
in millions	Average Volume		Yield/ Rate		Net  Change		(a)	Average Volume		Yield/ Rate		Net Change		(a)
INTEREST INCOME
Loans	$	11	$	(45)	$	(34)		$	13	$	(81)	$	(68)
Loans held for sale		2		—		2			3		—		3
Securities available for sale		(39)		(5)		(44)			(84)		(10)		(94)
Held-to-maturity securities		—		17		17			29		(1)		28
Trading account assets		(1)		(3)		(4)			(3)		(2)		(5)
Short-term investments		—		1		1			—		1		1
Other investments		(1)		(1)		(2)			(3)		(3)		(6)
Total interest income (TE)		(28)		(36)		(64)			(45)		(96)		(141)
INTEREST EXPENSE
NOW and money market deposit accounts		2		(8)		(6)			3		(13)		(10)
Savings deposits		—		(1)		(1)			—		(1)		(1)
Certificates of deposit ($100,000 or more)		(9)		(2)		(11)			(20)		(5)		(25)
Other time deposits		(9)		(3)		(12)			(20)		(6)		(26)
Deposits in foreign office		—		1		1			—		—		—
Total interest-bearing deposits		(16)		(13)		(29)			(37)		(25)		(62)
Federal funds purchased and securities sold under repurchase agreements		—		(1)		(1)			—		(1)		(1)
Bank notes and other short-term borrowings		(1)		—		(1)			(2)		—		(2)
Long-term debt		(18)		11		(7)			(22)		17		(5)
Total interest expense		(35)		(3)		(38)			(61)		(9)		(70)
Net interest income (TE)	$	7	$	(33)	$	(26)		$	16	$	(87)	$	(71)

(a) The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

Noninterest income

Our noninterest income was $485 million for the second quarter of 2012, compared to $454 million for the year-ago quarter, an increase of $31 million, or 6.8%. Gains on leased equipment increased $31 million due primarily to early terminations in the leverage lease portfolio, net gains from loan sales increasing by $21 million, letter of credit and loan fees increasing $9 million as well as increases in various other items. These increases were partially offset by a $12 million decrease in operating lease income, an $11 million decrease in trust and investment services income and a $14 million decline in electronic banking fees as a result of government pricing controls on debit transactions that went into effect on October 1, 2011.

For the six months ended June 30, 2012, noninterest income increased $46 million, or 5.0%, from the same period one year ago. Gains on leased equipment increased $54 million due primarily to early terminations in the leverage lease portfolio, net gains from loan sales increased $24 million, and other income increased $23 million. These increases were partially offset by a $25 million decrease in operating lease income and a $27 million decline in electronic banking fees as a result of government pricing controls on debit transactions that went into effect on October 1, 2011.

89

Figure 8. Noninterest Income

	Three months ended June  30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
Trust and investment services income	$	102	$	113	$	(11)		(9.7)	%	$	211	$	223	$	(12)		(5.4)	%
Service charges on deposit accounts		70		69		1		1.4			138		137		1		.7
Operating lease income		20		32		(12)		(37.5)			42		67		(25)		(37.3)
Letter of credit and loan fees		56		47		9		19.1			110		102		8		7.8
Corporate-owned life insurance income		30		28		2		7.1			60		55		5		9.1
Net securities gains (losses)		—		2		(2)		N/M			—		1		(1)		N/M
Electronic banking fees		19		33		(14)		(42.4)			36		63		(27)		(42.9)
Gains on leased equipment		36		5		31		620.0			63		9		54		600.0
Insurance income		11		14		(3)		(21.4)			23		29		(6)		(20.7)
Net gains (losses) from loan sales		32		11		21		190.9			54		30		24		80.0
Net gains (losses) from principal investing		24		17		7		41.2			59		52		7		13.5
Investment banking and capital markets income		37		42		(5)		(11.9)			80		85		(5)		(5.9)
Other income		48		41		7		17.1			81		58		23		39.7
Total noninterest income	$	485	$	454	$	31		6.8	%	$	957	$	911	$	46		5.0	%

The following discussion explains the composition of certain elements of our noninterest income and the factors that caused those elements to change.

90

Trust and investment services income

Trust and investment services are our largest source of noninterest income. The primary components of revenue generated by these services are shown in Figure 9. During the second quarter of 2012, and for the six months ended June 30, 2012, trust and investment services income decreased as compared to the same periods one year ago due to lower income from institutional asset management and custody fees.

Figure 9. Trust and Investment Services Income

	Three months ended     June 30,				Change					Six months ended     June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
Brokerage commissions and fee income	$	32	$	33	$	(1)		(3.0)	%	$	68	$	65	$	3		4.6	%
Personal asset management and custody fees		39		40		(1)		(2.5)			78		78		—		—
Institutional asset management and custody fees		31		40		(9)		(22.5)			65		80		(15)		(18.8)
Total trust and investment services income	$	102	$	113	$	(11)		(9.7)	%	$	211	$	223	$	(12)		(5.4)	%

A significant portion of our trust and investment services income depends on the value and mix of assets under management. At June 30, 2012, our bank, trust and registered investment advisory subsidiaries had assets under management of $49.1 billion, compared to $59.3 billion at June 30, 2011. As shown in Figure 10, the decrease was primarily attributable to reductions in the equity, securities lending, and money market portfolios, partially offset from growth in fixed income assets under management. The decline in the equity portfolio was due in part to asset outflows and a decline in the market. The previously announced plan to liquidate the Victory Money Market Mutual Funds was completed in late April 2012. The assets in these funds were transferred back to Key in the form of nontime deposits, alternative investments, other Money Market Mutual Funds, or the assets were transferred back to the clients. Our securities lending business has been declining due to our de-emphasis of this business resulting in lower transaction volumes, client departures, and fewer assets under management. The liquidation of our portfolio of hedge funds is attributable to our second quarter 2009 decision to wind down the operations of Austin (results included in discontinued operations).

Figure 10. Assets Under Management

	2012				2011
in millions	Second		First		Fourth		Third		Second
Assets under management by investment type:
Equity	$	30,366	$	33,306	$	30,086	$	29,176	$	37,423
Securities lending		4,292		4,640		4,950		5,622		5,445
Fixed income		11,814		11,561		10,684		10,359		10,251
Money market		2,677		3,126		5,850		6,231		5,903
Hedge funds(a)		—		—		162		196		231
Total	$	49,149	$	52,633	$	51,732	$	51,584	$	59,253
Proprietary mutual funds included in assets under management:
Money market		—	$	514	$	3,503	$	3,936	$	3,818
Equity	$	5,692		6,339		6,014		5,870		7,735
Fixed income		1,736		1,524		1,096		1,219		1,053
Total	$	7,428	$	8,377	$	10,613	$	11,025	$	12,606

(a)   Hedge funds are related to the discontinued operations of Austin.

Operating lease income

Operating lease income decreased $12 million, or 37.5%, for the second quarter of 2012 and decreased $25 million, or 37.3%, for the six months ended June 30, 2012 in our Equipment Finance line of business due to product run-off. Accordingly, as shown in Figure 12, operating lease expense also declined.

Investment banking and capital markets income (loss)

As shown in Figure 11, income from investment banking and capital markets activities decreased $5 million, or 11.9%, from the year ago quarter and $5 million, or 5.9%, from the six-month period ended one year ago.

Investment banking income had no change compared to the year ago quarter while it decreased $6 million, or 11.8%, when compared to the six-month period ended one year ago. This activity was due to a $14 million decline in equity originations income offset by an $8 million increase in transaction fees.

91

Income from other investments decreased by $6 million from the year-ago quarter and decreased $3 million from the six-month period ended one year ago due to fluctuations in asset sales made by our Funds Management Group.

Dealer trading and derivatives loss slightly decreased compared to the year-ago quarter. Dealer trading and derivatives income increased $6 million from the six-month period ended one year ago due primarily to improved fixed income sales and derivative income, which more than offset a $13 million increase in the provision for losses related to customer derivatives.

Figure 11. Investment Banking and Capital Markets Income (Loss)

	Three months ended June 30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
Investment banking income	$	25	$	25		—		—		$	45	$	51	$	(6)		(11.8)	%
Income (loss) from other investments		4		10	$	(6)		(60.0)	%		9		12		(3)		(25.0)
Dealer trading and derivatives income (loss), proprietary (a), (b)		(8)		(6)		(2)		N/M			(5)		(8)		3		N/M
Dealer trading and derivatives income (loss), nonproprietary (b)		6		3		3		100.0			12		9		3		33.3
Total dealer trading and derivatives income (loss)		(2)		(3)		1		N/M			7		1		6		600.0
Foreign exchange income (loss)		10		10		—		—			19		21		(2)		(9.5)
Total investment banking and capital markets income	$	37	$	42	$	(5)		(11.9)	%	$	80	$	85	$	(5)		(5.9)	%

(a) For the quarters ended June 30, 2012 and June 30, 2011, fixed income and equity securities trading comprised the vast majority of this amount. For the quarter ended June 30, 2012, income related to foreign exchange derivative trading, interest rate derivative trading, and credit portfolio management was less than $1 million. For the quarter ended June 30, 2011, income related to foreign exchange and interest rate derivative trading was less than $1 million and was offset by losses from our credit portfolio management activities.

(b) The allocation between proprietary and nonproprietary is made based upon whether the trade is conducted for the benefit of Key or Key’s clients rather than based upon the proposed rulemaking under the Volcker Rule. The prohibitions and restrictions on proprietary trading activities contemplated by the Volcker Rule and the rules proposed thereunder are not yet final. Therefore, the ultimate impact of the rules proposed under the Volcker Rule is not yet known.

Other income

Other income increased $7 million, or 17.1%, from the year-ago quarter primarily due to gains on the disposition of previously written down assets offset by decreases in commercial mortgage fees. Other income increased $23 million, or 39.7%, from the six-month period ended one year ago due to the impact of the change in fair value of certain hedge instruments and gains on the disposition of previously written down assets.

Noninterest expense

As shown in Figure 12, noninterest expense was $714 for the second quarter of 2012, compared to $680 million for the year-ago quarter representing an increase of $34 million or 5.0%. The provision (credit) for losses on lending-related commitments was an expense of $6 million compared to a credit of $12 million one year ago. OREO expense increased $10 million, and personnel expense increased $9 million due to increased hiring of client-facing personnel and annual merit increases. Business services and professional fees also increased $7 million, partially related to the new company-wide efficiency initiatives, and marketing expense was $7 million higher as a result of the spring home equity loan campaign and initiatives around our acquisition of 37 branches in Upstate New York. These increases in noninterest expense were partially offset by a $10 million decrease in operating lease expense.

For the six months ended June 30, 2012 noninterest expense increased $36 million, or 2.6%, compared to the same period a year ago. The provision (credit) for losses on lending-related commitments was an expense of $6 million compared to a credit of $16 million one year ago. Personnel expense increased $23 million due to increased hiring of client-facing personnel and annual merit increases. Business services and professional fees also increased $7 million, partially related to the company-wide efficiency initiatives, and marketing expense was $10 million higher partially due to the spring home equity loan campaign. These increases in noninterest expense were partially offset by a $22 million decrease in FDIC assessments and a $21 million decline in operating lease expense.

92

Figure 12. Noninterest Expense

	Three months ended June 30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
Personnel	$	389	$	380	$	9		2.4	%	$	774	$	751	$	23		3.1	%
Net occupancy		62		62		—		—			126		127		(1)		(.8)
Operating lease expense		15		25		(10)		(40.0)			32		53		(21)		(39.6)
Computer processing		43		42		1		2.4			84		84		—		—
Business services and professional fees		51		44		7		15.9			89		82		7		8.5
FDIC assessment		8		9		(1)		(11.1)			16		38		(22)		(57.9)
OREO expense, net		7		(3)		10		N/M			13		7		6		85.7
Equipment		27		26		1		3.8			53		52		1		1.9
Marketing		17		10		7		70.0			30		20		10		50.0
Provision (credit) for losses on lending-related commitments		6		(12)		18		N/M			6		(16)		22		N/M
Other expense		89		97		(8)		(8.2)			194		183		11		6.0
Total noninterest expense	$	714		680	$	34		5.0	%	$	1,417	$	1,381	$	36		2.6	%
Average full-time equivalent employees(a)		15,455		15,349		106		.7	%		15,430		15,326		104		.7	%

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

The following discussion explains the composition of certain elements of our noninterest expense and the factors that caused those elements to change.

Personnel

As shown in Figure 13, personnel expense, the largest category of our noninterest expense, increased by $9 million, or 2.4%, when compared to the year-ago quarter. This change was due primarily to increased hiring of client-facing personnel and annual merit increases. Personnel expense increased $23 million, or 3.1%, for the six months ended June 30, 2012, compared to the same period a year ago due primarily to increased hiring of client-facing personnel and annual merit increases, which were partially offset by declines in incentive compensation and severance.

Figure 13. Personnel Expense

	Three months ended June 30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
Salaries	$	245	$	228	$	17		7.5	%	$	481	$	452	$	29		6.4	%
Incentive compensation		71		73		(2)		(2.7)			137		146		(9)		(6.2)
Employee benefits		56		58		(2)		(3.4)			121		120		1		.8
Stock-based compensation		13		16		(3)		(18.8)			27		21		6		28.6
Severance		4		5		(1)		(20.0)			8		12		(4)		(33.3)
Total personnel expense	$	389	$	380	$	9		2.4	%	$	774	$	751	$	23		3.1	%

Operating lease expense

The $10 million decrease in operating lease expense compared to the year-ago quarter and the $21 million decrease in the first six months of 2012 compared to the same period a year ago is attributable to product run-off. Income related to the rental of leased equipment is presented in Figure 8 as “operating lease income.”

FDIC Assessment

FDIC insurance slightly decreased compared to the year-ago quarter and decreased $22 million in the first six months of 2012 as compared to the same period a year ago, as a result of the change in the calculation method for deposit insurance assessments as discussed in the “Deposits and other sources of funds” section under the “The Dodd-Frank Act reform of deposit insurance” heading on page 70 of our 2011 Annual Report on Form 10-K.

Other expense

Other expense is comprised of various miscellaneous expense items. The $8 million decrease in the current quarter compared to the year-ago quarter and the $11 million increase in the six months ended June 30, 2012, compared to the same period a year ago reflect fluctuations in several of those line items.

93

Income taxes

We recorded tax expense from continuing operations of $57 million for the second quarter of 2012, $75 million for the first quarter of 2012 and $94 million for the second quarter of 2011. For the first six months of 2012, we recorded tax expense from continuing operations of $132 million, compared to tax expense of $205 million for the same period last year.

Our federal tax expense differs from the amount that would be calculated using the federal statutory tax rate, primarily because we generate income from investments in tax-advantaged assets, such as corporate-owned life insurance, earn credits associated with investments in low-income housing projects and make periodic adjustments to our tax reserves. In addition, during the second quarter and the first six months of 2012, our effective tax rate was lower due to the early termination of certain leveraged leases that resulted in nontaxable gains pursuant to a prior settlement with the IRS.

Additional information pertaining to how our tax expense (benefit) and the resulting effective tax rates were derived is included in Note 12 (“Income Taxes”) on page 165 of our 2011 Annual Report on Form 10-K, and in Note 10 (“Income Taxes”) of this report.

94

Line of Business Results

This section summarizes the financial performance and related strategic developments of our two major business segments (operating segments), Key Community Bank and Key Corporate Bank. Note 16 (“Line of Business Results”) describes the products and services offered by each of these business segments, provides more detailed financial information pertaining to the segments and certain lines of business, and explains “Other Segments” and “Reconciling Items.”

Figure 14 summarizes the contribution made by each major business segment to our “taxable-equivalent revenue from continuing operations” and “income (loss) from continuing operations attributable to Key” for the three- and six-month periods ended June 30, 2012 and 2011.

Figure 14. Major Business Segments - Taxable-Equivalent (TE) Revenue from Continuing Operations and Income

(Loss) from Continuing Operations Attributable to Key

	Three months ended June 30,				Change					Six months ended June  30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
REVENUE FROM CONTINUING OPERATIONS (TE)
Key Community Bank	$	537	$	559	$	(22)		(3.9)	%	$	1,066	$	1,123	$	(57)		(5.1)	%
Key Corporate Bank		392		391		1		0.3			793		796		(3)		(0.4)
Other Segments		99		68		31		45.6			203		161		42		26.1
Total Segments		1,028		1,018		10		1.0			2,062		2,080		(18)		(0.9)
Reconciling Items		1		6		(5)		(83.3)			(2)		5		(7)		N/M
Total	$	1,029	$	1,024	$	5		0.5	%	$	2,060	$	2,085	$	(25)		(1.2)	%
INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO KEY
Key Community Bank	$	41	$	34	$	7		20.6	%	$	99	$	115	$	(16)		(13.9)	%
Key Corporate Bank		105		164		(59)		(36.0)			205		290		(85)		(29.3)
Other Segments		54		42		12		28.6			99		99		—		—
Total Segments		200		240		(40)		(16.7)			403		504		(101)		(20.0)
Reconciling Items		26		9		17		188.9			28		19		9		47.4
Total	$	226	$	249	$	(23)		(9.2)	%	$	431	$	523	$	(92)		(17.6)	%

Key Community Bank summary of operations

• Four consecutive quarters of average loan growth

• Strong spring borrowing campaign drove home equity balances 5% higher during second quarter

• Continued improvement in deposit mix

• Net loan charge-offs of 74 basis points at lowest level in four years

As shown in Figure 15, Key Community Bank recorded net income attributable to Key of $41 million for the second quarter of 2012, compared to net income attributable to Key of $34 million for the year-ago quarter.

Taxable-equivalent net interest income declined by $26 million, or 7%, from the second quarter of 2011. Average loans and leases grew 3% while average deposits increased 1% from one year ago. Given the continued low-rate environment, the value derived from deposits was less in the current period compared to the same period one year ago.

Noninterest income increased by $4 million, or 2.2%, from the year-ago quarter. Net gains (losses) from loan sales increased $9 million, and various other miscellaneous items increased $12 million. These increases in noninterest income were partially offset by a $14 million decline in electronic banking fees resulting from government pricing controls on debit transactions that went into effect October 1, 2011.

The provision for loan and lease losses declined by $68 million, or 86.1%, compared to the second quarter of 2011, due to lower net loan charge-offs from the same period one year ago. Net loan charge-offs were $50 million for the second quarter of 2012, down $29 million from the same period one year ago.

Noninterest expense increased by $29 million, or 6.5%, from the year-ago quarter. Key’s acquisition of 37 branches in Upstate New York and the spring home equity loan campaign resulted in increases to marketing and technology expenses. Personnel expense also increased due to the hiring of client-facing personnel and annual merit increases. These increases in

95

noninterest expense were partially offset by decreases in deferred loan origination expense and FDIC deposit insurance assessments from one year ago.

Figure 15. Key Community Bank

	Three months ended June 30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
SUMMARY OF OPERATIONS
Net interest income (TE)	$	348	$	374	$	(26)		(7.0)	%	$	701	$	752	$	(51)		(6.8)	%
Noninterest income		189		185		4		2.2			365		371		(6)		(1.6)
Total revenue (TE)		537		559		(22)		(3.9)			1,066		1,123		(57)		(5.1)
Provision (credit) for loan and lease losses		11		79		(68)		(86.1)			13		90		(77)		(85.6)
Noninterest expense		476		447		29		6.5			933		893		40		4.5
Income (loss) before income taxes (TE)		50		33		17		51.5			120		140		(20)		(14.3)
Allocated income taxes and TE adjustments		9		(1)		10		N/M			21		25		(4)		(16.0)
Net income (loss) attributable to Key	$	41		34	$	7		20.6	%	$	99	$	115	$	(16)		(13.9)	%
AVERAGE BALANCES
Loans and leases	$	27,043	$	26,242	$	801		3.1	%	$	26,830	$	26,277	$	553		2.1	%
Total assets		30,638		29,687		951		3.2			30,416		29,713		703		2.4
Deposits		48,253		47,719		534		1.1			48,011		47,912		99		.2
Assets under management at period end	$	21,116	$	19,787	$	1,329		6.7	%	$	21,116	$	19,787	$	1,329		6.7	%

ADDITIONAL KEY COMMUNITY BANK DATA
	Three months ended June 30,						Change					Six months ended June 30,				Change
dollars in millions	2012			2011			Amount		Percent			2012		2011		Amount		Percent
NONINTEREST INCOME
Trust and investment services income	$	47		$	46		$	1		2.2	%	$	95	$	92	$	3		3.3	%
Services charges on deposit accounts		59			59			—		—			115		114		1		.9
Electronic banking fees		19			33			(14)		(42.4)			36		63		(27)		(42.9)
Other noninterest income		64			47			17		36.2			119		102		17		16.7
Total noninterest income	$	189		$	185		$	4		2.2	%	$	365	$	371	$	(6)		(1.6)	%
AVERAGE DEPOSITS OUTSTANDING
NOW and money market deposit accounts	$	23,919		$	21,864		$	2,055		9.4	%	$	23,540	$	21,674	$	1,866		8.6	%
Savings deposits		2,078			1,975			103		5.2			2,035		1,938		97		5.0
Certificates of deposits ($100,000 or more)		3,275			4,081			(806)		(19.8)			3,361		4,295		(934)		(21.7)
Other time deposits		5,630			7,315			(1,685)		(23.0)			5,826		7,636		(1,810)		(23.7)
Deposits in foreign office		361			411			(50)		(12.2)			366		405		(39)		(9.6)
Noninterest-bearing deposits		12,990			12,073			917		7.6			12,883		11,964		919		7.7
Total deposits	$	48,253		$	47,719		$	534		1.1	%	$	48,011	$	47,912	$	99		.2	%
HOME EQUITY LOANS
Average balance	$	9,359		$	9,441
Weighted-average loan-to-value ratio (at date of origination)		71	%		70	%
Percent first lien positions		54			53
OTHER DATA
Branches		1,062			1,048
Automated teller machines		1,576			1,564

Key Corporate Bank summary of operations

• Acquired 166 new clients in the second quarter, up 41% from the first quarter

• Investment banking and debt placement fees were $69 million, up 17% from the first quarter

• Average loans up 8% from the prior year and flat to the prior quarter

• Average deposits up 22% from the prior year and 7% from the prior quarter

As shown in Figure 16, Key Corporate Bank recorded net income attributable to Key of $105 million for the second quarter of 2012, compared to net income attributable to Key of $164 million for the same period one year ago.

Taxable-equivalent net interest income increased by $6 million, or 3.4%, compared to the second quarter of 2011. Average earning assets increased $1.3 billion, or 7%, from the year-ago quarter, resulting in an increase in earning asset spread of $9 million. This increase was partially offset by a decrease in interest-related loan fees.

96

Noninterest income decreased by $5 million, or 2.3%, from the second quarter of 2011. Decreases in trust and investment services income, operating lease income, and investment banking and capital markets income were partially offset by increases in net gains (losses) from loan sales and letter of credit and loan fees compared to the year-ago quarter.

The provision for loan and lease losses in the second quarter of 2012 was a charge of $4 million compared to a credit of $76 million for the same period one year ago. The charge in the second quarter of 2012 related to the increase in loans and leases, partially offset by continued improvement in the portfolio’s asset quality for the eleventh consecutive quarter. Net loan charge-offs in the second quarter of 2012 were $9 million compared to $29 million for the same period one year ago.

Noninterest expense increased by $11 million, or 5.3%, from the second quarter of 2011. The provision (credit) for losses on lending-related commitments was an expense of $6 million compared to a credit of $13 million one year ago. OREO expense also increased $10 million. These increases in noninterest expense were partially offset by decreases in operating lease expense of $5 million, personnel expense of $4 million, and other operating expenses.

Figure 16. Key Corporate Bank

	Three months ended June 30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
SUMMARY OF OPERATIONS
Net interest income (TE)	$	182	$	176		6		3.4		$	369	$	362	$	7		1.9	%
Noninterest income		210		215	$	(5)		(2.3)	%		424		434		(10)		(2.3)
Total revenue (TE)		392		391		1		0.3			793		796		(3)		(0.4)
Provision (credit) for loan and lease losses		4		(76)		80		N/M			17		(97)		114		N/M
Noninterest expense		218		207		11		5.3			449		435		14		3.2
Income (loss) before income taxes (TE)		170		260		(90)		(34.6)			327		458		(131)		(28.6)
Allocated income taxes and TE adjustments		62		95		(33)		(34.7)			119		168		(49)		(29.2)
Net income (loss)		108		165		(57)		(34.5)			208		290		(82)		(28.3)
Less: Net income (loss) attributable to noncontrolling interests		3		1		2		200.0			3		—		3		N/M
Net income (loss) attributable to Key	$	105	$	164	$	(59)		(36.0)	%	$	205	$	290	$	(85)		(29.3)	%
AVERAGE BALANCES
Loans and leases	$	18,532	$	17,168	$	1,364		7.9	%	$	18,558	$	17,421	$	1,137		6.5	%
Loans held for sale		514		302		212		70.2			511		289		222		76.8
Total assets		22,715		21,468		1,247		5.8			22,789		21,607		1,182		5.5
Deposits		12,409		10,195		2,214		21.7			11,982		10,736		1,246		11.6
Assets under management at period end	$	28,033	$	39,466	$	(11,433)		(29.0)	%	$	28,033	$	39,466	$	(11,433)		(29.0)	%

ADDITIONAL KEY CORPORATE BANK DATA
	Three months ended June 30,				Change					Six months ended June 30,				Change
dollars in millions	2012		2011		Amount		Percent			2012		2011		Amount		Percent
NONINTEREST INCOME
Trust and investment services income	$	55	$	66	$	(11)		(16.7)	%	$	116	$	131	$	(15)		(11.5)	%
Investment banking and debt placement fees		69		57		12		21.1			128		118		10		8.5
Operating lease income and other leasing gains		20		28		(8)		(28.6)			43		57		(14)		(24.6)
Corporate services income		30		27		3		11.1			64		66		(2)		(3.0)
Other noninterest income		36		37		(1)		(2.7)			73		62		11		17.7
Total noninterest income(a)	$	210	$	215	$	(5)		(2.3)	%	$	424	$	434	$	(10)		(2.3)	%

(a) Included in “Trust and investment services income”, “Service charges on deposit accounts”, “Operating lease income”, “Letter of credit and loan fees”, “Investment banking and capital markets income (loss)”, “Net gains (losses) from loan sales”, “Gains on leased equipement”, and “Other income” on the consolidated statements of income.

Other Segments

Other Segments consist of Corporate Treasury, Key’s Principal Investing unit, and various exit portfolios. Other Segments generated net income attributable to Key of $54 million for the second quarter of 2012, compared to net income attributable to Key of $42 million for the same period last year. These results were primarily attributable to a $21 million net gain resulting from the early terminations of leveraged leases in the second quarter of 2012 (a $31 million gain on leased equipment less a $10 million charge for the write-off of capitalized loan origination costs). These results were partially offset by an increase in the provision (credit) for loan and lease losses of $16 million compared to one year ago.

97

Financial Condition

Loans and loans held for sale

At June 30, 2012, and December 31, 2011 total loans outstanding from continuing operations were $49.6 billion, compared to $47.8 billion at June 30, 2011. Loans related to the discontinued operations of the education lending business, which are excluded from total loans at June 30, 2012, December 31, 2011, and June 30, 2011, totaled $5.5 billion, $5.8 billion, and $6.3 billion, respectively. The increase in our outstanding loans from continuing operations over the past twelve months results primarily from increased lending activity in our commercial, financial and agricultural portfolio. For more information on balance sheet carrying value, see Note 1 (“Summary of Significant Accounting Policies”) under the headings “Loans” and “Loans Held for Sale” on pages 116-117 of our 2011 Annual Report on Form 10-K.

Commercial loan portfolio

Commercial loans outstanding were $34.6 billion at June 30, 2012, an increase of $1.9 billion, or 5.9%, compared to June 30, 2011.

Commercial, financial and agricultural. Our Commercial, Financial and Agricultural loans, also referred to as “Commercial and Industrial,” represent 41.1% of our total loan portfolio at June 30, 2012, 39.1% at December 31, 2011 and 35.3% at June 30, 2011 and are the largest component of our total loans. These loans are comprised of fixed and variable rate loans to our large, middle market and small business clients. These period end loans increased $3.5 billion or 20.7% from the same period one year ago. This growth in our commercial and industrial portfolio is primarily attributable to our clients in the manufacturing, technology and healthcare industries. We are experiencing growth in new high credit quality loan commitments, and utilization with clients in our middle market segment, and in our Institutional and Capital Markets business. Additionally, we are increasing loans to real estate investment trust (“REIT”) clients. REITs effectively enable us to lend to entities that generally have more diverse cash flows, lower debt levels and better access to the capital markets than private owners or developers.

While our pipelines and pricing are steady, and we continue to add new clients, we are tempered with caution on growth as our clients remain concerned with the slowed economic recovery and uncertainty in the macroeconomic environment in which they operate.

Commercial real estate loans. Our Commercial real estate (“CRE”) lending business is conducted through two primary sources: our 14-state banking franchise, and KeyBank Real Estate Capital, a national line of business that cultivates relationships with owners of CRE located both within and beyond the branch system. This line of business deals primarily with nonowner-occupied properties (generally properties for which at least 50% of the debt service is provided by rental income from nonaffiliated third parties) and accounted for approximately 54.6% of our average year-to-date commercial real estate loans, compared to 57.1% one year ago. KeyBank Real Estate Capital generally focuses on larger owners and operators of commercial real estate.

CRE loans represent 17.3% of our total loan portfolio at June 30, 2012 compared to 20.3% one year ago. These loans include both owner and nonowner occupied properties which at June 30, 2012 represented 24.8% of our commercial loan portfolio compared to 29.7% one year ago. These loans have decreased $1.1 billion, or 11.5%, to $8.6 billion at June 30, 2012, from $9.7 billion at June 30, 2011. This decrease in our CRE portfolio is due to a slowing economic recovery and our de-risking of the portfolio by changing focus from developers to REIT clients.

Figure 17 includes commercial mortgage and construction loans in both Key Community Bank and Key Corporate Bank. As shown in Figure 17, this loan portfolio is diversified by both property type and geographic location of the underlying collateral.

As shown in Figure 17, at June 30, 2012, our CRE portfolio included mortgage loans of $7.4 billion and construction loans of $1.2 billion, representing 14.9% and 2.4%, respectively, of our total loans. Nonowner-occupied loans represented 11.1% of our total loans and owner-occupied loans represented 6.2% of our total loans. The average size of mortgage loans originated during the second quarter of 2012 was $4.4 million, and our largest mortgage loan at June 30, 2012, had a balance of $73 million. At June 30, 2012, our average construction loan commitment was $3.8 million. Our largest construction loan commitment was $58.7 million, and our largest construction loan amount outstanding was $48.1 million.

98

Also shown in Figure 17, at June 30, 2012, 63.9% of our commercial real estate loans were for nonowner-occupied properties compared to 65.2% at June 30, 2011. Approximately 18.1% and 22.6% of these loans were construction loans at June 30, 2012 and 2011, respectively. Typically, these properties are not fully leased at the origination of the loan. The borrower relies upon additional leasing through the life of the loan to provide the cash flow necessary to support debt service payments. A significant decline in economic growth, and in turn, rental rates and occupancy would adversely affect our portfolio of construction loans.

Figure 17. Commercial Real Estate Loans

June 30, 2012	Geographic Region														Percent of					Commercial
dollars in millions	West		Southwest		Central		Midwest		Southeast		Northeast		Total		Total			Construction		Mortgage
Nonowner-occupied:
Multifamily properties	$	255	$	143	$	169	$	355	$	230	$	178	$	1,330		15.5	%	$	425	$	905
Retail properties		207		144		118		225		353		204		1,251		14.6			171		1,080
Health facilities		181		6		157		228		40		185		797		9.3			51		746
Office buildings		153		39		87		172		30		138		619		7.2			67		552
Warehouses		239		36		23		116		89		82		585		6.8			22		563
Hotels/Motels		81		—		23		4		47		15		170		2.0			—		170
Residential properties		26		13		21		47		28		32		167		1.9			104		63
Land and development		13		13		28		8		22		65		149		1.7			136		13
Manufacturing facilities		1		—		1		43		89		3		137		1.6			1		136
Other		97		1		16		17		87		61		279		3.3			13		266
Total nonowner-occupied		1,253		395		643		1,215		1,015		963		5,484		63.9			990		4,494
Owner-occupied		1,301		41		318		671		93		673		3,097		36.1			182		2,915
Total	$	2,554	$	436	$	961	$	1,886	$	1,108	$	1,636	$	8,581		100.0	%	$	1,172	$	7,409
Nonowner-occupied:
Nonperforming loans	$	15	$	47	$	5	$	23	$	64	$	14	$	168		N/M		$	62	$	106
Accruing loans past due 90 days or more		—		—		10		5		7		21		43		N/M			43		—
Accruing loans past due 30 through 89 days		10		—		1		—		42		2		55		N/M			33		22

West – Southwest – Central – Midwest – Southeast –

Alaska, California, Hawaii, Idaho, Montana, Oregon, Washington and Wyoming Arizona, Nevada and New Mexico Arkansas, Colorado, Oklahoma, Texas and Utah Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin Alabama, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington D.C. and West Virginia

Northeast –

Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont

In the first six months of 2012, nonperforming loans related to nonowner-occupied properties decreased by $6 million from December 31, 2011 to $168 million and increased by $5 million when compared to March 31, 2012.

Since June 30, 2011, our nonowner occupied commercial real estate portfolio has been reduced by approximately $837 million, or 13.2%, as many of our clients have taken advantage of opportunities to permanently refinance their loans at historically low interest rates.

If the economic recovery stalls, it may weaken commercial real estate market fundamentals (i.e., vacancy rates, the stability of rental income and asset values), leading to reduced cash flow to support debt service payments. Reduced client cash flow would adversely affect our ability to collect such payments. Accordingly, the value of our commercial real estate loan portfolio could be adversely affected.

Commercial lease financing. We conduct commercial lease financing arrangements through our Key Equipment Finance line of business and have both the scale and array of products to compete in the equipment lease financing business. Commercial lease financing receivables represented 16.3% of commercial loans at June 30, 2012, and 18.7% at June 30, 2011.

Commercial loan modification and restructuring

Certain commercial loans are modified and extended in the normal course of business for our clients. Loan modifications vary and are handled on a case by case basis with strategies responsive to the specific circumstances of each loan and borrower. In many cases, borrowers have other resources and can reinforce the credit with additional capital, collateral, guarantees or income sources.

99

Modifications are negotiated to achieve mutually agreeable terms that maximize loan credit quality while at the same time meeting our clients’ financing needs. Modifications made to loans of creditworthy borrowers not experiencing financial difficulties and under circumstances where ultimate collection of all principal and interest is not in doubt are not classified as TDRs. In accordance with applicable accounting guidance, TDR classification occurs when the borrower is experiencing financial difficulties and a creditor concession has been granted.

Our concession types are primarily categorized as interest rate reductions, principal deferral, or forgiveness of principal. Loan extensions are sometimes coupled with these primary concession types. As a result of modestly improving economic conditions combined with the restructuring of these loans to provide the optimal opportunity for successful repayment by the borrower, we have seen certain of our restructured loans returning to accrual status and consistent performance under the restructured loan terms for each primary type of concession over the past year.

In cases where the loan terms were extended at less than normal market rates for similar lending arrangements, we have transferred these loans to the Asset Recovery Group for resolution. During the first six months of 2012, there were $143 million of new restructured loans included in nonperforming loans, of which $31 million related to commercial real estate.

For more information on concession types for our commercial accruing and nonaccruing TDRs, see Note 4 (“Asset Quality”).

Figure 18 quantifies restructured loans and TDRs.

Figure 18. Commercial TDRs by Note Type and Accrual Status

	June 30,		March 31,		December 31,		September 30,		June 30,
in millions	2012		2012		2011		2011		2011
Commercial TDRs by Note Type
Tranche A	$	188	$	218	$	206	$	211	$	188
Tranche B		—		—		2		2		3
Total Commercial TDRs	$	188	$	218	$	208	$	213	$	191
Commercial TDRs by Accrual Status
Nonaccruing	$	133	$	148	$	150	$	120	$	114
Accruing		55		70		58		93		77
Total Commercial TDRs	$	188	$	218	$	208	$	213	$	191
Total Commercial and Consumer TDRs	$	274	$	293	$	276	$	277	$	252

The benefits derived from A-B note TDRs are recognized when the underlying assets (predominantly commercial real estate) have been stabilized with a level of leverage supportable by ongoing cash flows. Right-sizing the A note to sustainable cash flow should ultimately allow for its return to accrual status and thereupon a resumption of interest income recognition. Similarly, appropriately-sized A notes will allow for upgraded credit classification based on rehabilitated credit metrics, including demonstrated payment performance. Other benefits include the borrower’s retention of ownership and control of the asset, deleveraged and sustainable capital structure (often sufficient to attract fresh capital into the transaction) and rehabilitation of local markets by minimizing distressed/fire sales.

We use an A-B note structure for our TDRs, breaking the existing loan into two tranches. First, we create an A note. As the objective of this TDR note structure is to achieve a fully performing and well-rated A note, we focus on sizing that note to a level that is supported by cash flow available to service debt at current market terms and consistent with our customary underwriting standards. This note structure will typically include a debt coverage ratio of 1.2 or better of cash flow to monthly payments of market interest, and principal amortization of generally not more than 25 years. (These metrics are adjusted from time to time based upon changes in long-term markets and take out underwriting standards of our various lines of business.) Appropriately sized A notes are more likely to return to accrual status, allowing us to resume recognizing interest income. As the borrower’s payment performance improves, these restructured notes also typically allow for upgraded internal quality risk rating classification. Moreover, as noted above, the borrower retains ownership and control of the underlying collateral (typically, commercial real estate), the borrower’s capital structure is strengthened (often to the point that fresh capital is attracted to the transaction), and local markets are spared distressed/fire sales.

The B note is typically an interest-only note with no required amortization until the property stabilizes and generates excess cash flow. This excess cash flow is customarily applied directly to the principal of the A note. We evaluate the B note when we consider returning the A note to accrual status. In many cases, the B note is charged off at the same time the A note is

100

returned to accrual status. Alternatively, both A and B notes may be simultaneously returned to accrual if credit metrics are supportive.

Restructured nonaccrual loans may be returned to accrual status based on a current, well documented evaluation of the credit, which would include analysis of the borrower’s financial condition, prospects for repayment under the modified terms and/or alternate sources of repayment such as the value of loan collateral. Establishment of the borrower’s ability to sustain historical repayment performance would require a reasonable period (generally a minimum of six months) prior to the date on which the loan is returned to accrual status. Sustained historical repayment performance for a reasonable time prior to the restructuring may be taken into account. The primary consideration for returning a restructured loan to accrual status is the reasonable assurance that the full contractual principal balance of the loan along with ongoing contractually required interest payments can be expected to be fully repaid. Although our policy is a guideline, considerable judgment is required to review each borrower’s circumstances.

All loans processed as a TDR, including A notes and any non-charged-off B notes, are reported as TDRs during the calendar year in which the restructure took place.

Extensions. Certain commercial loans are modified and extended in the normal course of business for our clients. Project loans are typically refinanced into the permanent commercial loan market at maturity but are sometimes modified and extended, depending on the circumstances. Extension terms take into account the specific circumstances of the client relationship, the status of the project and near-term prospects for both the client and the collateral. In all cases, pricing and loan structure are reviewed and (where necessary) modified to ensure the loan has been priced to achieve a market rate of return and loan terms (i.e., amortization, covenants and term) that are appropriate for the risk. Typical enhancements include one or more of the following: principal paydown, increased amortization, additional collateral, increased guarantees, and/or a cash flow sweep. As previously mentioned, some maturing construction loans have automatic extension options built in and in those cases where the borrower qualifies for the extension option, pricing and loan terms cannot be altered. Most project loans by their nature are “collateral-dependent” as cash flow from the project loans or the sale of the real estate provides for repayment of the loan.

Pricing of a loan is determined based on the strength of the borrowing entity and the strength of the guarantor, if any. Therefore, pricing may remain the same (e.g., the loan is already priced at or above current market). We do not consider loan extensions in the normal course of business (under existing loan terms or at market rates) as TDRs, particularly when ultimate collection of all principal and interest is not in doubt and no concession has been made. In the case of loan extensions outside of the normal course of business—where either collection of all principal and interest is uncertain or a concession has been made— we would analyze such credit under the accounting guidance to determine whether it qualifies as a TDR. Extensions that qualify as TDRs are measured for impairment under the applicable accounting guidance.

Guarantors. A detailed guarantor analysis is conducted (1) for all new extensions of credit, (2) at the time of any material modification/extension, and (3) typically annually, as part of our on-going portfolio and loan monitoring procedures. This analysis includes submission by the guarantor entity of all appropriate financial statements, including balance sheets, income statements, tax returns, and real estate schedules.

While the specific steps of each guarantor analysis may have some minor differences, the high level objectives include reaching a conclusion regarding the overall financial conditions of the guarantor entities, including: size, quality, and nature of asset base; net worth (adjusted to reflect our opinion of market value); leverage; standing liquidity; recurring cash flow; contingent and direct debt obligations; and near term debt maturities.

Borrower and guarantor financial statements are required at least annually within 90-120 days of the calendar/fiscal year end. Income statements and rent rolls for project collateral are required quarterly. In some cases, disclosure of certain information including liquidity, certifications, status of asset sales or debt resolutions, and real estate schedules may be required more frequently.

We routinely seek performance from guarantors of impaired debt, if the guarantor is solvent. In limited circumstances, we would not seek to enforce the guaranty, including situations in which we are precluded by bankruptcy and/or it is determined the cost to pursue a guarantor exceeds the value to be returned given the guarantor’s verified financial condition. We are often successful in obtaining either monetary payment and/or the cooperation of our solvent guarantors to help mitigate loss, cost and the expense of collections.

As of June 30, 2012, we had $83 million of mortgage and construction loans that had a loan to value ratio greater than 1.0, and were accounted for as performing loans. These loans were not considered impaired due to one or more of the following

101

factors: (i) underlying cash flow adequate to service the debt at a market rate of return with adequate amortization; (ii) a satisfactory borrower payment history; and (iii) acceptable guarantor support.

Consumer loan portfolio

Consumer loans outstanding decreased by $150 million, or 1.0%, from one year ago. Most of the decrease is attributable to our exit portfolio, as shown in Figure 35 in the “Credit risk management” section.

The home equity portfolio is the largest segment of our consumer loan portfolio. Approximately 95.2% of this portfolio at June 30, 2012 is derived from our Key Community Bank. The remainder of the portfolio, which has been in an exit mode since the fourth quarter of 2007, was originated from the Consumer Finance line of business and is now included in Other Segments. Home equity loans from our Key Community Bank increased by $170 million, or 1.8%, over the past twelve months as a result of our 2012 spring home equity loan campaign.

As shown in Figure 15, we hold the first lien position for approximately 54% of the Key Community Bank home equity portfolio at June 30, 2012 and June 30, 2011. For consumer loans with real estate collateral, we track borrower performance monthly. Credit metrics are refreshed quarterly, including recent Fair Isaac Corporation scores as well as original and updated loan to value ratio regardless of lien position. This information is used in establishing the ALLL. Our methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” on page 117 of our 2011 Annual Report on Form 10-K.

Regulatory guidance issued in January 2012, addressed specific risks and required actions within home equity portfolios associated with second lien loans. At June 30, 2012, 46% of our home equity portfolio is secured by second lien mortgages. Approximately $4.8 billion of second lien home equity loans were reviewed by a third party service to determine the payment status of the associated first lien. The resulting data identified approximately $36 million or .74% of second lien home equity loans with an associated first lien that is 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown. In conjunction with this regulatory guidance, during the second quarter of 2012 this $36 million of second lien home equity loans that are currently accruing have been included in the nonperforming loan category. The classification of certain of these second liens as nonperforming loans did not have an impact on the ALLL in the second quarter of 2012 because as noted above, we have previously considered the risk characteristics of this portfolio of loans in our loss estimation methodology. On at least a quarterly basis, we will continue to monitor the risk characteristics of these loans when determining the appropriateness of our loss estimation methods. This policy related to the classification of second lien home equity loans was implemented prospectively, and therefore prior periods were not presented.

Figure 19 summarizes our home equity loan portfolio by source at the end of each of the last five quarters, as well as certain asset quality statistics and yields on the portfolio as a whole.

Figure 19. Home Equity Loans

	2012						2011
dollars in millions	Second			First			Fourth			Third			Second
SOURCES OF PERIOD END LOANS
Key Community Bank	$	9,601		$	9,153		$	9,229		$	9,347		$	9,431
Other		479			507			535			565			595
Total	$	10,080		$	9,660		$	9,764		$	9,912		$	10,026
Nonperforming loans at period end	$	158	(a)	$	121		$	120		$	114		$	112
Net loan charge-offs for the period		28			30			29			26			37
Yield for the period (b)		4.23	%		4.27	%		4.30	%		4.33	%		4.36	%

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January 2012.

(b) From continuing operations.

As previously reported, we have experienced a decrease in our consumer loan portfolio. We expect that the portfolio will continue to decrease in future periods as a result of our actions to exit dealer-originated home equity loans and indirect retail lending for marine and recreational vehicle products. We ceased originating new education loans effective December 5, 2009 and account for this business in discontinued operations.

102

Loans held for sale

As shown in Note 3 (“Loans and Loans Held for Sale”), our loans held for sale decreased to $656 million at June 30, 2012 from $728 million at December 31, 2011 and totaled $381 million at June 30, 2011. There were no loans held for sale related to the discontinued operations of the education lending business at June 30, 2012, December 31, 2011 and June 30, 2011.

At June 30, 2012, loans held for sale included $523 million of commercial mortgages, which increased by $325 million from June 30, 2011, and $90 million of residential mortgage loans, which increased $32 million from June  30, 2011.

Loan sales

As shown in Figure 20, during the first six months of 2012, we sold $1.5 billion of commercial real estate loans, $779 million of residential real estate loans, and $60 million of commercial loans. Most of these sales came from the held-for-sale portfolio.

Figure 20 summarizes our loan sales for the first six months of 2012 and all of 2011.

Figure 20. Loans Sold (Including Loans Held for Sale)

in millions	Commercial		Commercial  Real Estate		Commercial  Lease  Financing		Residential  Real Estate		Total
2012
Second quarter	$	24	$	808	$	26	$	379	$	1,237
First quarter		36		715		22		400		1,173
Total	$	60	$	1,523	$	48	$	779	$	2,410
2011
Fourth quarter	$	31	$	500		—	$	404	$	935
Third quarter		23		355		—		303		681
Second quarter		18		761		—		250		1,029
First quarter		46		397		—		438		881
Total	$	118	$	2,013		—	$	1,395	$	3,526

Figure 21 shows loans that are either administered or serviced by us, but not recorded on the balance sheet. The table includes loans that have been sold.

Figure 21. Loans Administered or Serviced

in millions	June 30,  2012		March 31,  2012		December 31,  2011		September 30,  2011		June 30,  2011
Commercial real estate loans	$	97,329	$	96,519	$	99,608	$	102,734	$	107,077
Commercial lease financing		517		538		521		573		639
Commercial loans		325		313		306		288		277
Total	$	98,171	$	97,370	$	100,435	$	103,595	$	107,993

In the event of default by a borrower, we are subject to recourse with respect to approximately $973 million of the $98.2 billion of loans administered or serviced at June 30, 2012. Additional information about this recourse arrangement is included in Note 12 (“Contingent Liabilities and Guarantees”) under the heading “Recourse agreement with FNMA.”

We derive income from several sources when retaining the right to administer or service loans that are sold. We earn noninterest income (recorded as “other income”) from fees for servicing or administering loans. This fee income is reduced by the amortization of related servicing assets. In addition, we earn interest income from investing funds generated by escrow deposits collected in connection with the servicing of commercial real estate loans.

Securities

Our securities portfolio totaled $17.6 billion at June 30, 2012, compared to $18.1 billion at December 31, 2011, and $18.7 billion at June 30, 2011. Available-for-sale securities were $13.2 billion at June 30, 2012, compared to $16 billion at December 31, 2011, reflecting the liquidity needs arising from changes in our loan and deposit balances and investments in held-to-maturity securities. Held-to-maturity securities were $4.4 billion at June 30, 2012, compared to $2.1 billion at

103

December 31, 2011, primarily reflecting increases in agency mortgage-backed securities as we continue to prepare for potential future changes in regulatory capital rules. At June 30, 2012, we had $4.4 billion in CMOs in our held-to-maturity securities portfolio.

As shown in Figure 22, all of our mortgage-backed securities, which include both securities available for sale and held-to-maturity securities, are issued by government-sponsored enterprises or GNMA, and are traded in highly liquid secondary markets. These securities are recorded on the balance sheet at fair value for the available-for-sale portfolio and at cost for the held-to-maturity portfolio. For more information about these securities, see Note 5 (“Fair Value Measurements”) under the heading “Qualitative Disclosures of Valuation Techniques” and Note 6 (“Securities”).

Figure 22. Mortgage-Backed Securities by Issuer^(a)

in millions	June 30,   2012		December 31,      2011		June 30,      2011
FHLMC	$	8,829	$	8,984	$	8,977
FNMA		5,598		5,583		5,852
GNMA		3,036		3,464		3,697
Total	$	17,463	$	18,031	$	18,526

(a) Includes securities held in the available-for-sale and held-to-maturity portfolios.

Securities available for sale

The majority of our securities available-for-sale portfolio consists of CMOs, which are debt securities secured by a pool of mortgages or mortgage-backed securities. CMOs generate interest income and serve as collateral to support certain pledging agreements. At June 30, 2012, we had $13.1 billion invested in CMOs and other mortgage-backed securities in the available-for-sale portfolio, compared to $15.9 billion at December 31, 2011, and $18.5 billion at June 30, 2011.

We periodically evaluate our securities available-for-sale portfolio in light of established A/LM objectives, changing market conditions that could affect the profitability of the portfolio, and the level of interest rate risk to which we are exposed. These evaluations may cause us to take steps to adjust our overall balance sheet positioning.

In addition, the size and composition of our securities available-for-sale portfolio could vary with our needs for liquidity and the extent to which we are required (or elect) to hold these assets as collateral to secure public funds and trust deposits. Although we generally use debt securities for this purpose, other assets, such as securities purchased under resale agreements or letters of credit, are used occasionally when they provide a lower cost of collateral or more favorable risk profiles.

During the second quarter of 2012, our investing activities continued to complement other balance sheet developments and provide for our ongoing liquidity management needs. For most of the first half of 2011, we chose not to reinvest the monthly security cash flows and also sold approximately $1.6 billion of CMOs. These actions provided the liquidity necessary to address the funding requirements arising from the loss of certain escrow deposit balances related to commercial mortgage securitizations serviced by Key and rated by Moody’s, and also contributed funds for our TARP repayment in March 2011.

Figure 23 shows the composition, yields and remaining maturities of our securities available for sale. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 6 (“Securities).

104

Figure 23. Securities Available for Sale

dollars in millions	U.S. Treasury, Agencies and Corporations		States and  Political  Subdivisions			Collateralized  Mortgage  Obligations		(a)	Other Mortgage- Backed Securities		(a)	Other Securities		(b)	Total			Weighted- Average Yield		(c)
June 30, 2012
Remaining maturity:
One year or less		—	$	1		$	964		$	1			—		$	966			3.43	%
After one through five years		—		16			11,513			614		$	20			12,163			3.16
After five through ten years		—		39			—			33			—			72			5.76
After ten years		—		—			—			4			—			4			5.57
Fair value		—	$	56		$	12,477		$	652		$	20		$	13,205			—
Amortized cost		—		53			12,098			597			20			12,768			3.19	%
Weighted-average yield (c)		—		6.01	%		3.08	%		5.22	%		—			3.19	%  (d)		—
Weighted-average maturity		—		5.8 years			2.0 years			2.6 years			2.5 years			2.0 years			—
December 31, 2011
Fair value		—	$	63		$	15,162		$	778		$	9		$	16,012			—
Amortized cost		—		60			14,707			715			8			15,490			3.19 %
June 30, 2011
Fair value	$	9	$	129		$	17,609		$	917		$	16		$	18,680			—
Amortized cost		9		126			17,124			845			13			18,117			3.22	%

(a) Maturity is based upon expected average lives rather than contractual terms.

(b) Includes primarily marketable equity securities.

(c) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

(d) Excludes $20 million of securities at June 30, 2012, that have no stated yield.

Held-to-maturity securities

Federal Agency CMOs constitute most of our held-to-maturity securities. The remaining balance is comprised of foreign bonds and preferred equity securities. Our held-to-maturity securities increased during the second half of 2011 and into the first half of 2012 due to purchases of Federal Agency CMOs as we increased this portfolio in response to potential future changes in regulatory capital rules. Figure 24 shows the composition, yields and remaining maturities of these securities.

Figure 24. Held-to-Maturity Securities

dollars in millions	Collateralized Mortgage Obligations			States and Political Subdivisions		Other Securities			Total			Weighted-  Average  Yield		(a)
June 30, 2012
Remaining maturity:
One year or less		—			—	$	5		$	5			9.65	%
After one through five years	$	4,334			—		13			4,347			1.92
Amortized cost	$	4,334			—	$	18		$	4,352			1.92	%
Fair value		4,378			—		18			4,396			—
Weighted-average yield		1.92	%		—		3.05	%  (b)		1.92	%  (b)		—
Weighted-average maturity		2.9 years			—		1.9 years			2.9 years			—
December 31, 2011
Amortized cost	$	2,091			—	$	18		$	2,109			2.06	%
Fair value		2,115			—		18			2,133			—
June 30, 2011
Amortized cost		—		$	1	$	18		$	19			3.57	%
Fair value		—			1		18			19			—

(a) Weighted-average yields are calculated based on amortized cost. Such yields have been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 35%.

(b) Excludes $5 million of securities at June 30, 2012, that have no stated yield.

105

Other investments

Principal investments — investments in equity and mezzanine instruments made by our Principal Investing unit — represented 61% of other investments at June 30, 2012. They include direct investments (investments made in a particular company) as well as indirect investments (investments made through funds that include other investors). Principal investments are predominantly made in privately held companies and are carried at fair value ($724 million at June 30, 2012, $709 million at December 31, 2011, and $740 million at June 30, 2011). During the first half of 2011, employees who managed our various principal investments formed two independent entities that now serve as investment managers of these investments. Under this arrangement, which was mutually agreeable to both parties, these individuals are no longer employees of Key. As a result of these changes, which were made during the second quarter of 2011, we deconsolidated certain of these direct and indirect investments, totaling $234 million.

In addition to principal investments, “other investments” include other equity and mezzanine instruments, such as certain real estate-related investments that are carried at fair value, as well as other types of investments that generally are carried at cost.

Most of our other investments are not traded on an active market. We determine the fair value at which these investments should be recorded based on the nature of the specific investment and all available relevant information. This review may encompass such factors as the issuer’s past financial performance and future potential, the values of public companies in comparable businesses, the risks associated with the particular business or investment type, current market conditions, the nature and duration of resale restrictions, the issuer’s payment history, our knowledge of the industry, third party data and other relevant factors. During the first six months of 2012, net gains from our principal investing activities (including results attributable to noncontrolling interests) totaled $59 million, which includes $37 million of net unrealized gains. These net gains are recorded as “net gains (losses) from principal investing” on the income statement. Additional information regarding these investments is provided in Note 5 (“Fair Value Measurements”).

Deposits and other sources of funds

Domestic deposits are our primary source of funding. During the second quarter of 2012, average domestic deposits were $60.3 billion and represented 84% of the funds we used to support loans and other earning assets, compared to $57.7 billion and 80% during the same quarter of 2011. The composition of our average deposits is shown in Figure 6 in the section entitled “Net interest income.”

The increase in average domestic deposits in the second quarter of 2012, compared to the second quarter of 2011, was due to the growth from demand deposits, as increases in interest-bearing liquid deposits were largely offset by declines in certificates of deposit ($100,000 or more) and other time deposits.

Approximately $3.8 billion of our certificates of deposit outstanding at June 30, 2012, mature over the next two quarters. The maturities of these certificates of deposit are as follows: $2.5 billion at a 2.23% cost mature in the third quarter of 2012, and $1.3 billion at a 2.18% cost mature in the fourth quarter of 2012. These re-pricing opportunities will benefit our net interest margin. Improved funding mix and previous maturities of our certificates of deposit have reduced the cost of total deposits, which is down six basis points from the first quarter of 2012.

Wholesale funds, consisting of deposits in our foreign office and short-term borrowings, averaged $3.1 billion during the second quarter of 2012, compared to $3.6 billion during the year-ago quarter. The change from the second quarter of 2011 resulted from a $110 million decrease in foreign office deposits, a $209 million decrease in federal funds purchased and securities sold under agreements to repurchase, and a $204 million decrease in bank notes and other short-term borrowings.

As previously reported, on July 13, 2012, we completed our acquisition of 37 retail banking branches in Buffalo and Rochester, NY. We added approximately $2.1 billion in deposits associated with these branches and loans of approximately $260 million. Additionally, we will be adding credit card receivables of approximately $70 million in September of 2012.

106

Capital

At June 30, 2012, our shareholders’ equity was $10.2 billion, up $250 million from December 31, 2011. The following sections discuss certain factors that contributed to this change. For other factors that contributed to the change, see the Consolidated Statements of Changes in Equity.

As previously reported, on January 1, 2010, we adopted new consolidation accounting guidance which required us to consolidate our education loan securitization trusts (classified as discontinued assets and liabilities). As a result, we consolidated our education loan securitization trusts and made a corresponding $45 million cumulative effect adjustment. That consolidation added $2.8 billion in discontinued assets, and the same amount of liabilities and equity to our balance sheet; loans constituted $2.6 billion of the assets. During the third quarter of 2011, we determined that the $45 million cumulative effect adjustment made related to the consolidation of these trusts on January 1, 2010 was incorrect. Further information regarding this error and its correction is provided in Note 11 (“Acquisition and Discontinued Operations”).

Comprehensive capital assessment review and capital actions

As part of its ongoing supervisory process, the Federal Reserve requires a BHC to submit an annual Comprehensive Capital Plan as well as to update such plan to reflect material changes in a firm’s risk profile, business strategies, or corporate structure, including but not limited to changes in planned capital actions. During the first quarter, we submitted to the Federal Reserve and provided to the OCC under the annual CCAR process our 2012-2013 Comprehensive Capital Plan. At its regular March 2012 meeting, our Board authorized the repurchase in the open market or through privately negotiated transactions of up to $312 million of our Common Shares. This authorization was expressly in addition to any amounts remaining under preexisting authority. Pursuant to our 2012 capital plan submitted to the Federal Reserve as part of CCAR and not objected to by the Federal Reserve, KeyCorp had authority to repurchase up to $344 million of our Common Shares, including $312 million for general repurchase and up to $32 million for repurchase in connection with employee elections under our compensation and benefit programs.

During the first half of the 2012, we completed $82 million of Common Share repurchases from shareholders on the open market, and $3 million of Common Share repurchases from employees in connection with employee elections under our compensation and benefit programs, pursuant to this plan. Following completion of these repurchases, we have remaining authority to repurchase up to $259 million of our Common Shares, including up to $230 million for general repurchase and up to $29 million for repurchase in connection with employee elections under our compensation and benefit programs. Our existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.

Our 2012 capital plan also includes an increase in our Common Share dividend from $.03 to $.05 per share. At the regular May Board of Directors meeting the Board declared a quarterly cash dividend of $.05 per share, representing an increase from $.03 per share to $.05 per share from the prior quarter. Subsequently, on July 13, 2012 at the regular July Board of Directors meeting, the Board declared a third quarter cash dividend of $.05 per share payable on September 14, 2012, to shareholders of record on August 28, 2012. Future increases will be evaluated by the Board of Directors based upon our earnings, financial condition, and other factors, including regulatory review. Further information regarding the capital plan process and CCAR is included in the “Supervision and Regulation” section under the heading “Capital Assessment and Review of Capital Actions” beginning on page 8 of our 2011 Annual Report on Form 10-K.

Provisions of the Dodd-Frank Act and the Basel III NPR provide for the phase-out of Tier 1 capital treatment for capital securities beginning in 2013. As a result, our outstanding trust preferred securities will eventually become Tier 2 capital. The Supervision and Regulation section of this report contains more detailed information about the Basel III NPR.

On April 16, 2012, KeyCorp commenced a consent solicitation from the holders of record as of April 10, 2012, of the outstanding trust preferred securities (“Trust Preferred Securities”) of KeyCorp Capital VII for the termination of the Replacement Capital Covenant, dated as of February 27, 2008, as amended (the “RCC”), by KeyCorp in favor of and for the benefit of each Covered Debtholder (as defined in such RCC). On April 27, 2012, KeyCorp announced that, effective as of April 26, 2012, a majority of the holders of record of the Trust Preferred Securities in liquidation amount of KeyCorp Capital VII consented to terminate the RCC. Pursuant to the terms of the consent solicitation, the termination of the RCC therefore became effective on April 26, 2012. On July 12, 2012, KeyCorp redeemed all of the enhanced Trust Preferred Securitites of KeyCorp Capital X in the amount of $568 million and all of the Trust Preferred Securities of KeyCorp Capital VII in the amount of $139 million.

107

Repurchase of TARP CPP preferred stock, warrant and completion of equity and debt offerings

As previously reported during the first half of 2011, Key completed the repurchase of the $2.5 billion of Series B Preferred Stock and corresponding warrant issued to the U.S. Treasury Department. As a result of the repurchase, we recorded a $49 million one-time deemed dividend in the first quarter of 2011 related to the remaining difference between the repurchase price and the carrying value of the preferred shares at the time of repurchase. On April 20, 2011 we repurchased the warrant directly from the U.S. Treasury for $70 million. Beginning with the second quarter of 2011, the repurchase resulted in the elimination of quarterly dividends of $31 million and discount amortization of $4 million, or $140 million on an annual basis, related to these preferred shares. In total, Key paid $2.867 billion to the U.S. Treasury during the investment period in the form of dividends, principal and repurchase of the warrant, resulting in a return to the U.S. Treasury of $367 million above the initial investment of $2.5 billion on November 14, 2008.

Dividends

During the second quarter of 2012, we made a dividend payment of $.05 per share, or $47 million, on our Common Shares. At its regular July meeting our Board of Directors declared a quarterly dividend of $.05 per share payable on September 14, 2012 to shareholders of record on August 28, 2012.

Also during the second quarter of 2012, we made a dividend payment of $1.9375 per share or $5 million on our Series A Preferred Stock. At its regular July meeting our Board of Directors declared a quarterly dividend of $1.9375 per share payable on September 15, 2012 to shareholders of record on August 31, 2012.

The repurchase of our Series B Preferred Stock as a participant in the U.S. Treasury’s TARP CPP in March 2011 eliminated all future quarterly dividends of $31 million, or $125 million on an annual basis.

Common shares outstanding

Our Common Shares are traded on the New York Stock Exchange under the symbol KEY with 33,084 holders of record at June 30, 2012. At June 30, 2012 our book value per Common Share was $10.43 based on 945.5 million shares outstanding at June 30, 2012, compared to $10.09 based on 953.0 million shares outstanding at December 31, 2011, and $9.88 based on 953.8 million shares outstanding at June 30, 2011. At June 30, 2012 our tangible book value per Common Share was $9.45 compared to $9.11 at December 31, 2011, and $8.90 at June 30, 2011.

Figure 25 shows activities that caused the change in outstanding Common Shares over the past five quarters.

Figure 25. Changes in Common Shares Outstanding

	2012				2011
in thousands	Second		First		Fourth		Third		Second
Shares outstanding at beginning of period		956,102		953,008		952,808		953,822		953,926
Common shares issued (repurchased)		(10,468)		—		—		—		—
Shares reissued (returned) under employee benefit plans		(161)		3,094		200		(1,014)		(104)
Shares outstanding at end of period		945,473		956,102		953,008		952,808		953,822

As shown above, Common Shares outstanding decreased by 10.6 million shares during the second quarter of 2012 from our share repurchase program and the net activity in our employee benefit plans.

At June 30, 2012, we had 71.5 million treasury shares, compared to 64.0 million treasury shares at December 31, 2011 and 63.1 million treasury shares at June 30, 2011. Going forward we expect to reissue treasury shares as needed in connection with stock-based compensation awards and for other corporate purposes.

Information on KeyCorp’s Common Share repurchase program is included in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this report.

108

Capital adequacy

Capital adequacy is an important indicator of financial stability and performance. All of our capital ratios remain in excess of regulatory requirements at June 30, 2012. Our capital and liquidity are intended to position us well to weather an adverse credit cycle while continuing to serve our clients’ needs, as well as to adjust to the regulations currently being proposed by the federal banking agencies to implement Basel III and provisions of the Dodd-Frank Act. Our shareholders’ equity to assets ratio was 11.74% at June 30, 2012, compared to 11.16% at December 31, 2011 and 10.95% at June 30, 2011. Our tangible common equity to tangible assets ratio was 10.44% at June 30, 2012, compared to 9.88% at December 31, 2011 and 9.67% at June 30, 2011.

Banking industry regulators prescribe minimum capital ratios for BHCs and their banking subsidiaries. Risk-based capital guidelines require a minimum level of capital as a percent of “risk-weighted assets.” Risk-weighted assets consist of total assets plus certain off-balance sheet and market risk items, subject to adjustment for predefined credit risk factors. Currently, banks and BHCs must maintain, at a minimum, Tier 1 capital as a percent of risk-weighted assets of 4.00% and total capital as a percent of risk-weighted assets of 8.00%. As of June 30, 2012, our Tier 1 risk-based capital ratio and our total risk-based capital ratios were 12.45% and 15.83%, respectively, compared to 12.99% and 16.51%, respectively, at December 31, 2011 and 13.93% and 17.88%, respectively at June 30, 2011.

Another indicator of capital adequacy, the leverage ratio, is defined as Tier 1 capital as a percentage of average quarterly tangible assets. BHCs that either have the highest supervisory rating or have implemented the Federal Reserve’s risk-adjusted measure for market risk — as we have — must maintain a minimum leverage ratio of 3.00%. All other bank holding companies must maintain a minimum ratio of 4.00%. As of June 30, 2012, our leverage ratio was 11.35% compared to 11.79% at December 31, 2011 and 12.13% at June 30, 2011.

The enactment of the Dodd-Frank Act changes the regulatory capital standards that apply to BHCs by requiring regulators to create rules phasing out the treatment of capital securities and cumulative preferred securities as eligible Tier 1 risk-based capital. Under the Basel III NPR, this three year phase-out period, which commences January 1, 2013, will ultimately result in our trust preferred securities issued by the KeyCorp capital trusts being treated only as Tier 2 capital. These changes in effect apply the same leverage and risk-based capital requirements that apply to depository institutions BHCs, savings and loan holding companies, and nonbank financial companies identified as systemically important. The Supervision and Regulation section of this report contains more detailed information about the Basel III NPR.

As of June 30, 2012, our Tier 1 risk-based capital ratio, leverage ratio, and total risk-based capital ratio (excluding trust preferred securities redeemed on July 12, 2012) were 12.45%, 11.35%, and 15.83%, respectively. The trust preferred securities issued by the KeyCorp capital trusts contribute $339 million or 44, 40, and 44 basis points to our Tier 1 risk-based capital ratio, Tier 1 leverage ratio, and total risk-based capital ratio, respectively, as of June 30, 2012.

Federal bank regulators group FDIC-insured depository institutions into five categories, ranging from “well-capitalized” to “critically undercapitalized.” A “well-capitalized” institution must meet or exceed the prescribed thresholds of 5.00% for Tier 1 risk-based capital, 6.00% for Tier 1 leverage capital, and 10.00% for total risk-based capital and must not be subject to any written agreement, order or directive to meet and maintain a specific capital level for any capital measure. If these provisions applied to BHCs, we would qualify as “well-capitalized” at June 30, 2012. We believe there has not been any change in condition or event since that date that would cause our capital classification to change. Analysis on a pro forma basis, accounting for the phase-out of our trust preferred securities as Tier 1 eligible (and therefore as Tier 2 instead) as of June 30, 2012, also determines that we would qualify as “well-capitalized” under current regulatory guidelines (Basel I), with the pro forma Tier 1 risk-based capital ratio, pro forma leverage ratio, and pro forma total risk-based capital ratio being 12.01%, 10.95%, and 15.83%, respectively. The current regulatory defined categories serve a limited supervisory function. Investors should not use our pro forma ratios as a representation of our overall financial condition or prospects of KeyCorp or KeyBank. A discussion of the regulatory capital standards and other related capital adequacy regulatory standards is included in “Item 1. Business” in the “Supervision and Regulation” section under the heading “Capital” beginning on page 7 of our Annual Report on Form 10-K.

Traditionally, the banking regulators have assessed bank and BHC capital adequacy based on both the amount and composition of capital, the calculation of which is prescribed in federal banking regulations. As a result of the financial crisis, the Federal Reserve has intensified its assessment of capital adequacy on a component of Tier 1 risk-based capital, known as Tier 1 common equity, and its review of the consolidated capitalization of systemically important financial companies, including KeyCorp. The capital modifications mandated by the Dodd-Frank Act and set forth in Basel III, which the Federal

109

banking agencies have recently proposed to implement, are consistent with the renewed focus on Tier 1 common equity and the consolidated capitalization of banks, BHCs, and covered nonbank financial companies, which resulted from the financial crisis. Tier 1 common equity is neither formally defined by GAAP nor prescribed in amount by federal banking regulations, this measure is considered to be a non-GAAP financial measure. Figure 5 in the “Highlights of Our Performance” section reconciles Key shareholders’ equity, the GAAP performance measure, to Tier 1 common equity, the corresponding non-GAAP measure. Our Tier 1 common equity ratio was 11.63% at June 30, 2012, compared to 11.26% at December 31, 2011 and 11.14% at June 30, 2011.

Generally, for risk-based capital purposes, deferred tax assets that are dependent upon future taxable income are limited to the lesser of: (i) the amount of deferred tax assets that a financial institution expects to realize within one year of the calendar quarter-end date, based on its projected future taxable income for the year, or (ii) 10% of the amount of an institution’s Tier 1 capital. As we anticipated, at June 30, 2012, and December 31, 2011, we had no net deferred tax assets deducted from Tier 1 capital and risk-weighted assets compared to net deferred tax assets of $75 million deducted at June 30, 2011. At June 30, 2012, on all Key’s consolidated operations we had a federal net deferred tax asset of $61 million and a state deferred tax liability of $27 million compared to a federal deferred tax asset of $60 million and a state deferred tax liability of $24 million at December 31, 2011, and a combined federal and state net deferred tax asset of $220 million at June 30, 2011.

Basel III

A detailed discussion of current rulemaking underway in the U.S. to implement Basel III is in the “Supervision and Regulation” discussion of this report. Given our strong capital position, we expect to be able to satisfy the Basel III capital framework when U.S. capital regulations corresponding to it are finalized. While we also have a strong liquidity position, the Basel III liquidity framework could require us and other U.S. banks to initiate additional liquidity management initiatives, including adding additional liquid assets, issuing term debt, and modifying our product pricing for loans, commitments, and deposits.

Figure 26 represents the details of our regulatory capital position at June 30, 2012, December 31, 2011, and June 30, 2011 under the existing Basel I standards.

110

Figure 26. Capital Components and Risk-Weighted Assets

dollars in millions		June 30,  2012			December 31,  2011			June 30,  2011
TIER 1 CAPITAL
Key shareholders’ equity		$	10,155		$	9,905		$	9,719
Qualifying capital securities			339			1,046			1,791
Less:	Goodwill		917			917			917
	Accumulated other comprehensive income (a)		(109)			(72)			47
	Other assets (b)		71			72			157
	Total Tier 1 capital		9,615			10,034			10,389
TIER 2 CAPITAL
Allowance for losses on loans and liability for losses on lending-related commitments (c)			969			970			941
Net unrealized gains on equity securities available for sale			—			—			1
Qualifying long-term debt			1,645			1,744			2,004
	Total Tier 2 capital		2,614			2,714			2,946
	Total risk-based capital	$	12,229		$	12,748		$	13,335
TIER 1 COMMON EQUITY
Tier 1 capital		$	9,615		$	10,034		$	10,389
Less:	Qualifying capital securities		339			1,046			1,791
	Series A Preferred Stock		291			291			291
	Total Tier 1 common equity	$	8,985		$	8,697		$	8,307
RISK-WEIGHTED ASSETS
Risk-weighted assets on balance sheet		$	61,434		$	61,900		$	60,543
Risk-weighted off-balance sheet exposure			16,148			15,901			15,372
Less:	Goodwill		917			917			917
	Other assets (b)		423			560			736
Plus:	Market risk-equivalent assets		1,043			1,073			771
	Gross risk-weighted assets		77,285			77,397			75,033
Less:	Excess allowance for loan and lease losses (c)		49			183			455
	Net risk-weighted assets	$	77,236		$	77,214		$	74,578
AVERAGE QUARTERLY TOTAL ASSETS		$	86,072		$	86,594		$	87,294
CAPITAL RATIOS
Tier 1 risk-based capital			12.45	%		12.99	%		13.93	%
Total risk-based capital			15.83			16.51			17.88
Leverage (d)			11.35			11.79			12.13
Tier 1 common equity			11.63			11.26			11.14

(a) Includes net unrealized gains or losses on securities available for sale (except for net unrealized losses on marketable equity securities), net gains or losses on cash flow hedges, and amounts resulting from our December 31, 2006, adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.

(b) Other assets deducted from Tier 1 capital and risk-weighted assets consist of disallowed deferred tax assets of $75 million at June 30, 2011, disallowed intangible assets (excluding goodwill) and deductible portions of nonfinancial equity investments. There were no disallowed deferred tax assets at June 30, 2012 and December 31, 2011.

(c) The allowance for loan and lease losses included in Tier 2 capital is limited by regulation to 1.25% of the sum of gross risk-weighted assets plus low level exposures and residual interests calculated under the direct reduction method, as defined by the Federal Reserve. The excess allowance for loan and lease losses includes $79 million, $104 million, and $109 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively, of allowance classified as “discontinued assets” on the balance sheet.

(d) This ratio is Tier 1 capital divided by average quarterly total assets as defined by the Federal Reserve less: (i) goodwill, (ii) the disallowed intangible assets described in footnote (b), and (iii) deductible portions of nonfinancial equity investments; plus assets derecognized as an offset to AOCI resulting from the adoption and subsequent application of the applicable accounting guidance for defined benefit and other postretirement plans.

111

Risk Management

Overview

Like all financial services companies, we engage in business activities and assume the related risks. The most significant risks we face are credit, liquidity, market, compliance, operational, strategic, and reputation risks. We must properly and effectively identify, assess, measure, monitor, control, and report such risks across the entire enterprise to maintain safety and soundness, and maximize profitability. Certain of these risks are defined and discussed in greater detail in the remainder of this section.

Our ERM Committee, which consists of the Chief Executive Officer and other Senior Executives, is responsible for managing risk and ensuring that the corporate risk profile is managed in a manner consistent with our risk appetite. The ERM Program encompasses our risk philosophy, policy, framework and governance structure for the management of risks across the entire company. The ERM Committee reports to the Risk Committee of our Board of Directors. Annually, the Board of Directors reviews and approves the ERM Program, as well as the risk appetite and corporate risk tolerances for major risk categories. We use a risk-adjusted capital framework to manage risks. This framework is approved and managed by the ERM Committee.

Our Board of Directors serves in an oversight capacity with the objective of managing our enterprise-wide risks in a manner that is effective, balanced, and adds value for the shareholders. The Board inquires about risk practices, reviews the portfolio of risks, compares actual risks to the risk appetite and tolerances, and receives regular reports about significant risks — both actual and emerging. To assist in these efforts, the Board has delegated primary oversight responsibility for risk to the Audit Committee and the Risk Committee.

The Audit Committee has oversight responsibility for internal audit; financial reporting; compliance risk and legal matters; the implementation, management and evaluation of operational risk and controls; information security; and fraud risk. The Audit Committee also is responsible for evaluating the qualifications and independence of the independent auditors. The Audit Committee discusses policies related to risk assessment and risk management and the processes related to risk review and compliance.

The Risk Committee has responsibility for overseeing the management of credit risk, market risk, interest rate risk, and liquidity risk, including the actions taken to mitigate these risks, as well as reputational and strategic risks. The Risk Committee also oversees the maintenance of appropriate regulatory and economic capital, reviews the ERM reports, and approves any material changes to the charter of the ERM Committee.

The Audit and Risk Committees meet jointly, as appropriate, to discuss matters that relate to each committee’s responsibilities. In addition to regularly scheduled bi-monthly meetings, the Audit Committee convenes to discuss the content of our financial disclosures and quarterly earnings releases. Committee chairpersons routinely meet with management during interim months to plan agendas for upcoming meetings and to discuss emerging trends and events that have transpired since the preceding meeting. All members of the Board receive formal reports designed to keep them abreast of significant developments during the interim months.

Federal banking regulators are reemphasizing with financial institutions the importance of relating capital management strategy to the level of risk at each institution. We believe our internal risk management processes help us achieve and maintain capital levels that are commensurate with our business activities and risks, and comport with regulatory expectations.

112

Market risk management

The cash flows and values of financial instruments change as a function of changes in market interest rates, foreign exchange rates, equity prices, commodity prices, and other market factors that influence prospective yields, values, or prices associated with the instrument. For example, the value of a fixed-rate bond will decline if market interest rates increase, while the cash flows associated with a variable rate loan will increase when interest rates increase. The holder of a financial instrument is exposed to “market risk” when the cash flows or value of the instrument is tied to such external factors. Most of our market risk is derived from interest rate fluctuations.

Interest rate risk management

Interest rate risk, which is inherent in the banking industry, is measured by the potential for fluctuations in net interest income and the EVE. Such fluctuations may result from changes in interest rates, and differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. We manage the exposure to changes in net interest income and the EVE in accordance with our risk appetite, and within policy limits established by the ERM Committee.

Interest rate risk positions are influenced by a number of factors including the balance sheet positioning that arises out of consumer preferences for loan and deposit products, economic conditions, the competitive environment within our markets and changes in market interest rates that affect client activity and our hedging, investing, funding and capital positions. The primary components of interest rate risk exposure consist of gap risk, basis risk, yield curve risk and option risk.

¿ “Gap risk” is the exposure to changes in interest rates and occurs when the volume of interest-bearing liabilities and the volume of interest-earning assets they fund (for example, deposits used to fund loans) do not mature or reprice at the same time.

¿ “Basis risk” is the exposure to asymmetrical changes in interest rate indexes and occurs when floating-rate assets and floating-rate liabilities reprice at the same time, but in response to different market factors or indices.

¿ “Yield curve risk” is the exposure to non-parallel changes in the slope of the yield curve (where the yield curve depicts the relationship between the yield on a particular type of security and its term to maturity) and occurs when interest-bearing liabilities and the interest-earning assets they fund do not price or reprice to the same term point on the yield curve.

¿ “Option risk” is the exposure to a customer or counterparty’s ability to take advantage of the interest rate environment and terminate or reprice one of our assets, liabilities or off-balance sheet instruments prior to contractual maturity without a penalty. Option risk occurs when exposures to customer and counterparty early withdrawals or early prepayments are not mitigated with an offsetting position or appropriate compensation.

Net interest income simulation analysis. The primary tool we use to measure our interest rate risk is simulation analysis. For purposes of this analysis, we estimate our net interest income based on the current and projected composition of our on- and off-balance sheet positions accounting for recent and anticipated trends in customer activity. The analysis also incorporates assumptions for the current and projected interest rate environments, including a most likely macro economic scenario. Simulation modeling assumes that residual risk exposures will be managed to within the risk appetite.

Typically, the amount of net interest income at risk is measured by simulating the change in net interest income that would occur if the federal funds target rate were to gradually increase or decrease by 200 basis points over the next twelve months, and term rates were to move in a similar fashion. In light of the low interest rate environment, beginning in the fourth quarter of 2008, we modified the standard rate scenario of a gradual decrease of 200 basis points over twelve months to a gradual decrease of 25 basis points over two months with no change over the following ten months. After calculating the amount of net interest income at risk to interest rate changes, we compare that amount with the base case of an unchanged interest rate environment. We also perform regular stress tests and sensitivities on the model inputs that could materially change the resulting risk assessments. One set of stress tests and sensitivities assesses the effect of interest rate inputs on simulated exposures. Assessments are performed using different shapes of the yield curve, including a sustained flat yield curve, an inverted slope yield curve, changes in credit spreads, an immediate parallel change in market interest rates and changes in the relationship of money market interest rates. Another set of stress tests and sensitivities assesses the effect of loan and deposit assumptions and assumed discretionary strategies on simulated exposures. Assessments are performed on changes to the following assumptions: the pricing of deposits without contractual maturities, changes in lending spreads, prepayments on

113

loans and securities, other loan and deposit balance shifts, investment, funding and hedging activities, and liquidity and capital management strategies.

Simulation analysis produces only a sophisticated estimate of interest rate exposure based on judgments related to assumption inputs into the simulation model. We tailor assumptions to the specific interest rate environment and yield curve shape being modeled, and validate those assumptions on a regular basis. Our simulations are performed with the assumption that interest rate risk positions will be actively managed through the use of on- and off-balance sheet financial instruments to achieve the desired residual risk profile. However, actual results may differ from those derived in simulation analysis due to unanticipated changes to the balance sheet composition, customer behavior, product pricing, market interest rates, investment, funding and hedging activities, and repercussions from unanticipated or unknown events.

Figure 27 presents the results of the simulation analysis at June 30, 2012 and 2011. At June 30, 2012, our simulated exposure to a change in short-term interest rates was moderately asset sensitive. ALCO policy limits for risk management require the development of remediation plans to maintain residual risk within tolerance if simulation modeling demonstrates that a gradual increase or decrease in short-term interest rates over the next twelve months would adversely affect net interest income over the same period by more than 4%. As shown in Figure 27, we are operating within these limits.

Figure 27. Simulated Change in Net Interest Income

June 30, 2012
Basis point change assumption (short-term rates)	-25		+200
ALCO policy limits	-4.00	%	-4.00	%
Interest rate risk assessment	-1.05	%	+2.01	%
June 30, 2011
Basis point change assumption (short-term rates)	-25		+200
ALCO policy limits	-4.00	%	-4.00	%
Interest rate risk assessment	-.76	%	+4.01	%

We have gradually migrated to a modest asset-sensitive position as a result of balance growth in transaction deposits and declines in loan balances. As the Federal Reserve’s Federal Open Market Committee has indicated that it anticipates that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014, we continue to invest available funds and execute hedges to moderate further increases in our asset-sensitive position. The nature of these discretionary activities will also continue to reflect the changes in the mix and maturity of customer deposits. Our current interest rate risk position could fluctuate to higher or lower levels of risk depending on the competitive environment and client behavior that may affect the actual volume, mix, maturity and repricing characteristics of loan and deposit flows. As changes occur to the configuration of the balance sheet and the outlook for the economy, management evaluates hedging opportunities that would change the reported interest rate risk profile.

The results of additional simulation analyses that make use of alternative interest rate paths and customer behavior assumptions indicate that net interest income improvement in a rising rate environment could be diminished, and actual results may be different than the policy simulation results in Figure 27. Net interest income improvements are highly dependent on the timing, magnitude, frequency and path of interest rate increases and assumption inputs for deposit repricing relationships, lending spreads and the balance behavior of transaction accounts.

We also conduct simulations that measure the effect of changes in market interest rates in the second and third years of a three-year horizon. These simulations are conducted in a manner similar to those based on a twelve-month horizon. To capture longer-term exposures, we calculate exposures to changes to the EVE as discussed in the following section.

Economic value of equity modeling. EVE complements net interest income simulation analysis as it estimates risk exposure beyond twelve-, twenty-four and thirty-six month horizons. EVE modeling measures the extent to which the economic values of assets, liabilities and off-balance sheet instruments may change in response to fluctuations in interest rates. EVE is calculated by subjecting the balance sheet to an immediate 200 basis point increase or decrease in interest rates, and measuring the resulting change in the values of assets, liabilities and off-balance sheet instruments and comparing those amounts with the base case of an unchanged interest rate environment. Because the calculation of EVE under an immediate 200 basis point decrease in interest rates in the current low rate environment results in certain interest rates declining to zero and a less than 200 basis point decrease in certain yield curve term points, we’ve modified the standard declining rate scenario to an immediate 100 basis point decrease. This analysis is highly dependent upon assumptions applied to assets and

114

liabilities with noncontractual maturities. Those assumptions are based on historical behaviors, as well as our expectations. We develop remediation plans that would maintain residual risk within tolerance if this analysis indicates that our EVE will decrease by more than 15% in response to an immediate increase or decrease in interest rates. We are operating within these guidelines.

Management of interest rate exposure. We use the results of our various interest rate risk analyses to formulate A/LM strategies to achieve the desired risk profile while managing to our objectives for capital adequacy and liquidity risk exposures. Specifically, we manage interest rate risk positions by purchasing securities, issuing term debt with floating or fixed interest rates, and using derivatives — predominantly in the form of interest rate swaps, which modify the interest rate characteristics of certain assets and liabilities.

Figure 28 shows all swap positions that we hold for A/LM purposes. These positions are used to convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index. For example, fixed-rate debt is converted to a floating rate through a “receive fixed/pay variable” interest rate swap. The volume, maturity and mix of portfolio swaps change frequently as we adjust our broader A/LM objectives and the balance sheet positions to be hedged. For more information about how we use interest rate swaps to manage our risk profile, see Note 7 (“Derivatives and Hedging Activities”).

Figure 28. Portfolio Swaps by Interest Rate Risk Management Strategy

	June 30, 2012
						Weighted-Average								June 30, 2011
dollars in millions	Notional  Amount		Fair  Value			Maturity (Years)		Receive Rate			Pay Rate			Notional  Amount		Fair  Value
Receive fixed/pay variable — conventional A/LM (a)	$	11,715	$	58			2.1		.7	%		.3	%	$	3,215	$	13
Receive fixed/pay variable — conventional debt		3,840		465			4.6		4.0			.4			6,100		378
Pay fixed/receive variable — conventional debt		312		(30)			8.8		.5			2.4			398		5
Foreign currency — conventional debt		—		—			—		—			—			1,188		(152)
Total portfolio swaps	$	15,867	$	493	(b)		2.9		1.5	%		.3	%	$	10,901	$	244	(b)

(a) Portfolio swaps designated as A/LM are used to manage interest rate risk tied to both assets and liabilities.

(b) Excludes accrued interest of $62 million and $64 million for June 30, 2012 and 2011, respectively.

Derivatives not designated in hedge relationships

Our derivatives that are not designated in hedge relationships are described in Note 7 (“Derivatives and Hedging Activities”). We use a VAR simulation model to measure the potential adverse effect of changes in interest rates, foreign exchange rates, equity prices, and credit spreads on the fair value of this portfolio. Using two years of historical information, the model estimates the maximum potential one-day loss with a 95% confidence level. Statistically, this means that losses will exceed VAR, on average, five out of 100 trading days, or three to four times each quarter.

We manage exposure to market risk in accordance with VAR limits for trading activity that have been approved by our Market Risk Committee as part of our ERM Program. At June 30, 2012, the aggregate one-day trading limit set by the committee was $4.7 million. We are operating within these constraints. During the first six months of 2012, our aggregate daily average, minimum and maximum VAR amounts were $1 million, $.8 million and $1.3 million, respectively. During the same period one year ago, our aggregate daily average, minimum and maximum VAR amounts were $1.3 million, $1.0 million and $1.8 million, respectively.

In addition to comparing VAR exposure against limits on a daily basis, we monitor loss limits, use sensitivity measures and conduct stress tests. We report our market risk exposure to the Risk Committee of the Board of Directors.

Liquidity risk management

We define “liquidity” as the ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner and without adverse consequences. Liquidity management involves maintaining sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets and liabilities under both normal and adverse conditions.

115

Governance structure

We manage liquidity for all of our affiliates on an integrated basis. This approach considers the unique funding sources available to each entity, as well as each entity’s capacity to manage through adverse conditions. The approach also recognizes that adverse market conditions or other events that could negatively affect the availability or cost of liquidity will affect the access of all affiliates to sufficient wholesale funding.

Oversight of the liquidity risk management process is governed by the Risk Committee of the KeyCorp Board of Directors, the KeyBank Board of Directors, the ERM Committee and the ALCO. These groups regularly review various liquidity reports, including liquidity and funding summaries, liquidity trends, peer comparisons, variance analyses, liquidity projections, hypothetical funding erosion stress tests and goal tracking reports. The reviews generate a discussion of positions, trends and directives on liquidity risk and shape a number of the decisions that we make. When liquidity pressure is elevated, positions are monitored more closely and reporting is more intensive. We communicate with individuals within and outside of the company on a daily basis to discuss emerging issues. In addition, we use a variety of daily liquidity reports to monitor the flow of funds.

Factors affecting liquidity

Our liquidity could be adversely affected by both direct and indirect events. An example of a direct event would be a downgrade in our public credit ratings by a rating agency. Examples of indirect events (events unrelated to us) that could impair our access to liquidity would be an act of terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund or hedge fund. Similarly, market speculation, or rumors about us or the banking industry in general may adversely affect the cost and availability of normal funding sources.

During the first quarter of 2011, Moody’s (a credit rating agency that rates KeyCorp and KeyBank debt securities) indicated to KeyBank that certain escrow deposits associated with our mortgage servicing operations had to be moved to another financial institution that meets Moody’s minimum ratings threshold. As a result of this decision by Moody’s, on March 7, 2011, KeyBank transferred approximately $1.5 billion of these escrow deposit balances to an acceptably-rated institution, which resulted in an immaterial impairment of the related mortgage servicing assets. KeyBank had ample liquidity reserves to offset the loss of these deposits.

On March 8, 2012, Fitch (a credit rating agency that rates KeyCorp and KeyBank debt securities) downgraded KeyCorp’s Series A Preferred Stock to BB and KeyCorp’s trust preferred securities to BB+. These rating downgrades were a result of Fitch’s change in its rating criteria applicable to these type of securities issued by bank and BHCs. A variety of financial institutions’ securities ratings have been similarly affected by Fitch’s ratings criteria change.

Our credit ratings at June 30, 2012, are shown in Figure 29. We believe that these credit ratings, under normal conditions in the capital markets, will enable the parent company or KeyBank to issue fixed income securities to investors. Conditions in the credit markets have materially improved relative to the disruption experienced between the latter part of 2007 through 2009.

Figure 29. Credit Ratings

June 30, 2012	Short-Term Borrowings		Senior         Long-Term Debt		Subordinated Long-Term Debt		Capital         Securities		Series A          Preferred  Stock
KEYCORP (THE PARENT COMPANY)
Standard & Poor’s		A-2		BBB+		BBB		BBB-		BBB-
Moody’s		P-2		Baa1		Baa2		Baa3		Ba1
Fitch		F1		A-		BBB+		BB+		BB
DBRS		R-2(high)		BBB(high)		BBB		BBB		BB(low)
KEYBANK
Standard & Poor’s		A-2		A-		BBB+		N/A		N/A
Moody’s		P-2		A3		Baa1		N/A		N/A
Fitch		F1		A-		BBB+		N/A		N/A
DBRS		R-1(low)		A(low)		BBB(high)		N/A		N/A

Managing liquidity risk

We regularly monitor our funding sources and measure our capacity to obtain funds in a variety of scenarios in an effort to maintain an appropriate mix of available and affordable funding. In the normal course of business, we perform a monthly

116

hypothetical funding erosion stress test for both KeyCorp and KeyBank. In a “heightened monitoring mode,” we may conduct the hypothetical funding erosion stress tests more frequently, and use assumptions so the stress tests are more strenuous and reflect the changed market environment. Our testing incorporates estimates for loan and deposit lives based on our historical studies. Erosion stress tests analyze potential liquidity scenarios under various funding constraints and time periods. Ultimately, they determine the periodic effects that major direct and indirect events would have on our access to funding markets and our ability to fund our normal operations. To compensate for the effect of these assumed liquidity pressures, we consider alternative sources of liquidity and maturities over different time periods to project how funding needs would be managed.

At June 30, 2012, we have no secured borrowings outstanding. However, we retain the capacity to utilize secured borrowings as a contingent funding source.

We maintain a Contingency Funding Plan that outlines the process for addressing a liquidity crisis. The Plan provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities for managing liquidity through a problem period. As part of the Plan, we maintain a liquidity reserve through balances in our liquid asset portfolio. During a problem period, that reserve could be used as a source of funding to provide time to develop and execute a longer-term strategy. The liquid asset portfolio at June 30, 2012, totaled $10.4 billion, consisting of $7.3 billion of unpledged securities, $1.7 billion of securities available for secured funding at the Federal Home Loan Bank of Cincinnati and $1.4 billion of net balances of federal funds sold and balances in our Federal Reserve account. The liquid asset portfolio can fluctuate over time due to excess liquidity, heightened risk, or prefunding of expected outflows, such as debt maturities. Additionally, as of June 30, 2012, our unused borrowing capacity secured by loan collateral was $13.2 billion at the Federal Reserve Bank of Cleveland and $5.0 billion at the Federal Home Loan Bank of Cincinnati.

Long-term liquidity strategy

Our long-term liquidity strategy is to be predominantly funded by core deposits. However, wholesale funds may be used to sustain an adequate liquid asset portfolio, meet daily cash demands, and allow management flexibility to execute business initiatives. Key’s client-based relationship strategy provides for a strong core deposit base which, in conjunction with intermediate and long-term wholesale funds managed to a diversified maturity structure and investor base, supports our liquidity risk management strategy. We use the loan to deposit ratio as a metric to monitor these strategies. Our target loan to deposit ratio is 90-100% (at June 30, 2012 our loan to deposit ratio was 86%), which we calculate as total loans, loans held for sale, and nonsecuritized discontinued loans divided by domestic deposits.

Sources of liquidity

Our primary sources of liquidity include customer deposits, wholesale funding and liquid assets. If the cash flows needed to support operating and investing activities are not satisfied by deposit balances, we rely on wholesale funding or liquid assets. Conversely, excess cash generated by operating, investing and deposit-gathering activities may be used to repay outstanding debt or invest in liquid assets.

Liquidity programs

We have several liquidity programs, which are described in Note 15 (“Long-Term Debt”) on page 173 of our 2011 Annual Report on Form 10-K, that enable the parent company and KeyBank to raise funds in the public and private markets when the capital markets are functioning normally. The proceeds from most of these programs can be used for general corporate purposes, including acquisitions. Each of the programs is replaced or renewed as needed. There are no restrictive financial covenants in any of these programs.

Liquidity for KeyCorp

The parent company has sufficient liquidity when it can service its debt; support customary corporate operations and activities (including acquisitions) and occasional guarantees of subsidiaries’ obligations in transactions with third parties at a reasonable cost, in a timely manner and without adverse consequences; and pay dividends to shareholders.

Our primary tool for assessing parent company liquidity is the net cash position, which measures the ability to fund debt maturing in 24 months or less with existing liquid assets, and a cash coverage metric, which measures the ability to meet all projected obligations. Another key measure of parent company liquidity is the “liquidity gap,” which represents the difference between projected liquid assets and anticipated financial obligations over several time horizons. We generally rely upon the issuance of term debt to manage our liquidity position within targeted ranges. The parent company generally maintains cash and short-term investments in an amount sufficient to meet projected debt maturities over the next 24 months.

117

At June 30, 2012, the parent company held $2.3 billion in short-term investments, which we projected to be sufficient to meet our projected obligations, including the July 12, 2012 redemption of certain trust preferred securities as well as the repayment of our maturing debt obligations for the periods prescribed by our policies.

Typically, the parent company meets its liquidity requirements through regular dividends from KeyBank. Federal banking law limits the amount of capital distributions that a bank can make to its holding company without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several factors, including net profits (as defined by statute) for the two previous calendar years and for the current year, up to the date of dividend declaration. During the first six months of 2012, KeyBank paid the parent $900 million in dividends, while nonbank subsidiaries did not make any dividend payments to the parent. During the first six months of 2012, the parent did not make any capital infusions to KeyBank. Based upon existing regulatory guidance, KeyBank has capacity to pay $836 million in dividends to KeyCorp at June 30, 2012.

During the first quarter of 2011, the parent company completed a $625 million equity offering at a price of $8.85 per Common Share. In conjunction with the equity offering, the parent company issued $1 billion, 5.1% Senior Medium-Term Notes, Series I, during the first quarter of 2011. The proceeds from the sale of Common Shares and medium-term notes were used, along with other available funds, to repurchase the Series B Preferred Stock issued to the U.S. Treasury. The repurchase eliminated future quarterly dividends of $31 million and discount amortization (non-cash) of $4 million, or $140 million on an annual basis, related to these preferred shares.

Our liquidity position and recent activity

Over the past twelve months our liquid asset portfolio, which includes overnight and short-term investments, as well as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress scenarios, has decreased as a result of trust preferred securities redemptions and net customer loan and deposit flows. However, the liquid asset portfolio still continues to exceed the amount we estimate would be necessary to manage through a liquidity event. Liquidity stress scenarios include the loss of access to either unsecured or secured funding sources, as well as draws on unfunded commitments and significant deposit withdrawals.

From time to time, KeyCorp or its principal subsidiary, KeyBank, may seek to retire, repurchase or exchange outstanding debt, capital securities, preferred shares or Common Shares through cash purchase, privately negotiated transactions or other means. We have periodically repurchased Common Shares in the open market or through privately negotiated transactions under a repurchase program authorized by our Board of Directors. Additional information on KeyCorp’s Common Share repurchase program is included in Part II, Item 2. “Unregistered Sales of Equity Securities or Use of Proceeds” of this report. Such transactions depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, regulatory requirements and other factors. The amounts involved may be material, individually or collectively.

We generate cash flows from operations, and from investing and financing activities. We have approximately $250 million of cash and cash equivalents and short-term investments in international tax jurisdictions as of June 30, 2012. As we consider alternative long-term strategic and liquidity plans, opportunities to repatriate these amounts would result in approximately $29 million in taxes to be paid. If we were to cease operations in all international tax jurisdictions, the total amount of taxes to be paid would increase to approximately $47 million. Accordingly, we have included the total amount as a deferred tax liability at June 30, 2012.

The consolidated statements of cash flows summarize our sources and uses of cash by type of activity for the six month periods ended June 30, 2012, and 2011.

Credit risk management

Credit risk is the risk of loss to us arising from an obligor’s inability or failure to meet contractual payment or performance terms. Like other financial services institutions, we make loans, extend credit, purchase securities and enter into financial derivative contracts, all of which have related credit risk.

Credit policy, approval and evaluation

We manage credit risk exposure through a multifaceted program. The Credit Risk Committee approves both retail and commercial credit policies. These policies are communicated throughout the organization to foster a consistent approach to granting credit.

118

Our credit risk management team is responsible for credit approval, is independent of our lines of business, and consists of senior officers who have extensive experience in structuring and approving loans. Only credit risk management members are authorized to grant significant exceptions to credit policies. It is not unusual to make exceptions to established policies when mitigating circumstances dictate, but most major lending units have been assigned specific thresholds to keep exceptions at a manageable level.

Loan grades are assigned at the time of origination, verified by the credit risk management team and periodically reevaluated thereafter. Most extensions of credit are subject to loan grading or scoring. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk within the context of the general economic outlook. Types of exposure, transaction structure and collateral, including credit risk mitigants, affect the expected recovery assessment.

Our credit risk management team uses risk models to evaluate consumer loans. These models, known as scorecards, forecast the probability of serious delinquency and default for an applicant. The scorecards are embedded in the application processing system, which allows for real-time scoring and automated decisions for many of our products. We periodically validate the loan grading and scoring processes.

We maintain an active concentration management program to encourage diversification in our credit portfolios. For individual obligors, we employ a sliding scale of exposure, known as hold limits, which is dictated by the strength of the borrower. Our legal lending limit is approximately $2 billion for any individual borrower. However, internal hold limits generally restrict the largest exposures to less than 20% of that amount. As of June 30, 2012, we had six client relationships with loan commitments net of credit default swaps of more than $200 million. The average amount outstanding on these six individual net obligor commitments was $63 million at June 30, 2012. In general, our philosophy is to maintain a diverse portfolio with regard to credit exposures.

We actively manage the overall loan portfolio in a manner consistent with asset quality objectives, including the use of credit derivatives — primarily credit default swaps — to mitigate credit risk. Credit default swaps enable us to transfer a portion of the credit risk associated with a particular extension of credit to a third party. At June 30, 2012, we used credit default swaps with a notional amount of $858 million to manage the credit risk associated with specific commercial lending obligations. We also sell credit derivatives — primarily index credit default swaps — to diversify and manage portfolio concentration and correlation risks. At June 30, 2012, the notional amount of credit default swaps sold by us for the purpose of diversifying our credit exposure was $488 million. Occasionally, we have provided credit protection to other lenders through the sale of credit default swaps. These transactions with other lenders generated fee income.

Credit default swaps are recorded on the balance sheet at fair value. Related gains or losses, as well as the premium paid or received for credit protection, are included in the trading income component of noninterest income.

We also manage the loan portfolio using portfolio swaps and bulk purchases and sales. Our overarching goal is to manage the loan portfolio within a specified range of asset quality.

Allowance for loan and lease losses

At June 30, 2012, the ALLL was $888 million, or 1.79% of loans, compared to $1.2 billion, or 2.57%, at June 30, 2011. The allowance includes $48 million that was specifically allocated for impaired loans of $411 million at June 30, 2012, compared to $46 million that was allocated for impaired loans of $488 million one year ago. For more information about impaired loans, see Note 4 (“Asset Quality”). At June 30, 2012, the allowance for loan and lease losses was 135.16% of nonperforming loans, compared to 146.08% at June 30, 2011.

Selected asset quality statistics for each of the past five years are presented in Figure 30. The factors that drive these statistics are discussed in the remainder of this section.

119

Figure 30. Selected Asset Quality Statistics from Continuing Operations

	2012						2011
dollars in millions	Second			First			Fourth			Third			Second
Net loan charge-offs	$	77		$	101		$	105		$	109		$	134
Net loan charge-offs to average loans		.63	%		.82	%		.86	%		.90	%		1.11	%
Allowance for loan and lease losses to annualized net loan charge-offs		286.74			232.39			241.01			261.54			228.85
Allowance for loan and lease losses	$	888		$	944		$	1,004		$	1,131		$	1,230
Allowance for credit losses (a)		939			989			1,049			1,187			1,287
Allowance for loan and lease losses to period-end loans		1.79	%		1.92	%		2.03	%		2.35	%		2.57	%
Allowance for credit losses to period-end loans		1.89			2.01			2.12			2.46			2.69
Allowance for loan and lease losses to nonperforming loans		135.16			141.74			138.10			143.53			146.08
Allowance for credit losses to nonperforming loans		142.92			148.50			144.29			150.63			152.85
Nonperforming loans at period end	$	657		$	666		$	727		$	788		$	842
Nonperforming assets at period end		751			767			859			914			950
Nonperforming loans to period-end portfolio loans		1.32	%		1.35	%		1.47	%		1.64	%		1.76	%
Nonperforming assets to period-end portfolio loans plus
OREO and other nonperforming assets		1.51			1.55			1.73			1.89			1.98

(a) Includes the allowance for loan and lease losses plus the liability for credit losses on lending-related commitments.

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology used is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” on page 117 of our 2011 Annual Report on Form 10-K. Briefly, we apply expected loss rates to existing loans with similar risk characteristics and exercise judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets.

For all commercial and consumer TDRs, regardless of size, as well as impaired commercial loans with an outstanding balance greater than $2.5 million, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan if deemed appropriate. We estimate the extent of impairment by comparing the recorded investment of the loan with the estimated present value of its expected cash flows, the fair value of its underlying collateral or the loan’s observable market price. A specific allowance also may be assigned — even when sources of repayment appear sufficient — if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. The ALLL at June 30, 2012, represents our best estimate of the probable credit losses inherent in the loan portfolio at that date.

As shown in Figure 31, our ALLL decreased by $342 million, or 28%, during the past twelve months. This contraction was associated with the improvement in credit quality of the loan portfolio, which has trended more favorably over the past twelve months. Asset quality is improving and has resulted in favorable risk rating migration and a reduction in our general allowance. Our delinquency trends continue to decline while our roll rates keep improving. We attribute this improvement to a more moderate level of economic activity, more favorable conditions in the capital markets, improvement in client income statements and continued run off in our exit loan portfolio. Our liability for credit losses on lending-related commitments decreased by $6 million to $51 million at June 30, 2012, compared to the same period one year ago. When combined with our allowance for loan and lease losses, our total allowance for credit losses represented 1.89% of loans at the end of the second quarter of 2012 compared to 2.69% at the end of the second quarter of 2011. We expect the allowance to decrease as a percent of total loans during the remainder of 2012 as a result of the continued improvement in credit quality that is anticipated.

120

Figure 31. Allocation of the Allowance for Loan and Lease Losses
	June 30, 2012								December 31, 2011								June 30, 2011
dollars in millions	Amount		Percent of Allowance to Total Allowance			Percent of Loan Type to Total Loans			Amount		Percent of Allowance to Total Allowance			Percent of Loan Type to Total Loans			Amount		Percent of Allowance to Total Allowance			Percent of Loan Type to Total Loans
Commercial, financial and agricultural	$	304		34.2	%		41.1	%	$	334		33.2	%		39.1	%	$	395		32.1	%		35.3	%
Commercial real estate:
Commercial mortgage		250		28.1			14.9			272		27.1			16.2			343		27.9			16.9
Construction		55		6.2			2.4			63		6.3			2.7			106		8.6			3.4
Total commercial real estate loans		305		34.3			17.3			335		33.4			18.9			449		36.5			20.3
Commercial lease financing		68		7.7			11.4			78		7.8			12.2			107		8.7			12.8
Total commercial loans		677		76.2			69.8			747		74.4			70.2			951		77.3			68.4
Real estate — residential mortgage		26		2.9			4.1			37		3.7			3.9			41		3.4			3.8
Home equity:
Community Banking		80		9.0			19.3			103		10.2			18.6			99		8.0			19.7
Other		24		2.7			1.0			29		2.9			1.1			37		3.0			1.2
Total home equity loans		104		11.7			20.3			132		13.1			19.7			136		11.0			20.9
Consumer other — Community Banking		34		3.9			2.5			41		4.1			2.4			47		3.8			2.4
Consumer other:
Marine		44		5.0			3.1			46		4.6			3.5			52		4.3			4.2
Other		3		.3			.2			1		.1			.3			3		.2			.3
Total consumer other		47		5.3			3.3			47		4.7			3.8			55		4.5			4.5
Total consumer loans		211		23.8			30.2			257		25.6			29.8			279		22.7			31.6
Total loans (a)	$	888		100.0	%		100.0	%	$	1,004		100.0	%		100.0	%	$	1,230		100.0	%		100.0	%

(a) Excludes allocations of the allowance for loan and lease losses in the amount of $79 million, $104 million, and $109 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively, related to the discontinued operations of the education lending business.

Our provision for loan and lease losses was a provision of $21 million for the second quarter of 2012, compared to a credit of $8 million for the year-ago quarter. Our net loan charge-offs for the second quarter of 2012 exceeded the provision for loan and lease losses by $56 million. The increase in our provision is due to the growth in our loans from continuing operations over the past twelve months, partially offset by continued improvement in credit quality experienced in most of our loan portfolios. Additionally, we continue to work our exit loans, and reduce exposure in our higher-risk businesses including the residential properties portion of our construction loan portfolio, Marine/RV financing, and other selected leasing portfolios through the sale of certain loans, payments from borrowers or net charge-offs.

121

Net loan charge-offs

Net loan charge-offs for the second quarter of 2012 totaled $77 million, or .63% of average loans from continuing operations. These results compare to net loan charge-offs of $134 million, or 1.11%, for the same period last year. Figure 32 shows the trend in our net loan charge-offs by loan type, while the composition of loan charge-offs and recoveries by type of loan is presented in Figure 33.

Compared to the first quarter of 2012, net loan charge-offs declined $24 million primarily due to stronger recoveries in the commercial loan portfolio. As shown in Figure 35, our exit loan portfolio accounted for $19 million, or 25%, of total net loan charge-offs for the second quarter of 2012. Net charge-offs in the exit loan portfolio decreased by $7 million from the first quarter of 2012 due to decreases in the commercial and consumer loan portfolios.

Figure 32. Net Loan Charge-offs from Continuing Operations

	2012						2011
dollars in millions	Second			First			Fourth			Third			Second
Commercial, financial and agricultural	$	3		$	15		$	28		$	23		$	36
Real estate — Commercial mortgage		9			21			23			25			12
Real estate — Construction (a)		4			10			(6)			8			24
Commercial lease financing		10			—			—			2			4
Total commercial loans		26			46			45			58			76
Home equity — Key Community Bank		21			23			20			18			27
Home equity — Other		7			7			9			8			10
Marine		7			10			14			11			4
Other		16			15			17			14			17
Total consumer loans		51			55			60			51			58
Total net loan charge-offs	$	77		$	101		$	105		$	109		$	134
Net loan charge-offs to average loans		.63	%		.82	%		.86	%		.90	%		1.11	%
Net loan charge-offs from discontinued operations — education lending business	$	12		$	19		$	25		$	31		$	32

(a) Credit amount indicates recoveries exceeded charge-offs.

122

Figure 33. Summary of Loan and Lease Loss Experience from Continuing Operations
	Three months ended June 30,						Six months ended June 30,
dollars in millions	2012			2011			2012			2011
Average loans outstanding	$	49,446		$	48,454		$	49,438		$	48,881
Allowance for loan and lease losses at beginning of period	$	944		$	1,372		$	1,004		$	1,604
Loans charged off:
Commercial, financial and agricultural		23			51			49			93
Real estate — commercial mortgage		23			16			46			62
Real estate — construction		5			27			16			62
Total commercial real estate loans (a)		28			43			62			124
Commercial lease financing		16			9			20			26
Total commercial loans		67			103			131			243
Real estate — residential mortgage		7			7			13			17
Home equity:
Key Community Bank		23			28			48			53
Other		9			11			17			26
Total home equity loans		32			39			65			79
Consumer other — Key Community Bank		10			11			20			23
Consumer other:
Marine		13			15			30			42
Other		2			2			4			5
Total consumer other		15			17			34			47
Total consumer loans		64			74			132			166
Total loans charged off		131			177			263			409
Recoveries:
Commercial, financial and agricultural		20			15			31			25
Real estate — commercial mortgage		14			4			16			7
Real estate — construction		1			3			2			8
Total commercial real estate loans (a)		15			7			18			15
Commercial lease financing		6			5			10			11
Total commercial loans		41			27			59			51
Real estate — residential mortgage		1			1			2			2
Home equity:
Key Community Bank		2			1			4			2
Other		2			1			3			2
Total home equity loans		4			2			7			4
Consumer other — Key Community Bank		2			2			3			4
Consumer other:
Marine		6			11			13			19
Other		—			—			1			2
Total consumer other		6			11			14			21
Total consumer loans		13			16			26			31
Total recoveries		54			43			85			82
Net loans charged off		(77)			(134)			(178)			(327)
Provision (credit) for loan and lease losses		21			(8)			63			(48)
Foreign currency translation adjustment		—			—			(1)			1
Allowance for loan and lease losses at end of period	$	888		$	1,230		$	888		$	1,230
Liability for credit losses on lending-related commitments at beginning of period	$	45		$	69		$	45		$	73
Provision (credit) for losses on lending-related commitments		6			(12)			6			(16)
Liability for credit losses on lending-related commitments at end of period (b)	$	51		$	57		$	51		$	57
Total allowance for credit losses at end of period	$	939		$	1,287		$	939		$	1,287
Net loan charge-offs to average loans		.63	%		1.11	%		.72	%		1.35	%
Allowance for loan and lease losses to annualized net loan charge-offs		286.74			228.85			248.08			186.53
Allowance for loan and lease losses to period-end loans		1.79			2.57			1.79			2.57
Allowance for credit losses to period-end loans		1.89			2.69			1.89			2.69
Allowance for loan and lease losses to nonperforming loans		135.16			146.08			135.16			146.08
Allowance for credit losses to nonperforming loans		142.92			152.85			142.92			152.85
Discontinued operations — education lending business:
Loans charged off	$	16		$	35		$	39		$	73
Recoveries		4			3			8			6
Net loan charge-offs	$	(12)		$	(32)		$	(31)		$	(67)

(a) See Figure 17 and the accompanying discussion in the “Loans and loans held for sale” section for more information related to our commercial real estate portfolio.

(b) Included in “accrued expense and other liabilities” on the balance sheet.

123

Nonperforming assets

Figure 34 shows the composition of our nonperforming assets. These assets totaled $751 million at June 30, 2012, and represented 1.51% of portfolio loans, OREO and other nonperforming assets, compared to $859 million, or 1.73%, at December 31, 2011, and $950 million, or 1.98%, at June 30, 2011. See Note 1 under the headings “Nonperforming Loans,” “Impaired Loans,” and “Allowance for Loan and Lease Losses” beginning on page 117 of our 2011 Annual Report on Form 10-K for a summary of our nonaccrual and charge-off policies.

Figure 34. Summary of Nonperforming Assets and Past Due Loans from Continuing Operations

	June 30,			March 31,			December 31,			September 30,			June 30,
dollars in millions	2012			2012			2011			2011			2011
Commercial, financial and agricultural	$	141		$	168		$	188		$	188		$	213
Real estate — commercial mortgage		172			175			218			237			230
Real estate — construction		68			66			54			93			131
Total commercial real estate loans		240			241			272			330			361
Commercial lease financing		18			22			27			31			41
Total commercial loans		399			431			487			549			615
Real estate — residential mortgage		78			82			87			88			79
Home equity:
Key Community Bank		141			109			108			102			101
Other		17			12			12			12			11
Total home equity loans		158			121			120			114			112
Consumer other — Key Community Bank		2			1			1			4			3
Consumer other:
Marine		19			30			31			32			32
Other		1			1			1			1			1
Total consumer other		20			31			32			33			33
Total consumer loans		258			235			240			239			227
Total nonperforming loans		657			666			727			788			842
Nonperforming loans held for sale		38			24			46			42			42
OREO		28			61			65			63			52
Other nonperforming assets		28			16			21			21			14
Total nonperforming assets	$	751		$	767		$	859		$	914		$	950
Accruing loans past due 90 days or more	$	131		$	169		$	164		$	118		$	118
Accruing loans past due 30 through 89 days		362			420			441			478			465
Restructured loans — accruing and nonaccruing (a)		274			293			276			277			252
Restructured loans included in nonperforming loans (a)		163			184			191			178			144
Nonperforming assets from discontinued operations — education lending business		18			19			23			22			21
Nonperforming loans to period-end portfolio loans		1.32	%		1.35	%		1.47	%		1.64	%		1.76	%
Nonperforming assets to period-end portfolio loans plus OREO and other nonperforming assets		1.51			1.55			1.73			1.89			1.98

(a) Restructured loans (i.e., TDRs) are those for which Key, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. These concessions are made to improve the collectability of the loan and generally take the form of a reduction of the interest rate, extension of the maturity date or reduction in the principal balance.

As shown in Figure 34, nonperforming assets decreased during the second quarter of 2012, which represents the eleventh consecutive quarterly decline. Most of the reduction came from nonperforming loans held for sale and OREO sales in the Real Estate Capital line of business. As shown in Figure 35, our exit loan portfolio accounted for $75 million, or 10%, of our total nonperforming assets at June 30, 2012, compared to $103 million, or 13%, at March 31, 2012.

At June 30, 2012, the carrying amount of our commercial nonperforming loans outstanding represented 59% of their contractual amount owed, and total nonperforming loans outstanding represented 70% of their contractual amount owed and nonperforming assets in total were carried at 64% of their original contractual amount.

At June 30, 2012, our 20 largest nonperforming loans totaled $220 million, representing 33% of total nonperforming loans.

Figure 35 shows the composition of our exit loan portfolio at June 30, 2012 and March 31, 2012, the net charge-offs recorded on this portfolio for the second quarter of 2012 and the first quarter of 2012, and the nonperforming status of these loans at June 30, 2012 and March 31, 2012. The exit loan portfolio represented 7% of total loans and loans held for sale at June 30, 2012. Additional information about loan sales is included in this report under the heading “Loans held for sale” and “Loan sales.”

124

Figure 35. Exit Loan Portfolio from Continuing Operations

	Balance          Outstanding				Change 6-30-12 vs.		Net Loan         Charge-offs					Balance on         Nonperforming         Status
in millions		6-30-12		3-31-12		3-31-12		2Q12		1Q12	(c)		6-30-12		3-31-12
Residential properties — homebuilder	$	33	$	34	$	(1)		—	$	2		$	14	$	17
Marine and RV floor plan		39		59		(20)	$	2		7			15		32
Commercial lease financing (a)		1,237		1,534		(297)		1		(1)			9		11
Total commercial loans		1,309		1,627		(318)		3		8			38		60
Home equity — Other		479		507		(28)		7		7			17		12
Marine		1,542		1,654		(112)		7		10			19		31
RV and other consumer		101		111		(10)		2		1			1		—
Total consumer loans		2,122		2,272		(150)		16		18			37		43
Total exit loans in loan portfolio	$	3,431	$	3,899	$	(468)	$	19	$	26		$	75	$	103
Discontinued operations — education lending business (not included in exit loans above)(b)	$	5,483	$	5,715	$	(232)	$	12	$	19		$	18	$	19

(a) Includes (1) the business aviation, commercial vehicle, office products, construction and industrial leases; (2) Canadian lease financing portfolios; and (3) all remaining balances related to LILO, SILO, service contract leases and qualified technological equipment leases.

(b) Includes loans in Key’s education loan securitization trusts.

(c) Credit amounts indicate recoveries exceeded charge-offs.

Figure 36 shows credit exposure by industry classification in the largest sector of our loan portfolio, “commercial, financial and agricultural loans.” Since December 31, 2011, total commitments and loans outstanding in this sector have increased by $1.3 billion and $1 billion, respectively, and have increased by $4.2 billion and $3.5 billion, respectively, from June 30, 2011.

Figure 36. Commercial, Financial and Agricultural Loans

							Nonperforming Loans
June 30, 2012	Total			Loans					Percent of Loans
dollars in millions		Commitments	(a)		Outstanding			Amount		Outstanding
Industry classification:
Services	$	9,401		$	4,762	$		23		.5	%
Manufacturing		8,783			3,749			38		1.0
Public utilities		5,111			1,135			—		—
Financial services		4,183			2,276			5		.2
Wholesale trade		3,380			1,648			10		.6
Retail trade		1,868			755			2		.3
Mining		1,704			670			5		.7
Dealer floor plan		1,383			1,002			10		1.0
Transportation		1,171			786			10		1.3
Property management		1,166			624			10		1.6
Building contractors		1,094			425			17		4.0
Agriculture/forestry/fishing		993			543			9		1.7
Insurance		531			96			—		—
Public administration		495			289			—		—
Communications		324			191			—		—
Individuals		4			2			—		—
Other		1,544			1,433			2		.1
Total	$	43,135		$	20,386	$		141		.7	%

(a) Total commitments include unfunded loan commitments, unfunded letters of credit (net of amounts conveyed to others) and loans outstanding.

The types of activity that caused the change in our nonperforming loans during each of the last five quarters are summarized in Figure 37. Loans placed on non accrual declined $60 million during the second quarter of 2012 as compared to the second quarter of 2011, as market liquidity continued to improve.

125

Figure 37. Summary of Changes in Nonperforming Loans from Continuing Operations

	2012					2011
in millions	Second		First			Fourth		Third		Second
Balance at beginning of period	$	666	$	727	$		788	$	842	$	885
Loans placed on nonaccrual status		350		214			230		292		410
Charge-offs		(131)		(132)			(149)		(157)		(177)
Loans sold		(49)		(27)			(28)		(16)		(11)
Payments		(110)		(65)			(70)		(125)		(156)
Transfers to OREO		(6)		(15)			(12)		(11)		(6)
Transfers to nonperforming loans held for sale		(16)		—			(19)		(24)		(15)
Transfers to other nonperforming assets		(14)		—			(4)		(3)		—
Loans returned to accrual status		(33)		(36)			(9)		(10)		(88)
Balance at end of period	$	657	$	666	$		727	$	788	$	842
The types of activity that caused the change in our nonperforming loans held for sale during each of the last five quarters are summarized in Figure 38.
Figure 38. Summary of Changes in Nonperforming Loans Held for Sale from Continuing Operations
	2012					2011
in millions	Second		First			Fourth		Third		Second
Balance at beginning of period	$	24	$	46	$		42	$	42	$	86
Transfers in		16		—			19		24		15
Net advances / (payments)		—		(1)			(3)		(5)		(13)
Loans sold		(1)		(1)			(11)		(5)		(37)
Transfers to OREO		—		—			(1)		(19)		(5)
Valuation adjustments		(1)		(1)			—		(1)		(4)
Loans returned to accrual status / other		—		(19)			—		6		—
Balance at end of period	$	38	$	24	$		46	$	42	$	42
The types of activity that contributed to the change in our OREO during each of the last five quarters are summarized in Figure 39.
Figure 39. Summary of Changes in Other Real Estate Owned, Net of Allowance, from Continuing Operations
	2012					2011
in millions	Second		First			Fourth		Third		Second
Balance at beginning of period	$	61	$	65	$		63	$	52	$	97
Properties acquired — nonperforming loans		6		15			13		30		11
Valuation adjustments		(7)		(7)			(4)		(3)		(7)
Properties sold		(32)		(12)			(7)		(16)		(49)
Balance at end of period	$	28	$	61	$		65	$	63	$	52

126

Operational risk management

Like all businesses, we are subject to operational risk, which is the risk of loss resulting from human error or malfeasance, inadequate or failed internal processes and systems, and external events. These events include, among other things, threats to our cybersecurity, as we are reliant upon information systems and the internet to conduct our business activities.

Operational risk also encompasses compliance risk, which is the risk of loss from violations of, or noncompliance with, laws, rules and regulations, prescribed practices, and ethical standards. Due to the passage of the Dodd-Frank Act, large financial companies like Key will be subject to heightened prudential standards and regulation due to their systemic importance. This heightened level of regulation will increase our operational risk. We have created work teams to respond to and analyze the regulatory requirements that will be promulgated as a result of the enactment of the Dodd-Frank Act. Resulting operational risk losses and/or additional regulatory compliance costs could take the form of explicit charges, increased operational costs, harm to our reputation or foregone opportunities.

We seek to mitigate operational risk through identification and measurement of risk, alignment of business strategies with risk appetite and tolerance, and a system of internal controls and reporting. We continuously strive to strengthen our system of internal controls to improve the oversight of our operational risk and to ensure compliance with laws, rules and regulations. For example, an operational event database tracks the amounts and sources of operational risk and losses. This tracking mechanism helps to identify weaknesses and to highlight the need to take corrective action. We also rely upon software programs designed to assist in the assessment of operational risk and monitoring our control processes. This technology has enhanced the reporting of the effectiveness of our controls to senior management and the Board of Directors.

Primary responsibility for managing and monitoring internal control mechanisms lies with the managers of our various lines of business. Our Operational Risk Management function manages the Operational Risk Management Program which provides the framework for the structure, governance, roles and responsibilities as well as the content to manage operational risk for Key. The Operational Risk Committee, a senior management committee, oversees our level of operational risk, and directs and supports our operational infrastructure and related activities. This committee and the Operational Risk Management function are an integral part of our ERM Program. Our Risk Review function periodically assesses the overall effectiveness of our Operational Risk Management Program and our system of internal controls. Risk Review reports the results of reviews on internal controls and systems to senior management and the Audit Committee, and independently supports the Audit Committee’s oversight of these controls.

Critical Accounting Policies and Estimates

Our business is dynamic and complex. Consequently, we must exercise judgment in choosing and applying accounting policies and methodologies. These choices are critical: not only are they necessary to comply with GAAP, they also reflect our view of the appropriate way to record and report our overall financial performance. All accounting policies are important, and all policies described in Note 1 (“Summary of Significant Accounting Policies”) beginning on page 113 of our 2011 Annual Report on Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance.

In our opinion, some accounting policies are more likely than others to have a critical effect on our financial results and to expose those results to potentially greater volatility. These policies apply to areas of relatively greater business importance, or require us to exercise judgment and to make assumptions and estimates that affect amounts reported in the financial statements. Because these assumptions and estimates are based on current circumstances, they may prove to be inaccurate, or we may find it necessary to change them.

We rely heavily on the use of judgment, assumptions and estimates to make a number of core decisions, including accounting for the allowance for loan and lease losses; contingent liabilities, guarantees and income taxes; derivatives and related hedging activities; and assets and liabilities that involve valuation methodologies. In addition, we may employ outside valuation experts to assist us in determining fair values of certain assets and liabilities. A brief discussion of each of these areas appears on pages 122 through 124 of our 2011 Annual Report on Form 10-K.

At June 30, 2012, $16.0 billion, or 18%, of our total assets were measured at fair value on a recurring basis. Approximately 95% of these assets, before netting adjustments, were classified as Level 1 or Level 2 within the fair value hierarchy. At June 30, 2012, $1.6 billion, or 2%, of our total liabilities were measured at fair value on a recurring basis. Substantially all of these liabilities were classified as Level 1 or Level 2.

127

During the second quarter of 2012, $138 million, or .2%, of our total assets were measured at fair value on a nonrecurring basis. Approximately 12% of these assets were classified as Level 1 or Level 2. At June 30, 2012, there were no liabilities measured at fair value on a nonrecurring basis.

In addition, the education lending securitization trusts assets and liabilities were included on the balance sheet at June 30, 2012 at fair value, in the amount of $2.6 billion and $2.4 billion, respectively, as a result of their consolidation on January 1, 2010. During the third quarter of 2011, we determined that the $45 million cumulative effect adjustment made related to the consolidation of these trusts on January 1, 2010, was incorrect. Further information regarding this error and its correction is provided in Note 11 (“Acquisition and Discontinued Operations”).

During the first six months of 2012, we did not significantly alter the manner in which we applied our critical accounting policies or developed related assumptions and estimates.

128

European Sovereign Debt Exposures

Our total European sovereign and non-sovereign debt exposure is presented in Figure 40.

Figure 40. European Sovereign and Non-sovereign Debt Exposures

June 30, 2012 in millions	Short-and Long- Term  Commercial Total		(a)	Foreign Exchange and Derivatives with Collateral		(b)	Net Exposure
France:
Sovereigns		—			—			—
Non-sovereign financial institutions		—		$	(11)		$	(11)
Non-sovereign non-financial institutions	$	68			—			68
Total		68			(11)			57
Germany:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			1			1
Non-sovereign non-financial institutions		340			—			340
Total		340			1			341
Greece:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		—			—			—
Total		—			—			—
Iceland:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		—			—			—
Total		—			—			—
Ireland:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		9			—			9
Total		9			—			9
Italy:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		60			—			60
Total		60			—			60
Netherlands:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			8			8
Non-sovereign non-financial institutions		280			—			280
Total		280			8			288
Portugal:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		—			—			—
Total		—			—			—
Spain:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		36			—			36
Total		36			—			36
Switzerland:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			1			1
Non-sovereign non-financial institutions		87			—			87
Total		87			1			88
United Kingdom:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			1			1
Non-sovereign non-financial institutions		191			—			191
Total		191			1			192
Other Europe: (c)
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		70			—			70
Total		70			—			70
Total Europe:
Sovereigns		—			—			—
Non-sovereign financial institutions		—			—			—
Non-sovereign non-financial institutions		1,141			—			1,141
Total	$	1,141			—		$	1,141

(a) This column represents our outstanding leases.

(b) These represent contracts to hedge our balance sheet asset and liability needs, and to accommodate our clients’ trading and/or hedging needs. Our derivative mark-to-market exposures are calculated and reported on a daily basis. These exposures are largely covered by cash or highly marketable securities collateral with daily collateral calls.

(c) Other Europe consists of the following countries: Austria, Belarus, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Finland, Hungary, Lithuania, Luxembourg, Malta, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sweden, and Ukraine. Approximately 73% of our exposure in other Europe is in Belgium, Finland, and Sweden.

Our credit risk exposure is largely concentrated in developed countries with emerging market exposure essentially limited to commercial facilities. At-risk exposures in the rest of the world, which are actively monitored by management, total less than $1 million.

129

Item 3. Quantitative and Qualitative Disclosure about Market Risk

The information presented in the “Market risk management” section of the Management’s Discussion & Analysis of Financial Condition & Results of Operations is incorporated herein by reference.

Item 4. Controls and Procedures

As of the end of the period covered by this report, KeyCorp carried out an evaluation, under the supervision and with the participation of KeyCorp’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of KeyCorp’s disclosure controls and procedures. Based upon that evaluation, KeyCorp’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective, in all material respects, as of the end of the period covered by this report, in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. No changes were made to KeyCorp’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, KeyCorp’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As of June 30, 2012, KeyCorp and its subsidiaries and its employees, directors and officers are defendants or putative defendants in a variety of legal proceedings, in the form of regulatory/government investigations as well as private, civil litigation and arbitration proceedings. The private, civil litigations range from individual actions involving a single plaintiff to a class action lawsuit. Investigations involve both formal and informal proceedings, by both government agencies and self-regulatory bodies. These legal proceedings are at varying stages of adjudication, arbitration or investigation and involve a variety of claims (including common law tort, contract claims, securities, ERISA, and consumer protection claims). At times, these legal proceedings present novel claims or legal theories.

On at least a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. For those matters where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we have not accrued legal reserves, consistent with applicable accounting guidance. Because the outcome of legal proceedings is inherently uncertain, based on information currently available to us, advice of counsel, and the availability of insurance coverage and indemnification from third parties, we believe that our established reserves are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operation for a particular period, depending upon the size of the loss or our income for that particular period.

The information presented in the Legal Proceedings section of Note 12 (“Contingent Liabilities and Guarantees”) of the Notes to our Consolidated Financial Statements is incorporated herein by reference.

Item 1A.  Risk Factors

For a discussion of certain risk factors affecting us, see Part 1, Item 1A: Risk Factors, on pages 13-29 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and our disclosure regarding the Forward-looking Statements in this Form 10-Q.

130

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

From time to time, KeyCorp or its principal subsidiary, KeyBank, may seek to retire, repurchase or exchange outstanding debt of KeyCorp or KeyBank, and capital securities or preferred stock of KeyCorp through cash purchase, privately negotiated transactions or otherwise. Such transactions, if any, depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions and other factors. The amounts involved may be material.

In the past, we have periodically repurchased Common Shares in the open market or through privately negotiated transactions under a repurchase program authorized by our Board of Directors. At its regular March 2012 meeting, our Board authorized the repurchase in the open market or through privately negotiated transactions of up to $312 million of our Common Shares. This authorization was expressly in addition to any amounts remaining under preexisting authority. Pursuant to our 2012 capital plan submitted to the Federal Reserve as part of CCAR and not objected to by the Federal Reserve, KeyCorp had authority to repurchase up to $344 million of our Common Shares, including $312 million for general repurchase and up to $32 million for repurchase in connection with employee elections under our compensation and benefit programs.

During the second quarter of the 2012, we completed $82 million of Common Share repurchases from shareholders on the open market, and $3 million of Common Share repurchases from employees in connection with employee elections under our compensation and benefit programs, pursuant to this plan. Following completion of these repurchases, we have remaining authority to repurchase up to $259 million of our Common Shares, including up to $230 million for general repurchase and up to $29 million for repurchase in connection with employee elections under our compensation and benefit programs. Our existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.

The following table summarizes Key’s repurchases of its Common Shares for the three months ended June 30, 2012.

Calendar month	Total number of shares repurchased		(a)	Average price paid per share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum number of shares that may yet be purchased under the plans or programs		(b)
April 1 - 30		2,893,680		$	8.03		2,494,580		50,228,405
May 1 - 31		7,988,764			7.76		7,973,408		44,588,723
June 1 - 30		985			7.96		—		43,637,833
Total		10,883,429		$	7.83		10,467,988

(a) Includes Common Shares deemed surrendered by employees in connection with Key’s stock compensation and benefit plans to satisfy tax obligations, and repurchases in the open market.

(b) Calculated using the remaining general repurchase amount divided by the closing price of KeyCorp Common Shares on April 30, 2012 at $8.04, May 31, 2012 at $7.50, and June 29, 2012 at $7.74, plus our previously existing program shares available of 13,922,496.

Item 6. Exhibits

15	Acknowledgment of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from KeyCorp’s Form 10-Q Report for the quarterly period ended June 30, 2012, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

Information Available on Website

KeyCorp makes available free of charge on its website, www.key.com, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports as soon as reasonably practicable after KeyCorp electronically files such material with, or furnishes it to, the SEC.

131

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KEYCORP
	(Registrant)
Date:  August 2, 2012	/s/ Robert L. Morris
	By:	Robert L. Morris
	Chief Accounting Officer

132

EX-15

Exhibit 15

ACKNOWLEDGMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

August 2, 2012

Shareholders and Board of Directors

KeyCorp

We are aware of the incorporation by reference in the following KeyCorp (“Key”) Registration Statements (including all amendments thereto) of our review report, dated August 2, 2012, relating to the unaudited consolidated interim financial statements of Key, included in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012:

Form S-3 No. 333-55959
Form S-3 No. 333-59175
Form S-3 No. 333-64601
Form S-3 No. 333-76619
Form S-3 No. 333-88934
Form S-3 No. 333-121553	(Amendment No. 1)
Form S-3 No. 333-124023	(Amendment No. 1)
Form S-3 No. 333-134937	(Post-Effective Amendment No. 3)
Form S-3 No. 333-151608
Form S-3 No. 333-174865
Form S-4 No. 333-146456
Form S-4 No. 333-159490	(Amendment No. 3)
Form S-8 No. 333-49609
Form S-8 No. 333-49633
Form S-8 No. 333-70669
Form S-8 No. 333-70703
Form S-8 No. 333-70775
Form S-8 No. 333-72189
Form S-8 No. 333-92881
Form S-8 No. 333-45320
Form S-8 No. 333-45322
Form S-8 No. 333-99493
Form S-8 No. 333-107074
Form S-8 No. 333-107075
Form S-8 No. 333-107076
Form S-8 No. 333-109273
Form S-8 No. 333-112225
Form S-8 No. 333-116120
Form S-8 No. 333-167093

/s/ Ernst & Young

Cleveland, Ohio

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Beth E. Mooney, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KeyCorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2012	/s/ Beth E. Mooney
	Beth E. Mooney
	Chairman, Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Jeffrey B. Weeden, certify that:

1. I have reviewed this quarterly report on Form 10-Q of KeyCorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2012	/s/ Jeffrey B. Weeden
	Jeffrey B. Weeden
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2012	/s/ Beth E. Mooney
	Beth E. Mooney
	Chairman, Chief Executive Officer and President

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, the undersigned officer of KeyCorp (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2012	/s/ Jeffrey B. Weeden
	Jeffrey B. Weeden
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Employee Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Employee Benefits [Abstract]

Net pension cost for all funded and unfunded plans

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Interest cost on PBO	$	12	$	14	$	24	$	28
Expected return on plan assets		(18)		(20)		(36)		(40)
Amortization of losses		4		3		8		6
Net pension cost	$	(2)	$	(3)	$	(4)		(6)

Net postretirement benefit cost for all funded and unfunded plans

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Interest cost on APBO	$	1	$	1	$	2	$	2
Expected return on plan assets		(1)		(1)		(2)		(2)
Net postretirement benefit cost		—		—		—		—

XML

Asset Quality (Details 6) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Jun. 30, 2011
Consumer Credit Exposure Credit Risk Profile by Regulatory Classifications
Credit risk profile based on payment	$ 49,605	$ 47,840
Residential, Prime, Financing Receivable [Member]
Consumer Credit Exposure Credit Risk Profile by Regulatory Classifications
Credit risk profile based on payment	12,096	11,864
Pass [Member] | Residential, Prime, Financing Receivable [Member]
Consumer Credit Exposure Credit Risk Profile by Regulatory Classifications
Credit risk profile based on payment	11,831	11,644
Substandard [Member] | Residential, Prime, Financing Receivable [Member]
Consumer Credit Exposure Credit Risk Profile by Regulatory Classifications
Credit risk profile based on payment	$ 265	$ 220

XML

Asset Quality (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Nonperforming Assets and Past Due Loans
Total nonperforming loans	$ 657	$ 727	$ 842
Nonperforming loans held for sale	38	46	42
OREO	28	65	52
Other nonperforming assets	28	21	14
Total nonperforming assets	751	859	950
Restructured loans included in nonperforming loans (b)	163	191	144
Restructured loans with an allocated specific allowance (c)	71	50	19
Specifically allocated allowance for restructured loans (d)	34	10	5
Accruing loans past due 90 days or more	131	164	118
Accruing loans past due 30 through 89 days	$ 362	$ 441	$ 465

XML

Securities (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
Cumulative Credit Portion of Impairments on Debt Securities
Cumulative Impairments on Debt Securities, Beginning Balance	$ 4
Impairment recognized in earnings
Cumulative Impairments on Debt Securities, Ending Balance	$ 4

XML

Asset Quality (Details 7) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Jun. 30, 2011
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	$ 49,605	$ 47,840
Consumer Loans [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	15,002	15,152
Consumer other - Key Community Bank [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	1,263	1,157
Consumer Marine [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	1,542	1,989
Consumer Others [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	101	142
Performing [Member] | Consumer other - Key Community Bank [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	1,261	1,154
Performing [Member] | Consumer Marine [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	1,523	1,957
Performing [Member] | Consumer Others [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	100	141
Nonperforming [Member] | Consumer other - Key Community Bank [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	2	3
Nonperforming [Member] | Consumer Marine [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	19	32
Nonperforming [Member] | Consumer Others [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	1	1
Credit Risk Profile [Member] | Consumer Loans [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	2,906	3,288
Credit Risk Profile [Member] | Performing [Member] | Consumer Loans [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	2,884	3,252
Credit Risk Profile [Member] | Nonperforming [Member] | Consumer Loans [Member]
Credit Risk Profile Based on Payment Activity
Credit risk profile based on payment	$ 22	$ 36

XML

Derivatives and Hedging Activities (Details 4) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Largest exposure to an individual counterparty
Largest gross exposure (derivative asset) to an individual counterparty	$ 196	$ 194	$ 147
Collateral posted by this counterparty	70	64	33
Derivative liability with this counterparty	217	250	250
Collateral pledged to this counterparty	93	127	137
Net exposure after netting adjustments and collateral	$ 2	$ 7	$ 2

XML

Employee Benefits (Details 1) (Other Postretirement Benefit Plans, Defined Benefit [Member], USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Net postretirement benefit cost for all funded and unfunded plans
Interest cost on APBO	$ 1	$ 1	$ 2	$ 2
Expected return on plan assets	(1)	(1)	(2)	(2)
Net pension cost

XML

Loans and Loans Held for Sale (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Changes in loans held for sale
Balance at beginning of the period	$ 511	$ 479	$ 426
New originations	1,308	1,235	914
Transfers from held to maturity, net	7	19	16
Loan sales	(1,165)	(932)	(1,039)
Loan draws (payments), net	(4)	(72)	73
Transfers to OREO / valuation adjustments	(1)	(1)	(9)
Balance at end of the period	$ 656	$ 728	$ 381

XML

Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2012

Derivatives and Hedging Activities [Abstract]

Fair values, Volume of activity and gain/loss information related to derivative instruments

	June 30, 2012						December 31, 2011						June 30, 2011
			Fair Value						Fair Value						Fair Value
in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	15,903	$	586	$	32	$	15,067	$	589	$	27	$	9,713	$	459	$	1
Foreign exchange		431		2		8		554		—		147		1,188		—		150
Total		16,334		588		40		15,621		589		174		10,901		459		151
Derivatives not designated as hedging instruments:
Interest rate		58,222		1,273		1,278		48,537		1,364		1,371		46,355		1,149		1,180
Foreign exchange		5,579		105		97		5,549		151		141		6,001		178		169
Energy and commodity		1,691		209		204		1,610		253		253		1,896		295		303
Credit		2,613		25		24		3,210		37		62		2,934		34		31
Equity		18		—		—		17		3		3		32		4		4
Total		68,123		1,612		1,603		58,923		1,808		1,830		57,218		1,660		1,687
Netting adjustments (a)		—		(1,382)		(880)		—		(1,452)		(978)		—		(1,219)		(847)
Total derivatives	$	84,457	$	818	$	763	$	74,544	$	945	$	1,026	$	68,119	$	900	$	991

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral.

Pre-tax net gains (losses) on fair value hedges

	Six months ended June 30, 2012
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains     (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on     Hedged Item
Interest rate	Other income	$	(13)	Long-term debt	Other income	$	10	(a)
Interest rate	Interest expense – Long-term debt		89
Foreign exchange	Other income		5	Long-term debt	Other income		(6)	(a)
Foreign exchange	Interest expense – Long-term debt		1	Long-term debt	Interest expense – Long-term debt		(1)	(b)
Total		$	82			$	3
	Six months ended June 30, 2011
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains     (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on     Hedged Item
Interest rate	Other income	$	(12)	Long-term debt	Other income	$	8	(a)
Interest rate	Interest expense – Long-term debt		112
Foreign exchange	Other income		90	Long-term debt	Other income		(95)	(a)
Foreign exchange	Interest expense – Long-term debt		5	Long-term debt	Interest expense – Long-term debt		(8)	(b)
Total		$	195			$	(95)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Derivative Instrument Cash Flow hedge earning recognized by income statement location

	Six months ended June 30, 2012
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified     From OCI Into Income (Effective  Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income     (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	50	Interest income – Loans	$	29		Other income		—
Interest rate		(7)	Interest expense – Long-term debt		(5)		Other income		—
Interest rate		—	Net gains (losses) from loan sales		—		Other income		—
Net Investment Hedges
Foreign exchange contracts		(6)	Other Income		—		Other income		—
Total	$	37		$	24				—
	Six months ended June 30, 2011
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified     From OCI Into Income (Effective Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income     (Ineffective Portion)
Interest rate	$	42	Interest income – Loans	$	27		Other income		—
Interest rate		(9)	Interest expense – Long-term debt		(5)		Other income		—
Interest rate		—	Net gains (losses) from loan sales		—		Other income		—
Total	$	33		$	22				—

After-tax change in AOCI resulting from cash flow hedges

in millions		December 31, 2011				2012 Hedging Activity			Reclassification of Gains to Net Income				June 30, 2012
AOCI resulting from cash flow and net investment hedges	$		(2	)	$		23	$		(15	)	$		6

Pre-tax net gains (losses) on derivatives not designated as hedging instruments

		Six months ended June 30,
in millions		2012		2011
NET GAINS (LOSSES) (a)
Interest rate	$		10	$	6
Foreign exchange			19		20
Energy and commodity			6		2
Credit			(9)		(10)
Total net gains (losses)	$		26	$	18

(a) Recorded in “investment banking and capital markets income (loss)” on the income statement.

Largest exposure to an individual counterparty

in millions	June 30,   2012		December 31,   2011		June 30,   2011
Largest gross exposure (derivative asset) to an individual counterparty	$	196	$	194	$	147
Collateral posted by this counterparty		70		64		33
Derivative liability with this counterparty		217		250		250
Collateral pledged to this counterparty		93		127		137
Net exposure after netting adjustments and collateral		2		7		2

Fair value of derivative assets by type

in millions	June 30,   2012		December 31,   2011		June 30,   2011
Interest rate	$	1,221	$	1,257	$	1,026
Foreign exchange		22		64		110
Energy and commodity		82		96		105
Credit		6		12		10
Equity		—		2		3
Derivative assets before collateral		1,331		1,431		1,254
Less:  Related collateral		513		486		354
Total derivative assets	$	818	$	945	$	900

Fair value of credit derivatives purchased and sold

	June 30, 2012						December 31, 2011						June 30, 2011
in millions	Purchased		Sold		Net		Purchased		Sold		Net		Purchased		Sold		Net
Single name credit default swaps	$	(4)	$	1	$	(3)	$	3	$	(1)	$	2	$	(10)	$	9	$	(1)
Traded credit default swap indices		—		3		3		6		(6)		—		—		2		2
Other		1		(1)		—		1		(1)		—		3		—		3
Total credit derivatives	$	(3)	$	3	$	—	$	10	$	(8)	$	2	$	(7)	$	11	$	4

Credit derivatives sold and held

	June 30, 2012							December 31, 2011							June 30, 2011
dollars in millions	Notional Amount		Average Term (Years)		Payment /     Performance Risk			Notional Amount		Average Term (Years)		Payment /     Performance Risk			Notional Amount		Average Term (Years)		Payment /     Performance Risk
Single name credit default swaps	$	550		2.42		4.40	%	$	878		2.18		4.98	%	$	844		2.40		4.45	%
Traded credit default swap indices		478		2.76		1.87			343		3.20		4.58			318		3.88		3.47
Other		23		5.48		9.74			18		5.74		10.89			17		5.56		9.04
Total credit derivatives sold	$	1,051		—		—		$	1,239		—		—		$	1,179		—		—

Credit risk contingent feature

		June 30, 2012				December 31, 2011				June 30, 2011
in millions		Moody’s		S&P		Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings			A3		A-		A3		A-		A3		A-
One rating downgrade	$		6	$	6	$	11	$	11	$	11	$	11
Two rating downgrades			11		11		16		16		16		16
Three rating downgrades			17		17		16		16		16		16

XML

Derivatives and Hedging Activities (Details 5) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Fair value of derivative assets
Derivative assets before collateral	$ 1,331	$ 1,431	$ 1,254
Less: Related collateral	513	486	354
Total derivative assets	818	945	900
Interest rate [Member]
Fair value of derivative assets
Derivative assets before collateral	1,221	1,257	1,026
Foreign exchange [Member]
Fair value of derivative assets
Derivative assets before collateral	22	64	110
Energy and commodity [Member]
Fair value of derivative assets
Derivative assets before collateral	82	96	105
Credit [Member]
Fair value of derivative assets
Derivative assets before collateral	6	12	10
Equity [Member]
Fair value of derivative assets
Derivative assets before collateral		$ 2	$ 3

XML

Securities (Details Textual) (USD $)	Jun. 30, 2012 Y MortgageObligation
Securities (Textual) [Abstract]
Gross unrealized losses attributable to collateralized mortgage obligations	$ 1,000,000
Number of fixed rate collateralized mortgage obligations	1
Weighted-average maturity collateralized mortgage, in years	0.2
Pledged available for sale and Held-To-Maturity securities	$ 10,000,000,000

XML

Acquisition and Discontinued Operations (Details 1) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012		Dec. 31, 2011		Jun. 30, 2011
Discontinued Assets and Liabilities of our Education Lending Business
Loans, net of unearned income of ($2), ($2) and $1	$ 49,605		$ 49,575		$ 47,840
Less: Allowance for loan and lease losses	888		1,004		1,230
Net loans	48,717		48,571		46,610
Trust accrued income and other assets at fair value	2,978	[1]	3,077	[1]	2,968	[1]
Total assets	5,533	[1]	5,860	[1]	6,328	[1]
Trust accrued expense and other liabilities at fair value	763		1,026		991
Total liabilities	2,401	[1]	2,550	[1]	2,950	[1]
Segment, Discontinued Operations [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Loans, net of unearned income of ($2), ($2) and $1	2,830		3,010		3,161
Less: Allowance for loan and lease losses	79		104		109
Net loans	5,404		5,708		6,152
Accrued income and other assets	76		87		110
Total liabilities	2,401		2,550		2,950
Education Lending [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Total assets	5,511		5,829		6,296
Total liabilities	2,401		2,550		2,949
Education Lending [Member] | Segment, Discontinued Operations [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Loans, net of unearned income of ($2), ($2) and $1	2,830		3,010		3,161
Less: Allowance for loan and lease losses	79		104		109
Net loans	5,404		5,708		6,152
Accrued income and other assets	76		87		110
Trust [Member] | Segment, Discontinued Operations [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Trust loans accounted for at fair value	2,580		2,726		3,100
Trust accrued income and other assets at fair value	31		34		34
Trust securities at fair value	2,373		2,522		2,919
Trust [Member] | Education Lending [Member] | Segment, Discontinued Operations [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Trust loans accounted for at fair value	2,580		2,726		3,100
Trust accrued income and other assets at fair value	31		34		34
Trust accrued expense and other liabilities at fair value	28		28		30
Trust securities at fair value	2,373		2,522		2,919
Portfolio [Member] | Segment, Discontinued Operations [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Trust loans accounted for at fair value	73		76
Portfolio [Member] | Education Lending [Member] | Segment, Discontinued Operations [Member]
Discontinued Assets and Liabilities of our Education Lending Business
Trust loans accounted for at fair value	$ 73		$ 76

[1] The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

XML

Asset Quality (Details 9) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations	$ 944	$ 1,372	$ 1,004	$ 1,604
Provisions			62	(47)
Charge-offs	(131)	(177)	(263)	(409)
Recoveries	54	43	85	82
Balance at end of period - continuing operations	888	1,230	888	1,230
Discontinued Operations, Beginning Balance			104	114
Provision, Discontinued Operations			6	62
Charge-offs, Discontinued Operations			(39)	(73)
Recoveries, Discontinued Operations			8	6
Discontinued Operations, Ending Balance	79	109	79	109
Financing Receivable Allowance For Credit Losses Total ALLL Including Discontinued Operations, Beginning Balance			1,108	1,718
Provisions, Total ALLL - Including Discontinued Operations			68	15
Charge-offs, Total ALLL - Including Discontinued Operations			(302)	(482)
Recoveries, Total ALLL - Including Discontinued Operations			93	88
Financing Receivable Allowance For Credit Losses Total ALLL Including Discontinued Operations, Ending Balance	967	1,339	967	1,339
Commercial, financial and agricultural [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			334	485
Provisions			(12)	(22)
Charge-offs			(49)	(93)
Recoveries			31	25
Balance at end of period - continuing operations	304	395	304	395
Commercial real estate: Commercial Mortgage [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			272	416
Provisions			8	(18)
Charge-offs			(46)	(62)
Recoveries			16	7
Balance at end of period - continuing operations	250	343	250	343
Commercial real estate: Construction [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			63	145
Provisions			6	15
Charge-offs			(16)	(62)
Recoveries			2	8
Balance at end of period - continuing operations	55	106	55	106
Commercial Lease Financing [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			78	175
Provisions				(53)
Charge-offs			(20)	(26)
Recoveries			10	11
Balance at end of period - continuing operations	68	107	68	107
Commercial [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			747	1,221
Provisions			2	(78)
Charge-offs			(131)	(243)
Recoveries			59	51
Balance at end of period - continuing operations	677	951	677	951
Real estate - residential mortgage [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			37	49
Provisions				7
Charge-offs			(13)	(17)
Recoveries			2	2
Balance at end of period - continuing operations	26	41	26	41
Home Equity Key Community Bank [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			103	120
Provisions			21	30
Charge-offs			(48)	(53)
Recoveries			4	2
Balance at end of period - continuing operations	80	99	80	99
Home Equity Other [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			29	57
Provisions			9	4
Charge-offs			(17)	(26)
Recoveries			3	2
Balance at end of period - continuing operations	24	37	24	37
Home Equity [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			132	177
Provisions			30	34
Charge-offs			(65)	(79)
Recoveries			7	4
Balance at end of period - continuing operations	104	136	104	136
Consumer other - Key Community Bank [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			41	57
Provisions			10	9
Charge-offs			(20)	(23)
Recoveries			3	4
Balance at end of period - continuing operations	34	47	34	47
Consumer Marine [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			46	89
Provisions			15	(14)
Charge-offs			(30)	(42)
Recoveries			13	19
Balance at end of period - continuing operations	44	52	44	52
Consumer Others [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			1	11
Provisions			5	(5)
Charge-offs			(4)	(5)
Recoveries			1	2
Balance at end of period - continuing operations	3	3	3	3
Consumer Other - Key Corporate Bank [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			47	100
Provisions			20	(19)
Charge-offs			(34)	(47)
Recoveries			14	21
Balance at end of period - continuing operations	47	55	47	55
Consumer Loans [Member]
Changes in Allowance for loan and lease losses by loan category
Balance at beginning of period - continuing operations			257	383
Provisions			60	31
Charge-offs			(132)	(166)
Recoveries			26	31
Balance at end of period - continuing operations	$ 211	$ 279	$ 211	$ 279

XML

Line of Business Results (Details Textual)	6 Months Ended
	Jun. 30, 2012 Branch
Line of Business Results (Textual) [Abstract]
Number of state branch network	14
Number of business units	2
Federal income tax rate	35.00%
State income tax rate	2.20%
Percentage of debt service provided by rental income from nonaffiliated third parties	50.00%

XML

Derivatives and Hedging Activities (Details 2) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
After-tax change in AOCI resulting from cash flow hedges
December 31, 2011	$ (2)
2012 Hedging Activity	23
Reclassification of Gains to Net Income	(15)
June 30, 2012	$ 6

XML

Variable Interest Entities (Details Textual) (USD $) In Millions, unless otherwise specified																	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Jun. 30, 2012 Retained Earnings [Member]	Dec. 31, 2011 Retained Earnings [Member]	Sep. 30, 2011 Retained Earnings [Member]	Jun. 30, 2011 Retained Earnings [Member]	Dec. 31, 2010 Retained Earnings [Member]	Jan. 01, 2010 Retained Earnings [Member]	Jun. 30, 2012 LIHTC funds [Member]	Jun. 30, 2012 LIHTC funds [Member] Maximum [Member]	Jun. 30, 2012 LIHTC funds [Member] Minimum [Member]	Jun. 30, 2012 LIHTC funds [Member] Investments [Member]	Sep. 30, 2011 LIHTC funds [Member] Retained Earnings [Member]	Dec. 31, 2010 LIHTC funds [Member] Retained Earnings [Member]	Jun. 30, 2012 Education Loan Securitization Trusts [Member]	Jun. 30, 2012 LIHTC investments [Member]
Variable Interest Entities (Textual) [Abstract]
Loan securitization trust VIEs										$ 91			$ 52			$ 2,611
Maximum exposure to Loss, Unconsolidated VIE																	399
Variable Interest Entity, Carrying Amount of Assets, Unconsolidated VIE										119							1,012
Settlement value of third party interest, approximately											21	12
Settlement value of third party interest, reserves										84
Cumulative effect adjustment to beginning balance of Retained Earnings	10,176	9,922	9,737	6,595	6,246	45	5,926	5,557	45					45	45
Recapture tax claims																	95
Additional Investments in Unconsolidated LIHTC Operating Partnerships Held By Consolidated LIHTC																	$ 987

XML

Derivatives and Hedging Activities (Details 7) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Credit risk contingent feature
Additional collateral aggregate fair value	$ 231
One Rating Downgrade [Member] | Moody's, A3 Rating [Member]
Credit risk contingent feature
Additional collateral aggregate fair value	6	11	11
One Rating Downgrade [Member] | Standard & Poor's, A- Rating [Member]
Credit risk contingent feature
Additional collateral aggregate fair value	6	11	11
Two Rating Downgrade [Member] | Moody's, A3 Rating [Member]
Credit risk contingent feature
Additional collateral aggregate fair value	11	16	16
Two Rating Downgrade [Member] | Standard & Poor's, A- Rating [Member]
Credit risk contingent feature
Additional collateral aggregate fair value	11	16	16
Three Rating Downgrade [Member] | Moody's, A3 Rating [Member]
Credit risk contingent feature
Additional collateral aggregate fair value	17	16	16
Three Rating Downgrade [Member] | Standard & Poor's, A- Rating [Member]
Credit risk contingent feature
Additional collateral aggregate fair value	$ 17	$ 16	$ 16

XML

Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011	Jun. 30, 2012	Dec. 31, 2011
Income Taxes (Textual) [Abstract]
Total income tax expense (benefit), rate	19.80%	27.00%	27.10%
Combined federal and state statutory tax rate				37.20%
Federal net deferred tax asset	$ 119			$ 119	$ 111
State deferred tax liability	22			22	19
Combined net federal and state deferred tax assets			$ 208

XML

Derivatives and Hedging Activities (Details 3) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Pre-tax net gains (losses) on derivatives not designated as hedging instruments
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net, Total	$ 26	$ 18
Interest rate [Member]
Pre-tax net gains (losses) on derivatives not designated as hedging instruments
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net, Total	10	6
Foreign exchange [Member]
Pre-tax net gains (losses) on derivatives not designated as hedging instruments
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net, Total	19	20
Energy and commodity [Member]
Pre-tax net gains (losses) on derivatives not designated as hedging instruments
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net, Total	6	2
Credit [Member]
Pre-tax net gains (losses) on derivatives not designated as hedging instruments
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net, Total	$ (9)	$ (10)

XML

Securities (Details 3) (USD $)	6 Months Ended
	Jun. 30, 2012
Available for Sale Securities Realized Gains and Losses
Realized gains
Realized losses
Net securities gains (losses)

XML

Shareholders' Equity

6 Months Ended

Jun. 30, 2012

Shareholders' Equity [Abstract]

Shareholders' Equity

15.  Shareholders’ Equity

Comprehensive Capital Plan

On January 9, 2012, we submitted to the Federal Reserve and provided to the OCC under the annual CCAR process our 2012-2013 Comprehensive Capital Plan. At its March 2012 meeting, our Board authorized the purchase in the open market or through privately negotiated transactions of up to $312 million of our Common Shares. This authorization was expressly in addition to any amounts remaining under preexisting authority. Pursuant to our 2012 capital plan submitted to the Federal Reserve as part of CCAR and not objected to by the Federal Reserve, KeyCorp had authority to purchase up to $344 million of our Common Shares, including $312 million for general repurchase and up to $32 million for repurchase in connection with employee elections under our compensation and benefit programs.

During the second quarter of 2012, we completed $82 million of Common Share repurchases from shareholders on the open market, and $3 million of Common Share repurchases from employees in connection with employee elections under our compensation and benefit programs, pursuant to this plan. Following completion of these repurchases, we have remaining authority to repurchase up to $259 million of our Common Shares, including up to $230 million for general repurchase and up to $29 million for repurchase in connection with employee elections under our compensation and benefit programs. Our existing repurchase program does not have an expiration date. Common Share repurchases under the current authorization are expected to be executed through the first quarter of 2013.

Repurchase of TARP CPP Preferred Stock, Warrant and Completion of Equity and Debt Offerings

During the first half of 2011, we completed the repurchase of the $2.5 billion of Series B Preferred Stock and corresponding warrant issued to the U.S. Treasury Department. As a result of the repurchase, we recorded a $49 million one-time deemed dividend in the first quarter of 2011 related to the remaining difference between the repurchase price and the carrying value of the preferred shares at the time of repurchase. On April 20, 2011 we repurchased the warrant directly from the U.S. Treasury for $70 million. Beginning with the second quarter of 2011, the repurchase resulted in the elimination of quarterly dividends of $31 million and discount amortization of $4 million, or $140 million on an annual basis, related to these preferred shares. In total, we paid $2.867 billion to the U.S. Treasury during the investment period in the form of dividends, principal and repurchase of the warrant, resulting in a return to the U.S. Treasury of $367 million above the initial investment of $2.5 billion on November 14, 2008.

XML

Asset Quality (Details 2) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012 Loan
Financing Receivable, Modifications [Line Items]
Number of loans	1,094
Pre-modification Outstanding Recorded Investment	$ 399
Post-modification Outstanding Recorded Investment	274
Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	463
Pre-modification Outstanding Recorded Investment	247
Post-modification Outstanding Recorded Investment	163
Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	631
Pre-modification Outstanding Recorded Investment	152
Post-modification Outstanding Recorded Investment	111
Commercial, financial and agricultural [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	95
Pre-modification Outstanding Recorded Investment	108
Post-modification Outstanding Recorded Investment	59
Commercial, financial and agricultural [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	115
Pre-modification Outstanding Recorded Investment	8
Post-modification Outstanding Recorded Investment	6
Commercial real estate: Commercial Mortgage [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	16
Pre-modification Outstanding Recorded Investment	47
Post-modification Outstanding Recorded Investment	31
Commercial real estate: Commercial Mortgage [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	7
Pre-modification Outstanding Recorded Investment	71
Post-modification Outstanding Recorded Investment	48
Commercial real estate: Construction [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	11
Pre-modification Outstanding Recorded Investment	60
Post-modification Outstanding Recorded Investment	43
Commercial real estate: Construction [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	1
Pre-modification Outstanding Recorded Investment	15
Post-modification Outstanding Recorded Investment	1
Commercial Real Estate Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	27
Pre-modification Outstanding Recorded Investment	107
Post-modification Outstanding Recorded Investment	74
Commercial Real Estate Loans [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	8
Pre-modification Outstanding Recorded Investment	86
Post-modification Outstanding Recorded Investment	49
Commercial Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	122
Pre-modification Outstanding Recorded Investment	215
Post-modification Outstanding Recorded Investment	133
Commercial Loans [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	123
Pre-modification Outstanding Recorded Investment	94
Post-modification Outstanding Recorded Investment	55
Real estate - residential mortgage [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	56
Pre-modification Outstanding Recorded Investment	7
Post-modification Outstanding Recorded Investment	7
Real estate - residential mortgage [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	111
Pre-modification Outstanding Recorded Investment	11
Post-modification Outstanding Recorded Investment	11
Home Equity Key Community Bank [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	50
Pre-modification Outstanding Recorded Investment	4
Post-modification Outstanding Recorded Investment	4
Home Equity Key Community Bank [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	88
Pre-modification Outstanding Recorded Investment	7
Post-modification Outstanding Recorded Investment	7
Home Equity Other [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	74
Pre-modification Outstanding Recorded Investment	2
Post-modification Outstanding Recorded Investment	1
Home Equity Other [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	101
Pre-modification Outstanding Recorded Investment	3
Post-modification Outstanding Recorded Investment	3
Home Equity Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	124
Pre-modification Outstanding Recorded Investment	6
Post-modification Outstanding Recorded Investment	5
Home Equity Loans [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	189
Pre-modification Outstanding Recorded Investment	10
Post-modification Outstanding Recorded Investment	10
Consumer other - Key Community Bank [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	11
Pre-modification Outstanding Recorded Investment	1
Post-modification Outstanding Recorded Investment	1
Consumer other - Key Community Bank [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	20
Pre-modification Outstanding Recorded Investment	1
Consumer Marine [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	139
Pre-modification Outstanding Recorded Investment	17
Post-modification Outstanding Recorded Investment	17
Consumer Marine [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	135
Pre-modification Outstanding Recorded Investment	34
Post-modification Outstanding Recorded Investment	33
Other Consumer [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	11
Pre-modification Outstanding Recorded Investment	1
Other Consumer [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	53
Pre-modification Outstanding Recorded Investment	2
Post-modification Outstanding Recorded Investment	2
Consumer Other [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	150
Pre-modification Outstanding Recorded Investment	18
Post-modification Outstanding Recorded Investment	17
Consumer Other [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	188
Pre-modification Outstanding Recorded Investment	36
Post-modification Outstanding Recorded Investment	35
Consumer Loans [Member] | Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	341
Pre-modification Outstanding Recorded Investment	32
Post-modification Outstanding Recorded Investment	30
Consumer Loans [Member] | Prior Year Accruing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	508
Pre-modification Outstanding Recorded Investment	58
Post-modification Outstanding Recorded Investment	$ 56

XML

Earnings Per Common Share (Details) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
EARNINGS
Income (loss) from continuing operations	$ 231		$ 252		$ 436		$ 534
Less: Net income (loss) attributable to noncontrolling interests	5		3		5		11
Income (loss) from continuing operations attributable to Key	226		249		431		523
Income (loss) from continuing operations attributable to Key common shareholders	221		243		420		427
Income (loss) from discontinued operations, net of taxes	10		(9)		5		(20)
Net income (loss) attributable to Key common shareholders	231		234		425		407
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)	944,648	[1]	947,565	[1]	946,995	[1]	914,911	[1]
Effect of dilutive convertible preferred stock, common stock options and other stock awards (000)	3,439		4,568		4,034		5,251
Weighted-average common shares and potential common shares outstanding (000)	948,087		952,133		951,029		920,162
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders	$ 0.23		$ 0.26		$ 0.44		$ 0.47
Income (loss) from discontinued operations, net of taxes	$ 0.01		$ (0.01)		$ 0.01		$ (0.02)
Net income (loss) attributable to Key common shareholders	$ 0.24		$ 0.25		$ 0.45		$ 0.44
Income (loss) from continuing operations attributable to Key common shareholders - assuming dilution	$ 0.23		$ 0.26		$ 0.44		$ 0.46
Income (loss) from discontinued operations, net of taxes	$ 0.01		$ (0.01)		$ 0.01		$ (0.02)
Net income (loss) attributable to Key common shareholders - assuming dilution	$ 0.24	[2]	$ 0.25	[2]	$ 0.45	[2]	$ 0.44	[2]
Series A Preferred Stock [Member]
EARNINGS
Less: Dividends on Series A Preferred Stock	5		6		11		12
Series B Preferred Stock [Member]
EARNINGS
Less: Dividends on Series A Preferred Stock							31
Amortization of discount on Series B Preferred Stock							$ 53

[1] Assumes conversion of stock options and/or Preferred Series A, as applicable.

[2] EPS may not foot due to rounding.

XML

Derivatives and Hedging Activities (Details 1) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Fair value hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) on Derivatives	$ 82	$ 195
Net Gains (Losses) on Hedged Item	3	(95)
Cash flow hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Recognized in OCI (Effective Portion)	37	33
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	24	22
Net Gains (Losses) Recognized in Income (Ineffective Portion)
Foreign exchange [Member] | Net Investment Hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Recognized in OCI (Effective Portion)	(6)
Other Income [Member] | Cash flow hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Recognized in Income (Ineffective Portion)
Other Income [Member] | Interest rate [Member] | Fair value hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) on Derivatives	(13)	(12)
Net Gains (Losses) on Hedged Item	10	8
Other Income [Member] | Foreign exchange [Member] | Fair value hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) on Derivatives	5	90
Net Gains (Losses) on Hedged Item	(6)	(95)
Other Income [Member] | Foreign exchange [Member] | Net Investment Hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Recognized in Income (Ineffective Portion)
Interest Expense [Member] | Cash flow hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	(5)	(5)
Interest Expense [Member] | Interest rate [Member] | Fair value hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) on Derivatives	89	112
Interest Expense [Member] | Interest rate [Member] | Cash flow hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Recognized in OCI (Effective Portion)	(7)	(9)
Interest Expense [Member] | Foreign exchange [Member] | Fair value hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) on Derivatives	1	5
Net Gains (Losses) on Hedged Item	(1)	(8)
Interest Income [Member] | Cash flow hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	29	27
Interest Income [Member] | Interest rate [Member] | Cash flow hedges [Member]
Pre-tax net gains (losses) on fair value hedges
Net Gains (Losses) Recognized in OCI (Effective Portion)	$ 50	$ 42

XML

Acquisition and Discontinued Operations (Details 9) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012		Mar. 31, 2012	Dec. 31, 2011		Sep. 30, 2011	Jun. 30, 2011		Mar. 31, 2011	Dec. 31, 2010
Combined assets and liabilities of the discontinued operations
Cash and due from banks	$ 717			$ 694			$ 853			$ 278
Loans, net of unearned income of ($2), ($2) and $1	49,605			49,575			47,840
Less: Allowance for loan and lease losses	888			1,004			1,230
Net loans	48,717			48,571			46,610
Loans held for sale	656		511	728		479	381		426
Trust accrued income and other assets at fair value	2,978	[1]		3,077	[1]		2,968	[1]
Total assets	5,533	[1]		5,860	[1]		6,328	[1]
Accrued expense and other liabilities	1,417			1,763			1,518
Total liabilities	2,401	[1]		2,550	[1]		2,950	[1]
Segment, Discontinued Operations [Member]
Combined assets and liabilities of the discontinued operations
Cash and due from banks	22			31			32
Loans, net of unearned income of ($2), ($2) and $1	2,830			3,010			3,161
Less: Allowance for loan and lease losses	79			104			109
Net loans	5,404			5,708			6,152
Accrued income and other assets	76			87			110
Total liabilities	2,401			2,550			2,950
Segment, Discontinued Operations [Member] | Trust [Member]
Combined assets and liabilities of the discontinued operations
Trust loans accounted for at fair value	2,580			2,726			3,100
Trust accrued income and other assets at fair value	31			34			34
Accrued expense and other liabilities	28			28			31
Trust securities at fair value	2,373			2,522			2,919
Segment, Discontinued Operations [Member] | Portfolio [Member]
Combined assets and liabilities of the discontinued operations
Trust loans accounted for at fair value	$ 73			$ 76

[1] The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

XML

Contingent Liabilities and Guarantees (Tables)

6 Months Ended

Jun. 30, 2012

Contingent Liabilities and Guarantees [Abstract]

Guarantees

June 30, 2012 in millions	Maximum Potential  Undiscounted  Future Payments		Liability  Recorded
Financial guarantees:
Standby letters of credit	$	10,137	$	52
Recourse agreement with FNMA		973		9
Return guarantee agreement with LIHTC investors		55		55
Written put options (a)		1,993		60
Default guarantees		3		1
Total	$	13,161	$	177

(a) The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

XML

Asset Quality (Details 4) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Past due loans including current loans
Current	$ 48,455		$ 46,415
30 to 59 Days Past Due	245		261
60 to 89 Days Past Due	117		204
90 and Greater Days Past Due	131		118
Nonperforming Loans	657	727	842
Total Past Due and Nonperforming Loans	1,150		1,425
Total Loans	49,605		47,840
Commercial, financial and agricultural [Member]
Past due loans including current loans
Current	20,148		16,599
30 to 59 Days Past Due	60		35
60 to 89 Days Past Due	13		17
90 and Greater Days Past Due	24		19
Nonperforming Loans	141		213
Total Past Due and Nonperforming Loans	238		284
Total Loans	20,386		16,883
Commercial real estate: Commercial Mortgage [Member]
Past due loans including current loans
Current	7,182		7,743
30 to 59 Days Past Due	15		34
60 to 89 Days Past Due	16		51
90 and Greater Days Past Due	24		11
Nonperforming Loans	172		230
Total Past Due and Nonperforming Loans	227		326
Total Loans	7,409		8,069
Construction [Member]
Past due loans including current loans
Current	1,033		1,437
30 to 59 Days Past Due	12		11
60 to 89 Days Past Due	24		24
90 and Greater Days Past Due	35		28
Nonperforming Loans	68		131
Total Past Due and Nonperforming Loans	139		194
Total Loans	1,172		1,631
Commercial Real Estate Loans [Member]
Past due loans including current loans
Current	8,215		9,180
30 to 59 Days Past Due	27		45
60 to 89 Days Past Due	40		75
90 and Greater Days Past Due	59		39
Nonperforming Loans	240		361
Total Past Due and Nonperforming Loans	366		520
Total Loans	8,581		9,700
Commercial Lease Financing [Member]
Past due loans including current loans
Current	5,581		5,983
30 to 59 Days Past Due	22		20
60 to 89 Days Past Due	8		40
90 and Greater Days Past Due	7		21
Nonperforming Loans	18		41
Total Past Due and Nonperforming Loans	55		122
Total Loans	5,636		6,105
Commercial Loans [Member]
Past due loans including current loans
Current	33,944		31,762
30 to 59 Days Past Due	109		100
60 to 89 Days Past Due	61		132
90 and Greater Days Past Due	90		79
Nonperforming Loans	399		615
Total Past Due and Nonperforming Loans	659		926
Total Loans	34,603		32,688
Real estate - residential mortgage [Member]
Past due loans including current loans
Current	1,895		1,713
30 to 59 Days Past Due	24		24
60 to 89 Days Past Due	10		14
90 and Greater Days Past Due	9		8
Nonperforming Loans	78		79
Total Past Due and Nonperforming Loans	121		125
Total Loans	2,016		1,838
Home Equity Key Community Bank [Member]
Past due loans including current loans
Current	9,361		9,216
30 to 59 Days Past Due	56		66
60 to 89 Days Past Due	26		32
90 and Greater Days Past Due	17		16
Nonperforming Loans	141		101
Total Past Due and Nonperforming Loans	240		215
Total Loans	9,601		9,431
Home Equity Other [Member]
Past due loans including current loans
Current	445		559
30 to 59 Days Past Due	10		13
60 to 89 Days Past Due	4		7
90 and Greater Days Past Due	3		5
Nonperforming Loans	17		11
Total Past Due and Nonperforming Loans	34		36
Total Loans	479		595
Home Equity Loans [Member]
Past due loans including current loans
Current	9,806		9,775
30 to 59 Days Past Due	66		79
60 to 89 Days Past Due	30		39
90 and Greater Days Past Due	20		21
Nonperforming Loans	158		112
Total Past Due and Nonperforming Loans	274		251
Total Loans	10,080		10,026
Consumer Marine [Member]
Past due loans including current loans
Current	1,478		1,898
30 to 59 Days Past Due	31		42
60 to 89 Days Past Due	10		14
90 and Greater Days Past Due	4		3
Nonperforming Loans	19		32
Total Past Due and Nonperforming Loans	64		91
Total Loans	1,542		1,989
Consumer Others [Member]
Past due loans including current loans
Current	95		138
30 to 59 Days Past Due	2		2
60 to 89 Days Past Due	2		1
90 and Greater Days Past Due	1
Nonperforming Loans	1		1
Total Past Due and Nonperforming Loans	6		4
Total Loans	101		142
Consumer other - Key Community Bank [Member]
Past due loans including current loans
Current	1,237		1,129
30 to 59 Days Past Due	13		14
60 to 89 Days Past Due	4		4
90 and Greater Days Past Due	7		7
Nonperforming Loans	2		3
Total Past Due and Nonperforming Loans	26		28
Total Loans	1,263		1,157
Consumer Other [Member]
Past due loans including current loans
Current	1,573		2,036
30 to 59 Days Past Due	33		44
60 to 89 Days Past Due	12		15
90 and Greater Days Past Due	5		3
Nonperforming Loans	20		33
Total Past Due and Nonperforming Loans	70		95
Total Loans	1,643		2,131
Consumer Loans [Member]
Past due loans including current loans
Current	14,511		14,653
30 to 59 Days Past Due	136		161
60 to 89 Days Past Due	56		72
90 and Greater Days Past Due	41		39
Nonperforming Loans	258		227
Total Past Due and Nonperforming Loans	491		499
Total Loans	$ 15,002		$ 15,152

XML

Fair Value Measurements (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011 Entity	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Mar. 31, 2011
Fair Value Measurements (Textual) [Abstract]
Loans in Portfolio	$ 73,000,000
Nonexit price methodology for valuing loan portfolio				0.40%
Loans, net of allowance	48,717,000,000	46,610,000,000		48,571,000,000
Loans held for sale	656,000,000	381,000,000	511,000,000	728,000,000	479,000,000	426,000,000
Notice Period to redeem quarterly investments (in days)	45 days
Transfer of commercial and consumer loans from held-for-sale to held-to-maturity, current fair value	38,000,000
Average maturity of short term financial instrument	less than six months
Fair Value Measurements (Additional Textual) [Abstract]
Period for evaluation of fair value of property	90 days
Number of independent entities		2
Passive funds [Member]
Fair Value Estimate Not Practicable (Textual) [Abstract]
Liquidation period of funds, minimum (in years)	1 year
Liquidation period of funds, maximum (in years)	7 years
Private equity funds [Member]
Fair Value Estimate Not Practicable (Textual) [Abstract]
Liquidation period of funds, minimum (in years)	1 year
Liquidation period of funds, maximum (in years)	10 years
Co-managed funds [Member]
Fair Value Estimate Not Practicable (Textual) [Abstract]
Maturity Period of funds, minimum (in Years)	2 years
Maturity Period of funds, maximum (in Years)	5 years
Segment, Discontinued Operations [Member]
Fair Value Measurements (Textual) [Abstract]
Loans, net of allowance	5,404,000,000	6,152,000,000		5,708,000,000
Segment, Discontinued Operations [Member] | Education Lending [Member]
Fair Value Measurements (Textual) [Abstract]
Loans in Portfolio	73,000,000			76,000,000
Loans, net of allowance	5,404,000,000	6,152,000,000		5,708,000,000
Residential Real Estate Mortgage Loans [Member]
Fair Value Measurements (Textual) [Abstract]
Loans, net of allowance	2,000,000,000			1,900,000,000
Carrying Amount [Member]
Fair Value Measurements (Textual) [Abstract]
Commercial loan portfolios held-for-sale	656,000,000			728,000,000
Carrying Amount [Member] | Segment, Discontinued Operations [Member] | Education Lending [Member]
Fair Value Measurements (Textual) [Abstract]
Loans, net of allowance	2,800,000,000			2,900,000,000
Loans held for sale	0
Fair Value [Member]
Fair Value Measurements (Textual) [Abstract]
Commercial loan portfolios held-for-sale	656,000,000			728,000,000
Fair Value [Member] | Segment, Discontinued Operations [Member] | Education Lending [Member]
Fair Value Measurements (Textual) [Abstract]
Loans in the trusts	2,600,000,000			2,700,000,000
Securities issued by the education lending securitization trust	2,400,000,000			2,500,000,000
Loans, net of allowance	2,400,000,000			2,500,000,000
Level 3 [Member] | Commercial Loan [Member]
Fair Value Measurements (Textual) [Abstract]
Commercial loan portfolios held-for-sale	15,000,000			15,000,000
Level 3 [Member] | Fair Value [Member]
Fair Value Measurements (Textual) [Abstract]
Commercial loan portfolios held-for-sale	$ 656,000,000

XML

Fair Value Measurements (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012
Principal Investments [Member]
Fair Values of Direct and Indirect Funds and Direct and Indirect Unfunded Commitments for Funds [Abstract]
Fair Value	$ 482
Unfunded Commitments	106
Principal Investments [Member] | Hedge funds [Member]
Fair Values of Direct and Indirect Funds and Direct and Indirect Unfunded Commitments for Funds [Abstract]
Fair Value	4
Principal Investments [Member] | Private equity funds [Member]
Fair Values of Direct and Indirect Funds and Direct and Indirect Unfunded Commitments for Funds [Abstract]
Fair Value	478
Unfunded Commitments	106
Private Equity and Mezzanine Investments [Member]
Fair Values of Direct and Indirect Funds and Direct and Indirect Unfunded Commitments for Funds [Abstract]
Fair Value	43
Unfunded Commitments	6
Private Equity and Mezzanine Investments [Member] | Passive Funds [Member]
Fair Values of Direct and Indirect Funds and Direct and Indirect Unfunded Commitments for Funds [Abstract]
Fair Value	18
Unfunded Commitments	3
Private Equity and Mezzanine Investments [Member] | Co Managed Funds [Member]
Fair Values of Direct and Indirect Funds and Direct and Indirect Unfunded Commitments for Funds [Abstract]
Fair Value	25
Unfunded Commitments	$ 3

XML

Loans and Loans Held for Sale (Details Textual) (Segment, Discontinued Operations [Member], Education Lending [Member], USD $) In Billions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Segment, Discontinued Operations [Member] | Education Lending [Member]
Loans and Loans Held for Sale (Textual) [Abstract]
Loans	$ 5.5	$ 5.8	$ 6.3

XML

Consolidated Statements of Changes in Equity (Unaudited) (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 Retained Earnings	Jun. 30, 2011 Retained Earnings	Jun. 30, 2012 Retained Earnings Series A Preferred Stock	Jun. 30, 2011 Retained Earnings Series A Preferred Stock	Jun. 30, 2011 Retained Earnings Series B Preferred Stock	Jun. 30, 2012 Accumulated Other Comprehensive Income (Loss)	Jun. 30, 2011 Accumulated Other Comprehensive Income (Loss)
Income taxes effect on net unrealized (losses) gains on securities available for sale						$ (31)	$ 61
Income taxes effect on net unrealized (losses) gains on derivative financial instruments						$ 5	$ 4
Cash dividends declared on common shares, per share	$ 0.08	$ 0.04
Cash dividends declared on Preferred Stock, per share/annum			$ 3.875	$ 3.875
Cash dividends accrued on Cumulative Series B Preferred Stock, (% per annum)					5.00%

XML

Fair Value Measurements (Details 1) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	$ 818	$ 945	$ 900
Total Derivative assets	818	945	900
Recurring [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	679
Commercial loans
Trading account assets	679
Securities available for sale	13,205	16,012
Total other investments	785	760
Derivative assets	2,200	2,397
Netting adjustments	(1,382)	(1,452)
Total Derivative assets	818	945
Accrued income and other assets	136	112
Total assets on a recurring basis at fair value	15,961	18,688
LIABILITIES MEASURED ON A RECURRING BASIS
Securities sold under repurchase agreements	481	292
Bank notes and other short-term borrowings, Short positions	363	337
Derivative liabilities	1,643	2,004
Netting adjustments	(880)	(978)
Total derivative liabilities	763	1,026
Accrued expense and other liabilities	4	45
Total liabilities on a recurring basis at fair value	1,611	1,700
Recurring [Member] | Short-term investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities purchased under resale agreements	338	236
Recurring [Member] | U.S. Treasury, agencies and corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	438	353
Recurring [Member] | States and political subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	84	81
Securities available for sale	56	63
Recurring [Member] | Collateralized mortgage obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	16	19
Securities available for sale	12,477	15,162
Recurring [Member] | Other mortgage-backed securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	101	62
Securities available for sale	652	778
Recurring [Member] | Other securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	40	108
Securities available for sale	20	9
Recurring [Member] | Total trading account securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities		623
Trading account assets		623
Recurring [Member] | Principal Direct Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	242	236
Recurring [Member] | Principal Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	482	473
Recurring [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	724	709
Recurring [Member] | Equity and Mezzanine Direct Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	18	15
Recurring [Member] | Equity and Mezzanine Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	43	36
Recurring [Member] | Private Equity and Mezzanine Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	61	51
Recurring [Member] | Interest rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	1,859	1,953
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	1,310	1,398
Recurring [Member] | Foreign exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	107	151
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	105	288
Recurring [Member] | Energy and commodity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	209	253
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	204	253
Recurring [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	25	37
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	24	62
Recurring [Member] | Equity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets		3
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities		3
Recurring [Member] | Level 1 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	3
Commercial loans
Trading account assets	3
Securities available for sale	20	9
Total other investments	11	11
Derivative assets	81	86
Total Derivative assets	81	86
Accrued income and other assets	2	7
Total assets on a recurring basis at fair value	117	192
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings, Short positions	3
Derivative liabilities	81	79
Total derivative liabilities	81	79
Accrued expense and other liabilities		23
Total liabilities on a recurring basis at fair value	84	102
Recurring [Member] | Level 1 [Member] | Other securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	3	79
Securities available for sale	20	9
Recurring [Member] | Level 1 [Member] | Total trading account securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities		79
Trading account assets		79
Recurring [Member] | Level 1 [Member] | Principal Direct Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	11	11
Recurring [Member] | Level 1 [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	11	11
Recurring [Member] | Level 1 [Member] | Foreign exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	81	86
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	81	79
Recurring [Member] | Level 1 [Member] | Equity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities
Recurring [Member] | Level 2 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	618
Commercial loans
Trading account assets	618
Securities available for sale	13,185	16,003
Derivative assets	2,078	2,266
Total Derivative assets	2,078	2,266
Accrued income and other assets	134	105
Total assets on a recurring basis at fair value	16,353	19,119
LIABILITIES MEASURED ON A RECURRING BASIS
Securities sold under repurchase agreements	481	292
Bank notes and other short-term borrowings, Short positions	360	337
Derivative liabilities	1,560	1,896
Total derivative liabilities	1,560	1,896
Accrued expense and other liabilities	4	22
Total liabilities on a recurring basis at fair value	2,405	2,547
Recurring [Member] | Level 2 [Member] | Short-term investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Securities purchased under resale agreements	338	236
Recurring [Member] | Level 2 [Member] | U.S. Treasury, agencies and corporations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	438	353
Recurring [Member] | Level 2 [Member] | States and political subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	27	81
Securities available for sale	56	63
Recurring [Member] | Level 2 [Member] | Collateralized mortgage obligations [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	16	19
Securities available for sale	12,477	15,162
Recurring [Member] | Level 2 [Member] | Other mortgage-backed securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	100	27
Securities available for sale	652	778
Recurring [Member] | Level 2 [Member] | Other securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	37	29
Recurring [Member] | Level 2 [Member] | Total trading account securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities		509
Trading account assets		509
Recurring [Member] | Level 2 [Member] | Interest rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	1,824	1,915
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	1,310	1,398
Recurring [Member] | Level 2 [Member] | Foreign exchange [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	26	65
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	24	209
Recurring [Member] | Level 2 [Member] | Energy and commodity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	209	253
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	203	252
Recurring [Member] | Level 2 [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	19	30
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	23	34
Recurring [Member] | Level 2 [Member] | Equity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	0	3
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities		3
Recurring [Member] | Level 3 [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	58
Commercial loans
Trading account assets	58
Total other investments	774	749
Derivative assets	41	45
Total Derivative assets	41	45
Total assets on a recurring basis at fair value	873	829
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	2	29
Total derivative liabilities	2	29
Total liabilities on a recurring basis at fair value	2	29
Recurring [Member] | Level 3 [Member] | States and political subdivisions [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	57
Recurring [Member] | Level 3 [Member] | Other mortgage-backed securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities	1	35
Recurring [Member] | Level 3 [Member] | Total trading account securities [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total trading account securities		35
Trading account assets		35
Recurring [Member] | Level 3 [Member] | Principal Direct Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	231	225
Recurring [Member] | Level 3 [Member] | Principal Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	482	473
Recurring [Member] | Level 3 [Member] | Principal Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	713	698
Recurring [Member] | Level 3 [Member] | Equity and Mezzanine Direct Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	18	15
Recurring [Member] | Level 3 [Member] | Equity and Mezzanine Indirect Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	43	36
Recurring [Member] | Level 3 [Member] | Private Equity and Mezzanine Investments [Member]
ASSETS MEASURED ON A RECURRING BASIS
Total other investments	61	51
Recurring [Member] | Level 3 [Member] | Interest rate [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	35	38
Recurring [Member] | Level 3 [Member] | Energy and commodity [Member]
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	1	1
Recurring [Member] | Level 3 [Member] | Credit [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	6	7
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities	1	28
Recurring [Member] | Level 3 [Member] | Equity [Member]
ASSETS MEASURED ON A RECURRING BASIS
Derivative assets	0
LIABILITIES MEASURED ON A RECURRING BASIS
Derivative liabilities

XML

Earnings Per Common Share (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2011
Earning Per Common Share (Additional Textual) [Abstract]
Amortization of discount on preferred stock including deemed dividend	$ 49,000,000
Series B Preferred Stock [Member]
Earning Per Common Share (Textual) [Abstract]
Repurchase of the Fixed-Rate Perpetual Preferred Stock	$ 2,500,000,000

XML

Loans and Loans Held for Sale (Tables)

6 Months Ended

Jun. 30, 2012

Asset Quality and Loans and Loans Held for Sale [Abstract]

Loans by Category

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Commercial, financial and agricultural	$	20,386	$	19,378	$	16,883
Commercial real estate:
Commercial mortgage		7,409		8,037		8,069
Construction		1,172		1,312		1,631
Total commercial real estate loans		8,581		9,349		9,700
Commercial lease financing		5,636		6,055		6,105
Total commercial loans		34,603		34,782		32,688
Residential — prime loans:
Real estate — residential mortgage		2,016		1,946		1,838
Home equity:
Key Community Bank		9,601		9,229		9,431
Other		479		535		595
Total home equity loans		10,080		9,764		10,026
Total residential — prime loans		12,096		11,710		11,864
Consumer other — Key Community Bank		1,263		1,192		1,157
Consumer other:
Marine		1,542		1,766		1,989
Other		101		125		142
Total consumer other		1,643		1,891		2,131
Total consumer loans		15,002		14,793		15,152
Total loans (a)	$	49,605	$	49,575	$	47,840

(a) Excluded at June 30, 2012, December 31, 2011, and June 30, 2011, are loans in the amount of $5.5 billion, $5.8 billion and $6.3 billion, respectively, related to the discontinued operations of the education lending business.

Loans held for sale

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Commercial, financial and agricultural	$	18	$	19	$	80
Real estate — commercial mortgage		523		567		198
Real estate — construction		12		35		39
Commercial lease financing		13		12		6
Real estate — residential mortgage		90		95		58
Total loans held for sale	$	656	$	728	$	381

Changes in loans held for sale

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Balance at beginning of the period	$	511	$	479	$	426
New originations		1,308		1,235		914
Transfers from held to maturity, net		7		19		16
Loan sales		(1,165)		(932)		(1,039)
Loan draws (payments), net		(4)		(72)		73
Transfers to OREO / valuation adjustments		(1)		(1)		(9)
Balance at end of perod	$	656	$	728	$	381

XML

Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Basic and diluted earnings per common share

		Three months ended June 30,				Six months ended June 30,
dollars in millions, except per share amounts		2012		2011		2012		2011
EARNINGS
Income (loss) from continuing operations		$	231	$	252	$	436	$	534
Less:	Net income (loss) attributable to noncontrolling interests		5		3		5		11
Income (loss) from continuing operations attributable to Key			226		249		431		523
Less:	Dividends on Series A Preferred Stock		5		6		11		12
	Cash dividends on Series B Preferred Stock (b)		—		—		—		31
	Amortization of discount on Series B Preferred Stock(b)		—		—		—		53
Income (loss) from continuing operations attributable to Key common shareholders			221		243		420		427
Income (loss) from discontinued operations, net of taxes (a)			10		(9)		5		(20)
Net income (loss) attributable to Key common shareholders		$	231	$	234	$	425	$	407
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)			944,648		947,565		946,995		914,911
Effect of dilutive convertible preferred stock, common share options and other stock awards (000)			3,439		4,568		4,034		5,251
Weighted-average common shares and potential common shares outstanding (000)			948,087		952,133		951,029		920,162
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders		$	.23	$	.26	$	.44	$	.47
Income (loss) from discontinued operations, net of taxes (a)			.01		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders (c)			.24		.25		.45		.44
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		$	.23	$	.26	$	.44	$	.46
Income (loss) from discontinued operations, net of taxes (a)			.01		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders — assuming dilution (c)			.24		.25		.45		.44

(a) In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of these decisions, we have accounted for these businesses as discontinued operations. The income from discontinued operations for the quarter ended June 30, 2012, and the six months ended June 30, 2012, was primarily attributable to fair value adjustments related to the education lending securitization trusts.

(b) Includes a $49 million deemed dividend recorded in the first quarter of 2011 related to the repurchase of the $2.5 billion Series B Preferred Stock.

(c) EPS may not foot due to rounding.

XML

Contingent Liabilities and Guarantees (Details Textual) (USD $) In Billions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 Y
Standby letters of credit
Remaining Weighted Average Life of Standby Letters of Credit	3.0
Remaining actual life	From less than one year to as many as eleven years
Recourse agreement with FNMA
Weighted average remaining term for outstanding commercial mortgage loans	6
Unpaid principal balance outstanding of loans sold	$ 3.0
Potential undiscounted future payments, maximum limit	One-third of principal balance of loan outstanding
Written put options
Weighted average life of written put options	1.8
Default guarantees
Terms of default guarantees range	From less than 1 year to as many as 7 years

XML

Asset Quality (Details 8) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of allowance for loan and lease losses
Balance at beginning of period - continuing operations	$ 944	$ 1,372	$ 1,004	$ 1,604
Charge-offs	(131)	(177)	(263)	(409)
Recoveries	54	43	85	82
Net loans charged off	(77)	(134)	(178)	(327)
Provision for loan and lease losses from continuing operations	21	(8)	63	(48)
Foreign currency translation adjustment			(1)	1
Balance at end of period - continuing operations	$ 888	$ 1,230	$ 888	$ 1,230

XML

Loans and Loans Held for Sale (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Loans by category
Commercial, financial and agricultural	$ 20,386	$ 19,378	$ 16,883
Commercial real estate:
Commercial mortgage	7,409	8,037	8,069
Construction	1,172	1,312	1,631
Total commercial real estate loans	8,581	9,349	9,700
Commercial lease financing	5,636	6,055	6,105
Total commercial loans	34,603	34,782	32,688
Residential - prime loans:
Real estate - residential mortgage	2,016	1,946	1,838
Home equity loans	10,080	9,764	10,026
Total residential - prime loans	12,096	11,710	11,864
Total consumer loans	15,002	14,793	15,152
Total loans	49,605	49,575	47,840
Segment, Discontinued Operations [Member]
Residential - prime loans:
Total loans	2,830	3,010	3,161
Other loan [Member]
Residential - prime loans:
Home equity loans	479	535	595
Community Bank [Member]
Residential - prime loans:
Home equity loans	9,601	9,229	9,431
Consumer other	1,263	1,192	1,157
Corporate Banking [Member]
Residential - prime loans:
Consumer other	1,643	1,891	2,131
Corporate Banking [Member] | Marine loan [Member]
Residential - prime loans:
Consumer other	1,542	1,766	1,989
Corporate Banking [Member] | Other loan [Member]
Residential - prime loans:
Consumer other	$ 101	$ 125	$ 142

XML

Asset Quality (Tables)

6 Months Ended

Jun. 30, 2012

Asset Quality and Loans and Loans Held for Sale [Abstract]

Nonperforming assets and past due loans

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Total nonperforming loans (a)	$	657	$	727	$	842
Nonperforming loans held for sale		38		46		42
OREO		28		65		52
Other nonperforming assets		28		21		14
Total nonperforming assets	$	751	$	859	$	950
Restructured loans included in nonperforming loans (b)	$	163	$	191	$	144
Restructured loans with an allocated specific allowance (c)		71		50		19
Specifically allocated allowance for restructured loans (d)		34		10		5
Accruing loans past due 90 days or more	$	131	$	164	$	118
Accruing loans past due 30 through 89 days		362		441		465

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are: subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January, 2012. This policy related to the classification of second lien home equity loans was implemented prospectively, and therefore prior periods were not presented.

(b) A loan is “restructured” (i.e., TDRs) when the borrower is experiencing financial difficulty and we grant a concession that we would not otherwise have considered to improve the collectability of the loan. Typical concessions include: reducing the interest rate, extending the maturity date, or reducing the principal balance.

(c) Included in individually impaired loans allocated a specific allowance.

(d) Included in allowance for individually evaluated impaired loans.

Breakdown of individually impaired loans

				Unpaid					Average
June 30, 2012	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	59		$	142			—	$	68
Commercial real estate:
Commercial mortgage		112			199			—		113
Construction		51			204			—		49
Total commercial real estate loans		163			403			—		162
Total commercial loans with no related allowance recorded		222			545			—		230
Real estate — residential mortgage		1			1			—		1
Total consumer loans		1			1			—		1
Total loans with no related allowance recorded		223			546			—		231
With an allowance recorded:
Commercial, financial and agricultural		43			53		$	12		46
Commercial real estate:
Commercial mortgage		56			98			15		63
Construction		4			4			3		4
Total commercial real estate loans		60			102			18		67
Total commercial loans with an allowance recorded		103			155			30		113
Real estate — residential mortgage		16			17			2		8
Home equity:
Key Community Bank		11			11			3		6
Other		6			6			1		3
Total home equity loans		17			17			4		9
Consumer other — Key Community Bank		2			2			1		1
Consumer other:
Marine		50			50			11		25
Other		—			—			—		—
Total consumer other		50			50			11		25
Total consumer loans		85			86			18		43
Total loans with an allowance recorded		188			241			48		156
Total	$	411		$	787		$	48	$	387

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

				Unpaid					Average
December 31, 2011	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	88		$	195			—	$	75
Commercial real estate:
Commercial mortgage		100			240			—		131
Construction		30			113			—		98
Total commercial real estate loans		130			353			—		229
Total loans with no related allowance recorded		218			548			—		304
With an allowance recorded:
Commercial, financial and agricultural		62			70		$	26		75
Commercial real estate:
Commercial mortgage		96			115			21		91
Construction		12			18			4		29
Total commercial real estate loans		108			133			25		120
Total loans with an allowance recorded		170			203			51		201
Total	$	388		$	751		$	51	$	505

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

				Unpaid					Average
June 30, 2011	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	116		$	217			—	$	89
Commercial real estate:
Commercial mortgage		123			207			—		143
Construction		83			226			—		124
Total commercial real estate loans		206			433			—		267
Total loans with no related allowance recorded		322			650			—		356
With an allowance recorded:
Commercial, financial and agricultural		43			71		$	14		66
Commercial real estate:
Commercial mortgage		89			174			21		88
Construction		34			73			11		39
Total commercial real estate loans		123			247			32		127
Commercial lease financing		—			—			—		6
Total loans with an allowance recorded		166			318			46		199
Total	$	488		$	968		$	46	$	555

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

Breakdown of nonperforming TDRs by loans category

				Pre-modification			Post-modification
				Outstanding			Outstanding
June 30, 2012	Number			Recorded			Recorded
dollars in millions	of loans			Investment			Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		95	$		108	$		59
Commercial real estate:
Real estate — commercial mortgage		16			47			31
Real estate — construction		11			60			43
Total commercial real estate loans		27			107			74
Total commercial loans		122			215			133
Real estate — residential mortgage		56			7			7
Home equity:
Key Community Bank		50			4			4
Other		74			2			1
Total home equity loans		124			6			5
Consumer other — Key Community Bank		11			1			1
Consumer other:
Marine		139			17			17
Other		11			1			—
Total consumer other		150			18			17
Total consumer loans		341			32			30
Total nonperforming TDRs		463			247			163
Prior-year accruing (a)
Commercial, financial and agricultural		115			8			6
Commercial real estate:
Real estate — commercial mortgage		7			71			48
Real estate — construction		1			15			1
Total commercial real estate loans		8			86			49
Total commercial loans		123			94			55
Real estate — residential mortgage		111			11			11
Home equity:
Key Community Bank		88			7			7
Other		101			3			3
Total home equity loans		189			10			10
Consumer other — Key Community Bank		20			1			—
Consumer other:
Marine		135			34			33
Other		53			2			2
Total consumer other		188			36			35
Total consumer loans		508			58			56
Total prior-year accruing TDRs		631			152			111
Total TDRs		1,094	$		399	$		274

(a) All TDRs that were restructured prior to January 1, 2012 and are fully accruing.

Concession types for our commercial accruing and nonaccruing TDRs

	June 30,			December 31,			June 30,
dollars in millions	2012			2011			2011
Interest rate reduction	$	155		$	177		$	175
Forgiveness of principal		13			23			10
Other modification of loan terms		20			8			6
Total	$	188		$	208		$	191
Total commercial and consumer TDRs (a)	$	274		$	276		$	252
Total commercial TDRs to total commercial loans		.54	%		.60	%		.58	%
Total commercial TDRs to total loans		.38			.42			.40
Total commercial loans	$	34,603		$	34,782		$	32,688
Total loans		49,605			49,575			47,840

(a) Commitments outstanding to lend additional funds to borrowers whose terms have been modified in TDRs are $45 million, $25 million, and $45 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively.

Past due loans including current loans

			30-59		60-89		90 and Greater				Total Past Due and
June 30, 2012			Days Past		Days Past		Days Past		Nonperforming		Nonperforming		Total
in millions	Current		Due		Due		Due		Loans (a)		Loans		Loans
LOAN TYPE
Commercial, financial and agricultural	$	20,148	$	60	$	13	$	24	$	141	$	238	$	20,386
Commercial real estate:
Commercial mortgage		7,182		15		16		24		172		227		7,409
Construction		1,033		12		24		35		68		139		1,172
Total commercial real estate loans		8,215		27		40		59		240		366		8,581
Commercial lease financing		5,581		22		8		7		18		55		5,636
Total commercial loans	$	33,944	$	109	$	61	$	90	$	399	$	659	$	34,603
Real estate — residential mortgage	$	1,895	$	24	$	10	$	9	$	78	$	121	$	2,016
Home equity:
Key Community Bank		9,361		56		26		17		141		240		9,601
Other		445		10		4		3		17		34		479
Total home equity loans		9,806		66		30		20		158		274		10,080
Consumer other — Key Community Bank		1,237		13		4		7		2		26		1,263
Consumer other:
Marine		1,478		31		10		4		19		64		1,542
Other		95		2		2		1		1		6		101
Total consumer other		1,573		33		12		5		20		70		1,643
Total consumer loans	$	14,511	$	136	$	56	$	41	$	258	$	491	$	15,002
Total loans	$	48,455	$	245	$	117	$	131	$	657	$	1,150	$	49,605

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January, 2012.

			30-59		60-89		90 and Greater				Total Past Due and
June 30, 2011			Days Past		Days Past		Days Past		Nonperforming		Nonperforming		Total
in millions	Current		Due		Due		Due		Loans		Loans		Loans
LOAN TYPE
Commercial, financial and agricultural	$	16,599	$	35	$	17	$	19	$	213	$	284	$	16,883
Commercial real estate:
Commercial mortgage		7,743		34		51		11		230		326		8,069
Construction		1,437		11		24		28		131		194		1,631
Total commercial real estate loans		9,180		45		75		39		361		520		9,700
Commercial lease financing		5,983		20		40		21		41		122		6,105
Total commercial loans	$	31,762	$	100	$	132	$	79	$	615	$	926	$	32,688
Real estate — residential mortgage	$	1,713	$	24	$	14	$	8	$	79	$	125	$	1,838
Home equity:
Key Community Bank		9,216		66		32		16		101		215		9,431
Other		559		13		7		5		11		36		595
Total home equity loans		9,775		79		39		21		112		251		10,026
Consumer other — Key Community Bank		1,129		14		4		7		3		28		1,157
Consumer other:
Marine		1,898		42		14		3		32		91		1,989
Other		138		2		1		—		1		4		142
Total consumer other		2,036		44		15		3		33		95		2,131
Total consumer loans	$	14,653	$	161	$	72	$	39	$	227	$	499	$	15,152
Total loans	$	46,415	$	261	$	204	$	118	$	842	$	1,425	$	47,840

Financing Receivable Credit Quality Indicators

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category ^(a)

June 30,
in millions
	Commercial, financial and  agricultural				RE — Commercial				RE — Construction				Commercial Lease				Total
RATING (b) (c)	2012		2011		2012		2011		2012		2011		2012		2011		2012		2011
AAA — AA	$	165	$	100		—	$	2	$	1	$	3	$	605	$	655	$	771	$	760
A		680		671	$	64		63		1		1		992		1,245		1,737		1,980
BBB — BB		17,652		13,546		5,925		5,553		791		747		3,709		3,590		28,077		23,436
B		868		955		553		941		58		262		197		343		1,676		2,501
CCC — C		1,021		1,611		867		1,510		321		618		133		272		2,342		4,011
Total	$	20,386	$	16,883	$	7,409	$	8,069	$	1,172	$	1,631	$	5,636	$	6,105	$	34,603	$	32,688

(a)  Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)  Our bond rating to internal loan grade conversion system is as follows: AAA - AA = 1, A = 2, BBB - BB = 3 - 13, B = 14 - 16, and CCC - C = 17 - 20.

(c)  Our internal loan grade to regulatory-defined classification is as follows: Pass = 1-16, Special Mention = 17, Substandard = 18, Doubtful = 19, and Loss = 20.

Consumer Credit Exposure

Credit Risk Profile by Regulatory Classifications ^(a) (b)

June 30,
in millions
	Residential — Prime
GRADE	2012		2011
Pass	$	11,831	$	11,644
Substandard		265		220
Total	$	12,096	$	11,864

Credit Risk Profile Based on Payment Activity ^(a) (b)

June 30,	Consumer — Key Community  Bank				Consumer — Marine				Consumer — Other				Total
in millions	2012		2011		2012		2011		2012		2011		2012		2011
Performing	$	1,261	$	1,154	$	1,523	$	1,957	$	100	$	141	$	2,884	$	3,252
Nonperforming		2		3		19		32		1		1		22		36
Total	$	1,263	$	1,157	$	1,542	$	1,989	$	101	$	142	$	2,906	$	3,288

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) Our past due payment activity to regulatory classification conversion is as follows: pass = less than 90 days; and substandard = 90 days and greater plus nonperforming loans. As of June 30, 2012, any second lien home equity loan with an associated first lien: that is 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan in accordance with regulatory guidance issued in January 2012.

Summary of the allowance for loan and lease losses

		Three months ended  June 30,					Six months ended  June 30,
in millions		2012		2011			2012		2011
Balance at beginning of period — continuing operations	$		944	$	1,372	$		1,004	$	1,604
Charge-offs			(131)		(177)			(263)		(409)
Recoveries			54		43			85		82
Net loans charged off			(77)		(134)			(178)		(327)
Provision for loan and lease losses from continuing operations			21		(8)			63		(48)
Foreign currency translation adjustment			—		—			(1)		1
Balance at end of period — continuing operations	$		888	$	1,230	$		888	$	1,230

Changes in allowance for loan and lease losses by loan category

in millions	December 31,  2011		Provision			Charge-offs		Recoveries		June 30,  2012
Commercial, financial and agricultural	$	334	$	(12)		$	(49)	$	31	$	304
Real estate — commercial mortgage		272		8			(46)		16		250
Real estate — construction		63		6			(16)		2		55
Commercial lease financing		78		—			(20)		10		68
Total commercial loans		747		2			(131)		59		677
Real estate — residential mortgage		37		—			(13)		2		26
Home equity:
Key Community Bank		103		21			(48)		4		80
Other		29		9			(17)		3		24
Total home equity loans		132		30			(65)		7		104
Consumer other — Key Community Bank		41		10			(20)		3		34
Consumer other:
Marine		46		15			(30)		13		44
Other		1		5			(4)		1		3
Total consumer other:		47		20			(34)		14		47
Total consumer loans		257		60			(132)		26		211
Total ALLL — continuing operations		1,004		62	(a)		(263)		85		888
Discontinued operations		104		6			(39)		8		79
Total ALLL — including discontinued operations	$	1,108	$	68		$	(302)	$	93	$	967

(a) Includes $1 million of foreign currency translation adjustment.

in millions	December 31,  2010		Provision			Charge-offs		Recoveries		June 30,  2011
Commercial, financial and agricultural	$	485	$	(22)		$	(93)	$	25	$	395
Real estate — commercial mortgage		416		(18)			(62)		7		343
Real estate — construction		145		15			(62)		8		106
Commercial lease financing		175		(53)			(26)		11		107
Total commercial loans		1,221		(78)			(243)		51		951
Real estate — residential mortgage		49		7			(17)		2		41
Home equity:
Key Community Bank		120		30			(53)		2		99
Other		57		4			(26)		2		37
Total home equity loans		177		34			(79)		4		136
Consumer other — Key Community Bank		57		9			(23)		4		47
Consumer other:
Marine		89		(14)			(42)		19		52
Other		11		(5)			(5)		2		3
Total consumer other:		100		(19)			(47)		21		55
Total consumer loans		383		31			(166)		31		279
Total ALLL — continuing operations		1,604		(47)	(a)		(409)		82		1,230
Discontinued operations		114		62			(73)		6		109
Total ALLL — including discontinued operations	$	1,718	$	15		$	(482)	$	88	$	1,339

(a) Includes $1 million of foreign currency translation adjustment.

Allowance for loan and lease losses and the corresponding loan balances

	Allowance (a)				Outstanding (a)
June 30, 2012	Individually Evaluated for		Collectively Evaluated for					Individually Evaluated for		Collectively  Evaluated for
in millions	Impairment		Impairment		Loans			Impairment		Impairment
Commercial, financial and agricultural	$	12	$	292	$	20,386		$	102	$	20,284
Commercial real estate:
Commercial mortgage		15		235		7,409			168		7,241
Construction		3		52		1,172			55		1,117
Total commercial real estate loans		18		287		8,581			223		8,358
Commercial lease financing		—		68		5,636			—		5,636
Total commercial loans		30		647		34,603			325		34,278
Real estate — residential mortgage		2		24		2,016			17		1,999
Home equity:
Key Community Bank		3		77		9,601			11		9,590
Other		1		23		479			6		473
Total home equity loans		4		100		10,080			17		10,063
Consumer other — Key Community Bank		1		33		1,263			2		1,261
Consumer other:
Marine		11		33		1,542			50		1,492
Other		—		3		101			—		101
Total consumer other		11		36		1,643			50		1,593
Total consumer loans		18		193		15,002			86		14,916
Total ALLL — continuing operations		48		840		49,605			411		49,194
Discontinued operations		—		79		5,483	(b)		—		5,483
Total ALLL — including discontinued operations	$	48	$	919	$	55,088		$	411	$	54,677

(a) There were no loans acquired with deteriorated credit quality at June 30, 2012.

(b) Amount includes $2.8 billion of loans carried at fair value that are excluded from ALLL consideration.

	Allowance (a)				Outstanding (a)
June 30, 2011	Individually Evaluated for		Collectively Evaluated for				Individually Evaluated for		Collectively  Evaluated for
in millions	Impairment		Impairment		Loans		Impairment		Impairment
Commercial, financial and agricultural	$	14	$	381	$	16,883	$	159	$	16,724
Commercial real estate:
Commercial mortgage		21		322		8,069		213		7,856
Construction		11		95		1,631		116		1,515
Total commercial real estate loans		32		417		9,700		329		9,371
Commercial lease financing		—		107		6,105		—		6,105
Total commercial loans		46		905		32,688		488		32,200
Real estate — residential mortgage		—		41		1,838		—		1,838
Home equity:
Key Community Bank		—		99		9,431		—		9,431
Other		—		37		595		—		595
Total home equity loans		—		136		10,026		—		10,026
Consumer other — Key Community Bank		—		47		1,157		—		1,157
Consumer other:
Marine		—		52		1,989		—		1,989
Other		—		3		142		—		142
Total consumer other		—		55		2,131		—		2,131
Total consumer loans		—		279		15,152		—		15,152
Total ALLL — continuing operations		46		1,184		47,840		488		47,352
Discontinued operations		—		109		6,261		—		6,261
Total ALLL — including discontinued operations	$	46	$	1,293	$	54,101	$	488	$	53,613

(a) There were no loans acquired with deteriorated credit quality at June 30, 2011.

Changes in Liability for Credit Losses on Lending Related Commitments

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Balance at beginning of period	$	45	$	69	$	45	$	73
Provision (credit) for losses on lending-related commitments		6		(12)		6		(16)
Balance at end of period	$	51	$	57	$	51	$	57

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair values of the funds and the unfunded commitments for funds

June 30, 2012			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Passive funds (a)	$	18	$	3
Co-managed funds (b)		25		3
Total	$	43	$	6

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to seven years.

(b) We are a manager or co-manager of these funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. In addition, we receive management fees. We can sell or transfer our interest in any of these funds with the written consent of a majority of the fund’s investors. In one instance, the other co-manager of the fund must consent to the sale or transfer of our interest in the fund. The funds will mature over a period of two to five years.

Fair values of indirect funds and unfunded commitments for indirect funds

June 30, 2012			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Private equity funds (a)	$	478	$	106
Hedge fund(b)		4		—
Total	$	482	$	106

(a) Consists of buyout, venture capital, and fund of funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to ten years.

(b) Consists of a fund invested in long and short positions of “stressed and distressed” fixed income-oriented securities, with the goal of producing attractive risk-adjusted returns. The investments can be redeemed quarterly with 45 days notice. However, the fund’s general partners may impose quarterly redemption limits that may delay receipt of requested redemptions.

Fair value of assets and liabilities on recurring basis

June 30, 2012
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short-term investments:
Securities purchased under resale agreements		—	$	338		—	$	338
Trading account assets:
U.S. Treasury, agencies and corporations		—		438		—		438
States and political subdivisions		—		27	$	57		84
Collateralized mortgage obligations		—		16		—		16
Other mortgage-backed securities		—		100		1		101
Other securities	$	3		37		—		40
Total trading account securities		3		618		58		679
Commercial loans		—		—		—		—
Total trading account assets		3		618		58		679
Securities available for sale:
States and political subdivisions		—	$	56		—	$	56
Collateralized mortgage obligations		—		12,477		—		12,477
Other mortgage-backed securities		—		652		—		652
Other securities	$	20		—		—		20
Total securities available for sale		20		13,185		—		13,205
Other investments:
Principal investments:
Direct	$	11		—	$	231	$	242
Indirect		—		—		482		482
Total principal investments		11		—		713		724
Equity and mezzanine investments:
Direct		—		—	$	18	$	18
Indirect		—		—		43		43
Total equity and mezzanine investments		—		—		61		61
Total other investments		11		—		774		785
Derivative assets:
Interest rate		—	$	1,824	$	35	$	1,859
Foreign exchange	$	81		26		—		107
Energy and commodity		—		209		—		209
Credit		—		19		6		25
Equity		—		—		—		—
Derivative assets		81		2,078		41		2,200
Netting adjustments(a)		—		—		—		(1,382)
Total derivative assets		81		2,078		41		818
Accrued income and other assets		2		134		—		136
Total assets on a recurring basis at fair value	$	117	$	16,353	$	873	$	15,961
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	481		—	$	481
Bank notes and other short-term borrowings:
Short positions	$	3		360		—		363
Derivative liabilities:
Interest rate		—		1,310		—		1,310
Foreign exchange		81		24		—		105
Energy and commodity		—		203	$	1		204
Credit		—		23		1		24
Equity		—		—		—		—
Derivative liabilities		81		1,560		2		1,643
Netting adjustments(a)		—		—		—		(880)
Total derivative liabilities		81		1,560		2		763
Accrued expense and other liabilities		—		4		—		4
Total liabilities on a recurring basis at fair value	$	84	$	2,405	$	2	$	1,611

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2011
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short term investments:
Securities purchased under resale agreements		—	$	236		—	$	236
Trading account assets:
U.S. Treasury, agencies and corporations		—		353		—		353
States and political subdivisions		—		81		—		81
Collateralized mortgage obligations		—		19		—		19
Other mortgage-backed securities		—		27	$	35		62
Other securities	$	79		29		—		108
Total trading account securities		79		509		35		623
Commercial loans		—		—		—		—
Total trading account assets		79		509		35		623
Securities available for sale:
States and political subdivisions		—		63		—		63
Collateralized mortgage obligations		—		15,162		—		15,162
Other mortgage-backed securities		—		778		—		778
Other securities		9		—		—		9
Total securities available for sale		9		16,003		—		16,012
Other investments:
Principal investments:
Direct		11		—		225		236
Indirect		—		—		473		473
Total principal investments		11		—		698		709
Equity and mezzanine investments:
Direct		—		—		15		15
Indirect		—		—		36		36
Total equity and mezzanine investments		—		—		51		51
Total other investments		11		—		749		760
Derivative assets:
Interest rate		—		1,915		38		1,953
Foreign exchange		86		65		—		151
Energy and commodity		—		253		—		253
Credit		—		30		7		37
Equity		—		3		—		3
Derivative assets		86		2,266		45		2,397
Netting adjustments (a)		—		—		—		(1,452)
Total derivative assets		86		2,266		45		945
Accrued income and other assets		7		105		—		112
Total assets on a recurring basis at fair value	$	192	$	19,119	$	829	$	18,688
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	292		—	$	292
Bank notes and other short-term borrowings:
Short positions		—		337		—		337
Derivative liabilities:
Interest rate		—		1,398		—		1,398
Foreign exchange	$	79		209		—		288
Energy and commodity		—		252	$	1		253
Credit		—		34		28		62
Equity		—		3		—		3
Derivative liabilities		79		1,896		29		2,004
Netting adjustments (a)		—		—		—		(978)
Total derivative liabilities		79		1,896		29		1,026
Accrued expense and other liabilities		23		22		—		45
Total liabilities on a recurring basis at fair value	$	102	$	2,547	$	29	$	1,700

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

Changes in Level 3 Fair Value Measurements

	Trading Account Assets						Other Investments												Derivative Instruments							(a)
in millions	Other Mortgage- Backed Securities			Other Securities			Principal Investments						Equity and Mezzanine Investments						Interest Rate			Energy and Commodity			Credit
							Direct			Indirect			Direct			Indirect
Balance at December 31, 2011	$	35			—		$	225		$	473		$	15		$	36		$	38		$	(1)		$    (21)
Gains (losses) included in earnings		2	(b)	$	(2	)  (b)		8	(c)		43	(c)		3	(c)		6	(c)		(3)	(b)		—	(b)	(7)	(b)
Purchases		—			—			10			20			—			4			1			—		—
Sales		(32)			—			(12)			(54)			—			—			(1)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			2			—			—			—			(3)			—			—		33
Transfers into Level 3		—			57	(d)		—			—			—			—			4	(d)		—		—
Transfers out of Level 3		(4)	(d)		—			—			—			—			—			(4)	(d)		—		—
Balance at June 30, 2012	$	1			57		$	231		$	482		$	18		$	43		$	35		$	(1)		$       5
Unrealized gains (losses) included in earnings		—	(b)	$	(2)	(b)	$	8	(c)	$	28	(c)	$	10	(c)	$	6	(c)		—	(b)		—	(b)	—	(b)
Balance at March 31, 2012	$	1		$	—		$	226		$	485		$	15		$	42		$	36			(1)		$       5
Gains (losses) included in earnings		—	(b)		(5)	(b)		7	(c)		20	(c)		3	(c)		5	(c)		2	(b)		—	(b)	(2)	(b)
Purchases		—			—			9			10			—			1			—			—		—
Sales		—			—			(11)			(33)			—			—			—			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			5			—			—			—			(2)			—			—		2
Transfers into Level 3		—			57	(d)		—			—			—			(3)	(d)		—			—		—
Transfers out of Level 3		—			—			—			—			—			—			(3)	(d)		—		—
Balance at June 30, 2012	$	1			57		$	231		$	482		$	18		$	43		$	35			(1)		$       5
Unrealized gains (losses) included in earnings		—	(b)		(5)	(b)	$	7	(c)	$	9	(c)	$	4	(c)	$	2	(c)		—	(b)		—	(b)	—	(b)
Balance at December 31, 2010	$	1		$	21		$	372		$	526		$	20		$	30		$	75		$	1		$     11
Gains (losses) included in earnings		—	(b)		—	(b)		2	(c)		43	(c)		13	(c)		—	(c)		14	(b)		(1)	(b)	(10)	(b)
Purchases		—			3			30			46			—			9			11			—		—
Sales		—			—			(9)			(36)			—			—			(20)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			(24)			—			—			(19)			(3)			—			—		7
Transfers into Level 3		—			—			—			—			—			—			10			—		—
Transfers out of Level 3		—			—			(125)	(e)		(109)	(e)		—			(3)			(9)			—		—
Balance at June 30, 2011	$	1		$	—		$	270		$	470		$	14		$	33		$	81		$	—		$       8
Unrealized gains (losses) included in earnings		—	(b)	$	3	(b)	$	8	(c)	$	28	(c)	$	32	(c)	$	(3)	(c)		—	(b)		—	(b)	—	(b)
Balance at March 31, 2011	$	1			—		$	395		$	548		$	25		$	27		$	81			—		$       4
Gains (losses) included in earnings		—	(b)	$	3	(b)		—	(c)		10	(c)		8	(c)		1	(c)		10	(b)		—	(b)	(9)	(b)
Purchases		—			—			2			32			—			7			11			—		6
Sales		—			—			(2)			(11)			—			—			(18)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			(3)			—			—			(19)			(2)			—			—		7
Transfers into Level 3		—			—			—			—			—			—			3			—		—
Transfers out of Level 3		—			—			(125)	(e)		(109)	(e)		—			—			(6)			—		—
Balance at June 30, 2011	$	1			—		$	270		$	470		$	14		$	33		$	81			—		$       8
Unrealized gains (losses) included in earnings		—	(b)	$	3	(b)	$	6	(c)	$	4	(c)	$	22	(c)	$	1	(c)		—	(b)		—	(b)	—	(b)

(a) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(b) Realized and unrealized gains and losses on trading account assets and derivative instruments are reported in “investment banking and capital markets income (loss)” on the income statement.

(c) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized gains and losses on private equity and mezzanine investments are reported in “investment banking and capital markets income (loss)” on the income statement.

(d) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

Assets Measured at Fair Value on a Nonrecurring Basis

	June 30, 2012								December 31, 2011
in millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	81	$	81		—		—	$	149	$	149
Loans held for sale (a)		—		—		15		15		—		—		15		15
Accrued income and other assets		—	$	17		25		42		—	$	19		25		44
Total assets on a nonrecurring basis at fair value		—	$	17	$	121	$	138		—	$	19	$	189	$	208

(a) During the first half of 2012, we transferred $38 million of commercial and consumer loans and leases from held-for-sale status to the held-to-maturity portfolio at their current fair value.

Quantitative Information about Level 3 Fair Value Measurements

June 30, 2012 dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	220	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple		4.8 - 8.2% (6.1%)
Equity instruments of private companies				EBITDA multiple (where applicable)		5.5 - 12.0% (4.8%)
				Revenue multiple (where applicable)		0.2 - 4.4% (0.6%)
Nonrecurring
Impaired loans		81	Fair value of underlying collateral	Discount		0.00 - 100.00% (32%)
Goodwill		917	Discounted cash flow and market data	Earnings multiple of peers		8.30 - 11.90 (10.01)
				Equity multiple of peers		1.21 - 1.32 (1.27)
				Control premium		N/A (32.00%)
				Weighted-average cost of capital		N/A (15.00%)
Mortgage servicing assets		237	Discounted cash flow	Prepayment speed		0.00 - 25.00% (11.70%)
				Expected credit losses		1.00 - 3.00% (2.40%)
				Residual cash flows discount rate		7.00 - 15.00% (9.40%)
				Value assigned to escrow funds		0.50 - 3.75% (1.80%)
				Servicing cost		700 - 17,000 (2,512)
				Loan assumption rate		0.00 - 3.00% (2.18%)
				Percentage late		0.00 - 2.00% (0.22%)

Fair Value Disclosures of Financial Instruments

		June 30, 2012													December 31, 2011
				Fair Value
in millions		Carrying Amount		Level 1		Level 2		Level 3		Netting Adjustment			Total		Carrying Amount		Fair Value
ASSETS
Cash and short-term investments (a)	$		2,933	$	2,595	$	338		—		—		$	2,933	$	4,213	$	4,213
Trading account assets (e)			679		3		618	$	58		—			679		623		623
Securities available for sale (e)			13,205		20		13,185		—		—			13,205		16,012		16,012
Held-to-maturity securities (b)			4,352		—		4,396		—		—			4,396		2,109		2,133
Other investments (e)			1,186		11		401		774		—			1,186		1,163		1,163
Loans, net of allowance (c)			48,717		—		—		47,912		—			47,912		48,571		47,561
Loans held for sale (e)			656		—		—		656		—			656		728		728
Mortgage servicing assets (d)			186		—		—		237		—			237		173		245
Derivative assets (e)			818		81		2,078		41	$	(1,382	)     (f)		818		945		945
LIABILITIES
Deposits with no stated maturity (a)	$		52,495		—	$	52,495		—		—		$	52,495	$	51,014	$	51,014
Time deposits (d)			9,672	$	617		9,271		—		—			9,888		10,942		11,253
Short-term borrowings (a)			2,078		3		2,075		—		—			2,078		2,048		2,048
Long-term debt (d)			7,521		3,890		3,955		—		—			7,845		9,520		9,792
Derivative liabilities (e)			763		81		1,560	$	2	$	(880	)    (f)		763		1,026		1,026

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities and certain prepayment assumptions. We review the valuations derived from the models to ensure they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(c) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(d) Fair values of mortgage servicing assets, time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(e) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets Measured at Fair Value on a Nonrecurring Basis” in this note.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

XML

Consolidated Statements of Changes in Equity (Unaudited) (USD $) In Millions, except Share data, unless otherwise specified	Total	Preferred Stock	Series B Preferred Stock	Common Stock	Common Stock Warrant	Capital Surplus	Retained Earnings	Retained Earnings Series A Preferred Stock	Retained Earnings Series B Preferred Stock	Treasury Stock, at Cost	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
Beginning Balance at Dec. 31, 2010		$ 2,737		$ 946	$ 87	$ 3,711	$ 5,557			$ (1,904)	$ (17)	$ 257
Beginning Balance, Preferred Shares at Dec. 31, 2010		2,930,000
Beginning Balance, Common Shares at Dec. 31, 2010				880,608,000
Net income (loss)	514						503					11
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of $61 and ($31) for six months ended June 30, 2011 and 2012 respectively	103										103
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $4 and $5 for six months ended June 30, 2011 and 2012 respectively	7										7
Net distribution to noncontrolling interests												(250)
Foreign currency translation adjustments	13										13
Net pension and postretirement benefit costs, net of income taxes	3										3
Deferred compensation						(2)
Cash dividends declared on common shares ($.04 per share) ($.08 per share) for six months ended June 30, 2011 and 2012 respectively							(38)
Cash dividends declared on Preferred Stock								(12)	(31)
Preferred Stock- TARP redemption, shares		(25,000)
Preferred Stock- TARP redemption, value		(2,451)					(49)
Repurchase of common stock warrant					(87)	17
Amortization of discount on Series B Preferred Stock			4						(4)
Common shares issuance, Value				71		533
Common shares issuance, shares				70,621,000
Common shares reissued (returned) for stock options and other employee benefit plans						(68)				89
Common shares reissued for stock options and other employee benefit plans, Shares				2,593,000
Other		1
Ending Balance at Jun. 30, 2011	9,737	291		1,017	0	4,191	5,926			(1,815)	109	18
Ending Balance, Preferred Shares at Jun. 30, 2011		2,905,000
Beginning Balance at Dec. 31, 2011	9,922	291		1,017	0	4,194	6,246			(1,815)	(28)	17
Beginning Balance, Preferred Shares at Dec. 31, 2011		2,905,000
Beginning Balance, Common Shares at Dec. 31, 2011				953,008,000
Net income (loss)	441						436					5
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of $61 and ($31) for six months ended June 30, 2011 and 2012 respectively	(53)										(53)
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of $4 and $5 for six months ended June 30, 2011 and 2012 respectively	8										8
Net distribution to noncontrolling interests	(1)
Foreign currency translation adjustments	(4)										(4)
Net pension and postretirement benefit costs, net of income taxes	5										5
Deferred compensation						8
Cash dividends declared on common shares ($.04 per share) ($.08 per share) for six months ended June 30, 2011 and 2012 respectively							(76)
Cash dividends declared on Preferred Stock								(11)
Common shares repurchased				(10,468,000,000)						(82,000,000)
Common shares reissued (returned) for stock options and other employee benefit plans						(82)				101
Common shares reissued for stock options and other employee benefit plans, Shares				2,933,000
Ending Balance at Jun. 30, 2012	$ 10,176	$ 291		$ 1,017	$ 0	$ 4,120	$ 6,595			$ (1,796)	$ (72)	$ 21
Ending Balance, Preferred Shares at Jun. 30, 2012		2,905,000

XML

Securities (Tables)

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Details of Securities

		June 30, 2012
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$		53	$	3		—	$	56
Collateralized mortgage obligations			12,098		379		—		12,477
Other mortgage-backed securities			597		55		—		652
Other securities			20		1	$	1		20
Total securities available for sale	$		12,768	$	438	$	1	$	13,205
HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$		4,334	$	44		—	$	4,378
Other securities			18		—		—		18
Total held-to-maturity securities	$		4,352	$	44		—	$	4,396
		December 31, 2011
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$		60	$	3		—	$	63
Collateralized mortgage obligations			14,707		455		—		15,162
Other mortgage-backed securities			715		63		—		778
Other securities			8		1		—		9
Total securities available for sale	$		15,490	$	522		—	$	16,012
HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$		2,091	$	24		—	$	2,115
Other securities			18		—		—		18
Total held-to-maturity securities	$		2,109	$	24		—	$	2,133
		June 30, 2011
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations	$		9		—		—	$	9
States and political subdivisions			126	$	3		—		129
Collateralized mortgage obligations			17,124		485		—		17,609
Other mortgage-backed securities			845		72		—		917
Other securities			13		3		—		16
Total securities available for sale	$		18,117	$	563		—	$	18,680
HELD-TO-MATURITY SECURITIES
States and political subdivisions	$		1		—		—	$	1
Other securities			18		—		—		18
Total held-to-maturity securities	$		19		—		—	$	19

Available for Sale Securities (Unrealized Loss Position)

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
in millions	Fair Value		Gross   Unrealized   Losses		Fair Value		Gross   Unrealized   Losses		Fair Value		Gross Unrealized Losses
June 30, 2012
Securities available for sale:
Collateralized mortgage obligations	$	1		—		—		—	$	1		—
Other securities		12	$	1		—		—		12	$	1
Held-to-maturity:
Collateralized mortgage obligations		200		—		—		—		200		—
Total temporarily impaired securities	$	213	$	1		—		—	$	213	$	1
December 31, 2011
Securities available for sale:
Collateralized mortgage obligations	$	1		—		—		—	$	1		—
Other securities		3		—		—		—		3		—
Total temporarily impaired securities	$	4		—		—		—	$	4		—
June 30, 2011
Securities available for sale:
Collateralized mortgage obligations	$	126		—		—		—	$	126		—
Total temporarily impaired securities	$	126		—		—		—	$	126		—

Cumulative Credit Portion of Impairments on Debt Securities

in millions
Balance at March 31, 2012	$	4
Impairment recognized in earnings		—
Balance at June 30, 2012	$	4

Available for Sale Securities Realized Gains and Losses

in millions
Realized gains	—
Realized losses	—
Net securities gains (losses)	—

Securities by Maturity

	Securities         Available for Sale				Held-to-Maturity          Securities
June 30, 2012 in millions	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	950	$	966	$	5	$	5
Due after one through five years		11,748		12,163		4,347		4,391
Due after five through ten years		66		72		—		—
Due after ten years		4		4		—		—
Total	$	12,768	$	13,205	$	4,352	$	4,396

XML

Mortgage Servicing Assets (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Changes in the carrying amount of mortgage servicing assets
Balance at beginning of year	$ 173	$ 196
Servicing retained from loan sales	20	11
Purchases	24	2
Amortization	(29)	(29)
Impairments	(2)
Balance at end of year	186	180
Fair value at end of Period	$ 237	$ 247

XML

Line of Business Results (Tables)

6 Months Ended

Jun. 30, 2012

Line of Business Results [Abstract]

Financial Information of Business Groups

Three months ended June 30,	Key Community Bank						Key Corporate Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	348		$	374		$	182		$	176
Noninterest income		189			185			210			215
Total revenue (TE) (a)		537			559			392			391
Provision (credit) for loan and lease losses		11			79			4			(76)
Depreciation and amortization expense		9			10			13			19
Other noninterest expense		467			437			205			188
Income (loss) from continuing operations before income taxes (TE)		50			33			170			260
Allocated income taxes and TE adjustments		9			(1)			62			95
Income (loss) from continuing operations		41			34			108			165
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		41			34			108			165
Less: Net income (loss) attributable to noncontrolling interests		—			—			3			1
Net income (loss) attributable to Key	$	41		$	34		$	105		$	164
AVERAGE BALANCES (b)
Loans and leases	$	27,043		$	26,242		$	18,532		$	17,168
Total assets (a)		30,638			29,687			22,715			21,468
Deposits		48,253			47,719			12,409			10,195
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	50		$	79		$	9		$	29
Return on average allocated equity (b)		5.73	%		4.22	%		23.61	%		28.26 %
Return on average allocated equity		5.73			4.22			23.61			28.26
Average full-time equivalent employees (c)		8,757			8,504			2,257			2,191
Six months ended June 30,	Key Community Bank						Key Corporate Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	701		$	752		$	369		$	362
Noninterest income		365			371			424			434
Total revenue (TE) (a)		1,066			1,123			793			796
Provision (credit) for loan and lease losses		13			90			17			(97)
Depreciation and amortization expense		19			19			26			39
Other noninterest expense		914			874			423			396
Income (loss) from continuing operations before income taxes (TE)		120			140			327			458
Allocated income taxes and TE adjustments		21			25			119			168
Income (loss) from continuing operations		99			115			208			290
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		99			115			208			290
Less: Net income (loss) attributable to noncontrolling interests		—			—			3			—
Net income (loss) attributable to Key	$	99			115		$	205			290
AVERAGE BALANCES (b)
Loans and leases	$	26,830			26,277		$	18,558			17,421
Total assets (a)		30,416			29,713			22,789			21,607
Deposits		48,011			47,912			11,982			10,736
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	99		$	155		$	34		$	104
Return on average allocated equity (b)		6.82	%		7.11	%		22.30	%		23.78 %
Return on average allocated equity		6.82			7.11			22.30			23.78
Average full-time equivalent employees (c)		8,738			8,441			2,256			2,173

(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
$	12		$	13		$	542		$	563		$	2		$	7		$	544		$	570
	87			55			486			455			(1	)		(1)			485			454
	99			68			1,028			1,018			1			6			1,029			1,024
	6			(10)			21			(7)			—			(1)			21			(8)
	2			5			24			34			35			35			59			69
	19			20			691			645			(36	)		(34)			655			611
	72			53			292			346			2			6			294			352
	16			9			87			103			(24	)		(3)			63			100
	56			44			205			243			26			9			231			252
	—			—			—			—			10			(9)			10			(9)
	56			44			205			243			36			—			241			243
	2			2			5			3			—			—			5			3
$	54		$	42		$	200		$	240		$	36		$	—		$	236		$	240
$	3,804		$	4,985		$	49,379		$	48,395		$	67		$	59		$	49,446		$	48,454
	26,862			28,965			80,215			80,120			705			1,266			80,920			81,386
	510			801			61,172			58,715			(109	)		(174)			61,063			58,541
$	18		$	26		$	77		$	134			—			—		$	77		$	134
	31.57	%		20.82	%		15.02	%		15.12	%		2.20	%		1.13	%		9.00	%		10.45	%
	31.57			20.82			15.02			15.12			3.05			—			9.40			10.07
	6			23			11,020			10,718			4,435			4,631			15,455			15,349
Other Segments						Total Segments						Reconciling Items						Key
2012			2011			2012			2011			2012			2011			2012			2011
$	27		$	46		$	1,097		$	1,160		$	6		$	14		$	1,103		$	1,174
	176			115			965			920			(8	)		(9)			957			911
	203			161			2,062			2,080			(2	)		5			2,060			2,085
	33			(35)			63			(42)			—			(6)			63			(48)
	5			10			50			68			69			75			119			143
	40			44			1,377			1,314			(79	)		(76)			1,298			1,238
	125			142			572			740			8			12			580			752
	24			32			164			225			(20	)		(7)			144			218
	101			110			408			515			28			19			436			534
	—			—			—			—			5			(20)			5			(20)
	101			110			408			515			33			(1)			441			514
	2			11			5			11			—			—			5			11
$	99		$	99		$	403		$	504		$	33		$	(1)		$	436		$	503
$	3,997		$	5,139		$	49,385		$	48,837		$	53		$	44		$	49,438		$	48,881
	26,723			30,157			79,928			81,477			765			1,355			80,693			82,832
	498			786			60,491			59,434			(144	)		(148)			60,347			59,286
$	45		$	69		$	178		$	328			—		$	(1)		$	178		$	327
	28.73	%		24.29	%		14.83	%		15.54	%		1.23	%		1.00	%		8.63	%		10.16	%
	28.73			24.29			14.83			15.54			1.45			(.05)			8.73			9.77
	5			43			10,999			10,657			4,431			4,669			15,430			15,326

Supplementary information (Key Corporate Bank lines of business)

		Real Estate Capital and																Institutional and
Three months ended June 30,		Corporate Banking Services								Equipment Finance								Capital Markets
dollars in millions		2012				2011				2012				2011				2012				2011
Total revenue (TE)	$		176		$		156		$		57		$		63		$		159		$		172
Provision (credit) for loan and lease losses			5				(49)				6				(30)				(7)				3
Noninterest expense			63				50				37				45				118				112
Net income (loss) attributable to Key			65				97				9				30				31				37
Average loans and leases			7,343				7,713				4,886				4,545				6,303				4,910
Average loans held for sale			337				229				23				—				154				73
Average deposits			9,190				7,371				7				12				3,212				2,812
Net loan charge-offs			7				26				4				2				(2)				1
Net loan charge-offs to average loans			.38	%			1.35	%			.33	%			.18	%			(.13)	%			.08	%
Nonperforming assets at period end	$		186		$		245		$		33		$		39		$		29		$		55
Return on average allocated equity			30.90	%			31.13	%			14.48	%			35.81	%			17.99	%			20.00	%
Average full-time equivalent employees			950				902				464				511				843				778
		Real Estate Capital and																Institutional and
Six months ended June 30,		Corporate Banking Services								Equipment Finance								Capital Markets
dollars in millions		2012				2011				2012				2011				2012				2011
Total revenue (TE)	$		337		$		324		$		122		$		126		$		334		$		346
Provision (credit) for loan and lease losses			4				(39)				4				(56)				9				(2)
Noninterest expense			122				118				75				98				252				219
Net income (loss) attributable to Key			129				154				27				53				49				83
Average loans and leases			7,521				8,146				4,833				4,583				6,204				4,692
Average loans held for sale			314				185				23				2				174				102
Average deposits			8,705				7,987				7				9				3,270				2,740
Net loan charge-offs			23				91				9				12				2				1
Net loan charge-offs to average loans			.61	%			2.25	%			.37	%			.53	%			.06	%			.04
Nonperforming assets at period end	$		186		$		245		$		33		$		39		$		29		$		55
Return on average allocated equity			29.15	%			22.72	%			20.88	%			31.34	%			14.10	%			22.29	%
Average full-time equivalent employees			951				892				466				516				839				765

XML

Asset Quality (Details 5) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Jun. 30, 2011
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	$ 49,605	$ 47,840
Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	20,386	16,883
RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	7,409	8,069
RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1,172	1,631
Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	5,636	6,105
Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	34,603	32,688
AAA-AA [Member] | Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	165	100
AAA-AA [Member] | RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans		2
AAA-AA [Member] | RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1	3
AAA-AA [Member] | Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	605	655
AAA-AA [Member] | Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	771	760
A [Member] | Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	680	671
A [Member] | RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	64	63
A [Member] | RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1	1
A [Member] | Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	992	1,245
A [Member] | Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1,737	1,980
BBB-BB [Member] | Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	17,652	13,546
BBB-BB [Member] | RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	5,925	5,553
BBB-BB [Member] | RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	791	747
BBB-BB [Member] | Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	3,709	3,590
BBB-BB [Member] | Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	28,077	23,436
B [Member] | Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	868	955
B [Member] | RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	553	941
B [Member] | RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	58	262
B [Member] | Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	197	343
B [Member] | Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1,676	2,501
CCC-C [Member] | Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1,021	1,611
CCC-C [Member] | RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	867	1,510
CCC-C [Member] | RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	321	618
CCC-C [Member] | Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	133	272
CCC-C [Member] | Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	2,342	4,011
Commercial [Member] | Commercial, financial and agricultural [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	20,386	16,883
Commercial [Member] | RE-Commercial [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	7,409	8,069
Commercial [Member] | RE-Construction [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	1,172	1,631
Commercial [Member] | Commercial Lease [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	5,636	6,105
Commercial [Member] | Commercial Loan [Member]
Commercial Credit Exposure Credit Risk Profile by Creditworthiness Category
Total Loans	$ 34,603	$ 32,688

XML

Securities (Details 4) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012
Securities by Maturity
Amortized cost of securities available for sale, Due in one year or less	$ 950
Amortized cost of securities available for sale, Due after one through five years	11,748
Amortized cost of securities available for sale, Due after five through ten years	66
Amortized cost of securities available for sale, Due after ten years	4
Total amortized cost of securities available for sale	12,768
Fair Value of securities available for sale, Due in one year or less	966
Fair Value of securities available for sale, Due after one through five years	12,163
Fair Value of securities available for sale, Due after five through ten years	72
Fair Value of securities available for sale, Due after ten years	4
Total Fair Value of securities available for sale	13,205
Amortized cost of held-to-maturity securities, Due in one year or less	5
Amortized cost of held-to-maturity securities, Due after one through five years	4,347
Amortized cost of held-to-maturity securities, Due after five through ten years
Amortized cost of held-to-maturity securities, Due after ten years
Total amortized cost of held-to-maturity securities	4,352
Fair Value of held-to-maturity securities, Due in one year or less	5
Fair Value of held-to-maturity securities, Due after one through five years	4,391
Fair Value of held-to-maturity securities, Due after five through ten years
Fair Value of held-to-maturity securities, Due after ten years
Total Fair Value of held-to-maturity securities	$ 4,396

XML

Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Jun. 30, 2012		Dec. 31, 2011		Jun. 30, 2011
ASSETS
Cash and due from banks	$ 717		$ 694		$ 853
Short-term investments	2,216		3,519		4,563
Trading account assets	679		623		769
Securities available for sale	13,205		16,012		18,680
Held-to-maturity securities (fair value: $4,396, $2,133 and $19)	4,352		2,109		19
Other investments	1,186		1,163		1,195
Loans, net of unearned income of $1,155, $1,388 and $1,460	49,605		49,575		47,840
Less: Allowance for loan and lease losses	888		1,004		1,230
Net loans	48,717		48,571		46,610
Loans held for sale	656		728		381
Premises and equipment	931		944		919
Operating lease assets	318		350		453
Goodwill	917		917		917
Other intangible assets	15		17		19
Corporate-owned life insurance	3,285		3,256		3,208
Derivative assets	818		945		900
Accrued income and other assets (including $91 of consolidated LIHTC guaranteed funds VIEs, see Note 9)(a)	2,978	[1]	3,077	[1]	2,968	[1]
Discontinued assets (including $2,611 of consolidated education loan securitization trust VIEs (see Note 9) and $73 of loans in portfolio at fair value)(a)	5,533	[1]	5,860	[1]	6,328	[1]
Total assets	86,523		88,785		88,782
Deposits in domestic offices:
NOW and money market deposit accounts	28,957		27,954		26,277
Savings deposits	2,103		1,962		1,973
Certificates of deposit ($100,000 or more)	3,669		4,111		4,939
Other time deposits	5,385		6,243		7,167
Total interest-bearing	40,114		40,270		40,356
Noninterest-bearing	21,435		21,098		19,318
Deposits in foreign office - interest-bearing	618		588		736
Total deposits	62,167		61,956		60,410
Federal funds purchased and securities sold under repurchase agreements	1,716		1,711		1,668
Bank notes and other short-term borrowings	362		337		511
Derivative liabilities	763		1,026		991
Accrued expense and other liabilities	1,417		1,763		1,518
Long-term debt	7,521		9,520		10,997
Discontinued liabilities (including $2,401 of consolidated education loan securitization trust VIEs at fair value, see Note 9)(a)	2,401	[1]	2,550	[1]	2,950	[1]
Total liabilities	76,347		78,863		79,045
Preferred stock, $1 par value, authorized 25,000,000 shares:
Common shares, $1 par value; authorized 1,400,000,000 shares; issued 1,016,969,905, 1,016,969,905 and 1,016,969,905 shares	1,017		1,017		1,017
Capital surplus	4,120		4,194		4,191
Retained earnings	6,595		6,246		5,926
Treasury stock, at cost (71,496,550, 63,962,113 and 63,147,538)	(1,796)		(1,815)		(1,815)
Accumulated other comprehensive income (loss)	(72)		(28)		109
Key shareholders' equity	10,155		9,905		9,719
Noncontrolling interests	21		17		18
Total equity	10,176		9,922		9,737
Total liabilities and equity	86,523		88,785		88,782
Preferred Stock
Preferred stock, $1 par value, authorized 25,000,000 shares:
Total equity	291		291		291
Series A Preferred Stock
Preferred stock, $1 par value, authorized 25,000,000 shares:
Preferred stock	$ 291		$ 291		$ 291

[1] The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

XML

Loans and Loans Held for Sale (Details 1) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011
Loans Held For Sale
Commercial, financial and agricultural	$ 18		$ 19		$ 80
Real estate - construction	12		35		39
Commercial lease financing	13		12		6
Total loans held for sale	656	511	728	479	381	426
Commercial Mortgage Backed Securities [Member]
Loans Held For Sale
Real estate - mortgage	523		567		198
Residential Mortgage [Member]
Loans Held For Sale
Real estate - mortgage	$ 90		$ 95		$ 58

XML

Acquisition and Discontinued Operations (Details 8) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Combined results of the discontinued operations
Net interest income	$ 538	$ 564	$ 1,091	$ 1,161
Provision for loan and lease losses			62	(47)
Net interest income (expense) after provision for loan and lease losses	517	572	1,028	1,209
Noninterest income	(485)	(454)	(957)	(911)
Noninterest expense	714	680	1,417	1,381
Income taxes	57	94	132	205
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
Segment, Discontinued Operations [Member]
Combined results of the discontinued operations
Net interest income	30	35	61	71
Provision for loan and lease losses	2	30	6	62
Net interest income (expense) after provision for loan and lease losses	28	5	55	9
Noninterest income	(2)	(11)	(20)	(20)
Noninterest expense	10	9	27	21
Income (loss) before income taxes	16	(15)	8	(32)
Income taxes	6	(6)	3	(12)
Income (loss) from discontinued operations, net of taxes	$ 10	$ (9)	$ 5	$ (20)

XML

Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Net income (loss)	$ 241	$ 243	$ 441	$ 514
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of income taxes of ($25), $73, ($31) and $61	(42)	123	(53)	103
Net unrealized gains (losses) on derivative financial instruments, net of income taxes of ($2), $9, $5 and $4	(4)	15	8	7
Foreign currency translation adjustments	(10)	4	(4)	13
Net pension and postretirement benefit costs, net of income taxes	3	2	5	3
Other comprehensive income (loss), net of tax:	188	387	397	640
Net contribution to (distribution from) noncontrolling interests	4	(254)	4	(239)
Total comprehensive income (loss) attributable to Key	$ 192	$ 133	$ 401	$ 401

XML

Acquisition and Discontinued Operations (Details 6) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Components of Income (Loss) from Discontinued Operations, Net of Taxes, of Subsidiary
Noninterest income	$ 485	$ 454	$ 957	$ 911
Noninterest expense	714	680	1,417	1,381
Income taxes	57	94	132	205
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
Community Bank [Member]
Components of Income (Loss) from Discontinued Operations, Net of Taxes, of Subsidiary
Noninterest income	189	185	365	371
Income taxes	9	(1)	21	25
Income (loss) from discontinued operations, net of taxes
Segment, Discontinued Operations [Member]
Components of Income (Loss) from Discontinued Operations, Net of Taxes, of Subsidiary
Noninterest income	2	11	20	20
Noninterest expense	10	9	27	21
Income (loss) before income taxes	16	(15)	8	(32)
Income taxes	6	(6)	3	(12)
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
Segment, Discontinued Operations [Member] | Austin Capital Management [Member]
Components of Income (Loss) from Discontinued Operations, Net of Taxes, of Subsidiary
Noninterest income				1
Noninterest expense	1		9	1
Income (loss) before income taxes	(1)		(9)
Income taxes			(3)
Income (loss) from discontinued operations, net of taxes	$ (1)		$ (6)

XML

Asset Quality (Details 11) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Changes in the liability for credit losses on lending-related commitments
Beginning Balance	$ (45)	$ (69)	$ (45)	$ (73)
Provision (credit) for losses on lending-related commitments	6	(12)	6	(16)
Ending Balance	$ (51)	$ (57)	$ (51)	$ (57)

XML

Contingent Liabilities and Guarantees (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Guarantees
Maximum Potential Undiscounted Future Payments	$ 13,161
Liability Recorded	177
Standby letters of credit [Member]
Guarantees
Maximum Potential Undiscounted Future Payments	10,137
Liability Recorded	52
Recourse agreement with FNMA [Member]
Guarantees
Maximum Potential Undiscounted Future Payments	973
Liability Recorded	9
Return guarantee agreement with LIHTC investors [Member]
Guarantees
Maximum Potential Undiscounted Future Payments	55
Liability Recorded	55
Return guarantee agreement with LIHTC investors
Compliance period of property	15 years
Expiration of guarantees	Extend through 2018
Written put options [Member]
Guarantees
Maximum Potential Undiscounted Future Payments	1,993
Liability Recorded	60
Default guarantees [Member]
Guarantees
Maximum Potential Undiscounted Future Payments	3
Liability Recorded	$ 1
Risk Level, Low [Member] | Maximum [Member]
Additional Contingent Liabilities and Guarantees (Textual) [Abstract]
Guarantee Obligations	30.00%
Risk Level, Low [Member] | Minimum [Member]
Additional Contingent Liabilities and Guarantees (Textual) [Abstract]
Guarantee Obligations	0.00%
Risk Level, Medium [Member] | Maximum [Member]
Additional Contingent Liabilities and Guarantees (Textual) [Abstract]
Guarantee Obligations	70.00%
Risk Level, Medium [Member] | Minimum [Member]
Additional Contingent Liabilities and Guarantees (Textual) [Abstract]
Guarantee Obligations	31.00%
Risk Level, High [Member] | Maximum [Member]
Additional Contingent Liabilities and Guarantees (Textual) [Abstract]
Guarantee Obligations	100.00%
Risk Level, High [Member] | Minimum [Member]
Additional Contingent Liabilities and Guarantees (Textual) [Abstract]
Guarantee Obligations	71.00%

XML

Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2012

Basis of Presentation and Variable Interest Entities [Abstract]

Variable Interest Entities Information

		Consolidated VIEs					Unconsolidated VIEs
in millions		Total         Assets		Total             Liabilities			Total     Assets		Total               Liabilities		Maximum       Exposure to Loss
June 30, 2012
LIHTC funds	$		91		84	$		119		—		—
Education loan securitization trusts			2,611	$	2,401			N/A		N/A		N/A
LIHTC investments			N/A		N/A			1,012		—	$	494

XML

Fair Value Measurements (Details 4) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012
Discount [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	32.00%
Level 3 [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Other investment		$ 220
Level 3 [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Loans, net of allowance		81
Goodwill		917
Mortgage servicing assets		237
Mortgage servicing assets, Valuation Techniques	Discounted cash flow
Level 3 [Member] | EBITDA multiple [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	6.10%
Level 3 [Member] | EBITDA multiple (where applicable) [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	4.80%
Level 3 [Member] | Revenue multiple (where applicable) [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.60%
Level 3 [Member] | Earnings multiple of peers [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	10.01
Level 3 [Member] | Equity multiple of peers [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	1.27
Level 3 [Member] | Control premium [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	32.00%
Level 3 [Member] | Weighted-average cost of capital [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	15.00%
Level 3 [Member] | Prepayment speed [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	11.70%
Level 3 [Member] | Expected credit losses [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	2.40%
Level 3 [Member] | Residual cash flows discount rate [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	9.40%
Level 3 [Member] | Value assigned to escrow funds [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	1.80%
Level 3 [Member] | Servicing Cost [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Mortgage servicing assets	2,512
Level 3 [Member] | Loan assumption rate [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	2.18%
Level 3 [Member] | Percentage late [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.22%
Other Investments [Member] | Level 3 [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Fair value measurements, valuation techniques	Individual analysis of the condition of each investment
Impaired Loans [Member] | Level 3 [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Fair value measurements, valuation techniques	Fair value of underlying collateral
Goodwill [Member] | Level 3 [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Fair value measurements, valuation techniques	Discounted cash flow and market data
Maximum [Member] | Discount [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	100.00%
Maximum [Member] | Level 3 [Member] | EBITDA multiple [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	8.20%
Maximum [Member] | Level 3 [Member] | EBITDA multiple (where applicable) [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	12.00%
Maximum [Member] | Level 3 [Member] | Revenue multiple (where applicable) [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	4.40%
Maximum [Member] | Level 3 [Member] | Earnings multiple of peers [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	11.90
Maximum [Member] | Level 3 [Member] | Equity multiple of peers [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	1.32
Maximum [Member] | Level 3 [Member] | Prepayment speed [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	25.00%
Maximum [Member] | Level 3 [Member] | Expected credit losses [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	3.00%
Maximum [Member] | Level 3 [Member] | Residual cash flows discount rate [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	15.00%
Maximum [Member] | Level 3 [Member] | Value assigned to escrow funds [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	3.75%
Maximum [Member] | Level 3 [Member] | Servicing Cost [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Mortgage servicing assets	17,000
Maximum [Member] | Level 3 [Member] | Loan assumption rate [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	3.00%
Maximum [Member] | Level 3 [Member] | Percentage late [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	2.00%
Minimum [Member] | Discount [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.00%
Minimum [Member] | Level 3 [Member] | EBITDA multiple [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	4.80%
Minimum [Member] | Level 3 [Member] | EBITDA multiple (where applicable) [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	5.50%
Minimum [Member] | Level 3 [Member] | Revenue multiple (where applicable) [Member] | Recurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.20%
Minimum [Member] | Level 3 [Member] | Earnings multiple of peers [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	8.30
Minimum [Member] | Level 3 [Member] | Equity multiple of peers [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	1.21
Minimum [Member] | Level 3 [Member] | Prepayment speed [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.00%
Minimum [Member] | Level 3 [Member] | Expected credit losses [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	1.00%
Minimum [Member] | Level 3 [Member] | Residual cash flows discount rate [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	7.00%
Minimum [Member] | Level 3 [Member] | Value assigned to escrow funds [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.50%
Minimum [Member] | Level 3 [Member] | Servicing Cost [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Mortgage servicing assets	700
Minimum [Member] | Level 3 [Member] | Loan assumption rate [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	0.00%
Minimum [Member] | Level 3 [Member] | Percentage late [Member] | Nonrecurring [Member]
Quantitative Information about Level 3 Fair Value Measurements
Significant unobservable input weighted-average	0.0000

XML

Contingent Liabilities and Guarantees

6 Months Ended

Jun. 30, 2012

Contingent Liabilities and Guarantees [Abstract]

Contingent Liabilities and Guarantees

12.  Contingent Liabilities and Guarantees

Legal Proceedings

The following provides information on material developments in our legal proceedings during the quarter. Additional information on our legal proceedings is available in our 2011 Annual Report on Form 10-K, Note 16 (“Commitments, Contingent Liabilities and Guarantees”) under the heading “Legal Proceedings” on pages 175-177, and in our Form 10-Q for the period ended March 31, 2012, Note 12 (“Contingent Liabilities and Guarantees”) under the heading “Legal Proceedings” on page 60.

Austin Related Claims.

Acquisition-related claim. KeyCorp was named as a defendant in an action filed in June 2011 by the former owners of Austin in the United States District Court for the Northern District of Ohio. This acquisition-related lawsuit concerned an alleged breach of contract by KeyCorp under the purchase and sale agreement between the plaintiffs and KeyCorp, which related to our original purchase of Austin. The parties settled and, on April 30, 2012, the court entered a stipulation of dismissal of the litigation. The settlement amount was immaterial and paid out of existing reserves.

Monday litigation. As previously reported, KeyCorp and certain current and former directors and officers were named as defendants in the shareholder derivative lawsuit captioned Warren Monday, et al., v. Henry L. Meyer III, et al. (“Monday”), filed in the United States District Court for the Northern District of Ohio. As previously reported, plaintiffs filed a notice of appeal after the court dismissed the lawsuit in late 2011. While the matter was pending on appeal, the parties agreed to a settlement, subject to the approval of the court. On June 20, 2012, the court entered an order preliminarily approving the settlement and providing for notice to shareholders. The “Notice of Proposed Settlement in Monday v. Meyer Shareholder Derivative Action,” which sets forth the terms of the proposed settlement, is available at www.key.com/ir by clicking on “corporate governance.” A fairness hearing is scheduled for August 6, 2012.

Taylor and Metyk litigation. As previously reported, KeyCorp and certain of its directors and employees were named as defendants in two putative class actions filed in Ohio federal court styled Taylor v. KeyCorp, et al., and Wildes v. KeyCorp, et al. The plaintiffs in these cases sought to represent a class of all participants in our 401(k) Savings Plan and alleged that the defendants in the lawsuit breached fiduciary duties owed to them under ERISA. These cases were substantively consolidated with each other and proceeded styled Taylor v. KeyCorp, et al. (“Taylor”). Plaintiffs’ consolidated complaint continued to name certain employees as defendants but no longer named any outside directors. On May 25, 2012, the federal court of appeals affirmed the trial court’s decision dismissing Taylor for lack of standing. The court of appeals did not address Key’s cross-appeal.

Following the trial court’s dismissal of Taylor on August 12, 2010, two putative class actions with similar allegations and causes of action were filed, on September 21, 2010, in Ohio federal court. These two putative class action lawsuits were substantively consolidated with each other and are proceeding styled Thomas Metyk, et al. v. KeyCorp, et al. (“Metyk”). Metyk had been stayed due to the pendency of the appeals in Taylor. On June 25, 2012, the court lifted the stay. We strongly disagree with the allegations asserted against us and intend to vigorously defend against them.

Other litigation. In the ordinary course of business, we are subject to various other litigation, investigations and administrative proceedings. These other matters may involve claims for substantial monetary relief. Due to the complex nature of these various other matters, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information presently known to us, we do not believe there is any other matter to which we are a party, or involving any of our properties that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on our financial condition. We note, however, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution will not exceed established reserves. As a result, the outcome of a particular matter, or a combination of matters, may be material to our results of operation for a particular period, depending upon the size of the loss or our income for that particular period.

Guarantees

We are a guarantor in various agreements with third parties. The following table shows the types of guarantees that we had outstanding at June 30, 2012. Information pertaining to the basis for determining the liabilities recorded in connection with these guarantees is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Guarantees” on page 177 of our 2011 Annual Report on Form 10-K.

June 30, 2012 in millions	Maximum Potential  Undiscounted  Future Payments		Liability  Recorded
Financial guarantees:
Standby letters of credit	$	10,137	$	52
Recourse agreement with FNMA		973		9
Return guarantee agreement with LIHTC investors		55		55
Written put options (a)		1,993		60
Default guarantees		3		1
Total	$	13,161	$	177

(a) The maximum potential undiscounted future payments represent notional amounts of derivatives qualifying as guarantees.

We determine the payment/performance risk associated with each type of guarantee described below based on the probability that we could be required to make the maximum potential undiscounted future payments shown in the preceding table. We use a scale of low (0-30% probability of payment), moderate (31-70% probability of payment) or high (71-100% probability of payment) to assess the payment/performance risk, and have determined that the payment/performance risk associated with each type of guarantee outstanding at June 30, 2012, is low.

Standby letters of credit. KeyBank issues standby letters of credit to address clients’ financing needs. These instruments obligate us to pay a specified third party when a client fails to repay an outstanding loan or debt instrument or fails to perform some contractual nonfinancial obligation. Any amounts drawn under standby letters of credit are treated as loans to the client; they bear interest (generally at variable rates) and pose the same credit risk to us as a loan. At June 30, 2012, our standby letters of credit had a remaining weighted-average life of 3.0 years, with remaining actual lives ranging from less than one year to as many as eleven years.

Recourse agreement with FNMA. We participate as a lender in the FNMA Delegated Underwriting and Servicing program. FNMA delegates responsibility for originating, underwriting, and servicing mortgages, and we assume a limited portion of the risk of loss during the remaining term on each commercial mortgage loan that we sell to FNMA. We maintain a reserve for such potential losses in an amount that we believe approximates the fair value of our liability. At June 30, 2012, the outstanding commercial mortgage loans in this program had a weighted-average remaining term of six years, and the unpaid principal balance outstanding of loans sold by us as a participant was $3.0 billion. As shown in the preceding table, the maximum potential amount of undiscounted future payments that we could be required to make under this program is equal to approximately one-third of the principal balance of loans outstanding at June 30, 2012. If we are required to make a payment, we would have an interest in the collateral underlying the related commercial mortgage loan; any loss we incur could be offset by the amount of any recovery from the collateral.

Return guarantee agreement with LIHTC investors. KAHC, a subsidiary of KeyBank, offered limited partnership interests to qualified investors. Partnerships formed by KAHC invested in low-income residential rental properties that qualify for federal low income housing tax credits under Section 42 of the Internal Revenue Code. In certain partnerships, investors paid a fee to KAHC for a guaranteed return that is based on the financial performance of the property and the property’s confirmed LIHTC status throughout a fifteen-year compliance period. Typically, KAHC fulfills these guaranteed returns by distributing tax credits and deductions associated with the specific properties. If KAHC defaults on its obligation to provide the guaranteed return, KeyBank is obligated to make any necessary payments to investors. No recourse or collateral is available to offset our guarantee obligation other than the underlying income stream from the properties and the residual value of the operating partnership interests.

As shown in the previous table, KAHC maintained a reserve in the amount of $55 million at June 30, 2012, which we believe will be sufficient to cover estimated future obligations under the guarantees. The maximum exposure to loss reflected in the table represents undiscounted future payments due to investors for the return on and of their investments. A majority of these payments are due and payable within the next twelve months.

These guarantees have expiration dates that extend through 2018, but KAHC has not formed any new partnerships under this program since October 2003. Additional information regarding these partnerships is included in Note 9 (“Variable Interest Entities”).

Written put options. In the ordinary course of business, we “write” interest rate caps and floors for commercial loan clients that have variable and fixed rate loans, respectively, with us and wish to mitigate their exposure to changes in interest rates. At June 30, 2012, our written put options had an average life of 1.8 years. These instruments are considered to be guarantees, as we are required to make payments to the counterparty (the commercial loan client) based on changes in an underlying variable that is related to an asset, a liability, or an equity security that the client holds (i.e., the commercial loan client). We are obligated to pay the client if the applicable benchmark interest rate is above or below a specified level (known as the “strike rate”). These written put options are accounted for as derivatives at fair value, as further discussed in Note 7 (“Derivatives and Hedging Activities”). We typically mitigate our potential future payment obligations by entering into offsetting positions with third parties.

Written put options where the counterparty is a broker-dealer or bank are accounted for as derivatives at fair value but are not considered guarantees since these counterparties typically do not hold the underlying instruments. In addition, we are a purchaser and seller of credit derivatives, which are further discussed in Note 7.

Default guarantees. Some lines of business participate in guarantees that obligate us to perform if the debtor (typically a client) fails to satisfy all of its payment obligations to third parties. We generally undertake these guarantees for one of two possible reasons: either the risk profile of the debtor should provide an investment return, or we are supporting our underlying investment in the debtor. The terms of these default guarantees range from less than one year to as many as seven years; some default guarantees do not have a contractual end date. Although no collateral is held, we would receive a pro rata share should the third party collect some or all of the amounts due from the debtor.

Other Off-Balance Sheet Risk

Other off-balance sheet risk stems from financial instruments that do not meet the definition of a guarantee as specified in the applicable accounting guidance, and from other relationships.

Liquidity facilities that support asset-backed commercial paper conduits. At June 30, 2012, we did not have any liquidity facilities remaining outstanding with any unconsolidated third-party commercial paper conduit. The liquidity facility, which expired during the second quarter of 2012, obligated us to provide aggregate funding of up to a certain amount in the event that a credit market disruption or other factors prevented the conduit from issuing commercial paper.

Indemnifications provided in the ordinary course of business. We provide certain indemnifications, primarily through representations and warranties in contracts that we execute in the ordinary course of business in connection with loan sales and other ongoing activities, as well as in connection with purchases and sales of businesses. We maintain reserves, when appropriate, with respect to liability that reasonably could arise as a result of these indemnities.

Intercompany guarantees. KeyCorp and certain of our affiliates are parties to various guarantees that facilitate the ongoing business activities of other affiliates. These business activities encompass issuing debt, assuming certain lease and insurance obligations, purchasing or issuing investments and securities, and engaging in certain leasing transactions involving clients.

XML

Acquisition and Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2012

Acquisition and Discontinued Operations [Abstract]

Components of Income (Loss) from Discontinued Operations, Net of Taxes, of Education Lending Business

		Three months ended June 30,					Six months ended June 30,
in millions		2012		2011			2012		2011
Net interest income	$		30	$	35	$		61	$	71
Provision for loan and lease losses			2		30			6		62
Net interest income (expense) after provision for loan and lease losses			28		5			55		9
Noninterest income			(2)		(11)			(20)		(21)
Noninterest expense			9		9			18		20
Income (loss) before income taxes			17		(15)			17		(32)
Income taxes			6		(6)			6		(12)
Income (loss) from discontinued operations, net of taxes (a)	$		11	$	(9)	$		11	$	(20)

(a) Includes after-tax charges of $12 million and $12 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $26 million and $25 million for the six-month periods ended June 30, 2012 and June 30, 2011, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

Components of Assets and Liabilities of Education Lending Business

in millions	June 30,  2012		December 31,  2011		June 30,  2011
Trust loans at fair value	$	2,580	$	2,726	$	3,100
Portfolio loans at fair value		73		76		—
Loans, net of unearned income of ($2), ($2) and $1		2,830		3,010		3,161
Less: Allowance for loan and lease losses		79		104		109
Net loans		5,404		5,708		6,152
Trust accrued income and other assets at fair value		31		34		34
Accrued income and other assets		76		87		110
Total assets	$	5,511	$	5,829	$	6,296
Trust accrued expense and other liabilities at fair value	$	28	$	28	$	30
Trust securities at fair value		2,373		2,522		2,919
Total liabilities	$	2,401	$	2,550	$	2,949

Quantitative Information about Level 3 Fair Value Measurements

June 30, 2012 dollars in millions	Fair Value of Level 3         Assets and  Liabilities		Valuation    Technique	Significant Unobservable Input	Range (Weighted-Average)
Trust loans and	$	2,653	Discounted cash flow	Prepayment speed		4.00 - 26.00% (10.22%)
portfolio loans				Expected credit losses		2.00 - 80.00% (52.34%)
accounted for at fair				Discount rate		3.00 - 8.10% (5.30%)
value				Expected defaults		8.00 - 20.64% (12.40%)
Trust securities		2,373	Discounted cash flow	Discount rate		2.10 - 6.90% (4.80%)

Consolidated trusts' assets and liabilities at fair value and contractual values

June 30, 2012 in millions	Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	70	$	73
Trust loans		2,712		2,580
Trust other assets		31		31
LIABILITIES
Trust securities	$	2,772	$	2,373
Trust other liabilities		28		28

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Consolidated assets and liabilities at fair value on a recurring basis

June 30, 2012
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short-term investments:
Securities purchased under resale agreements		—	$	338		—	$	338
Trading account assets:
U.S. Treasury, agencies and corporations		—		438		—		438
States and political subdivisions		—		27	$	57		84
Collateralized mortgage obligations		—		16		—		16
Other mortgage-backed securities		—		100		1		101
Other securities	$	3		37		—		40
Total trading account securities		3		618		58		679
Commercial loans		—		—		—		—
Total trading account assets		3		618		58		679
Securities available for sale:
States and political subdivisions		—	$	56		—	$	56
Collateralized mortgage obligations		—		12,477		—		12,477
Other mortgage-backed securities		—		652		—		652
Other securities	$	20		—		—		20
Total securities available for sale		20		13,185		—		13,205
Other investments:
Principal investments:
Direct	$	11		—	$	231	$	242
Indirect		—		—		482		482
Total principal investments		11		—		713		724
Equity and mezzanine investments:
Direct		—		—	$	18	$	18
Indirect		—		—		43		43
Total equity and mezzanine investments		—		—		61		61
Total other investments		11		—		774		785
Derivative assets:
Interest rate		—	$	1,824	$	35	$	1,859
Foreign exchange	$	81		26		—		107
Energy and commodity		—		209		—		209
Credit		—		19		6		25
Equity		—		—		—		—
Derivative assets		81		2,078		41		2,200
Netting adjustments(a)		—		—		—		(1,382)
Total derivative assets		81		2,078		41		818
Accrued income and other assets		2		134		—		136
Total assets on a recurring basis at fair value	$	117	$	16,353	$	873	$	15,961
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	481		—	$	481
Bank notes and other short-term borrowings:
Short positions	$	3		360		—		363
Derivative liabilities:
Interest rate		—		1,310		—		1,310
Foreign exchange		81		24		—		105
Energy and commodity		—		203	$	1		204
Credit		—		23		1		24
Equity		—		—		—		—
Derivative liabilities		81		1,560		2		1,643
Netting adjustments(a)		—		—		—		(880)
Total derivative liabilities		81		1,560		2		763
Accrued expense and other liabilities		—		4		—		4
Total liabilities on a recurring basis at fair value	$	84	$	2,405	$	2	$	1,611

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2011
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short term investments:
Securities purchased under resale agreements		—	$	236		—	$	236
Trading account assets:
U.S. Treasury, agencies and corporations		—		353		—		353
States and political subdivisions		—		81		—		81
Collateralized mortgage obligations		—		19		—		19
Other mortgage-backed securities		—		27	$	35		62
Other securities	$	79		29		—		108
Total trading account securities		79		509		35		623
Commercial loans		—		—		—		—
Total trading account assets		79		509		35		623
Securities available for sale:
States and political subdivisions		—		63		—		63
Collateralized mortgage obligations		—		15,162		—		15,162
Other mortgage-backed securities		—		778		—		778
Other securities		9		—		—		9
Total securities available for sale		9		16,003		—		16,012
Other investments:
Principal investments:
Direct		11		—		225		236
Indirect		—		—		473		473
Total principal investments		11		—		698		709
Equity and mezzanine investments:
Direct		—		—		15		15
Indirect		—		—		36		36
Total equity and mezzanine investments		—		—		51		51
Total other investments		11		—		749		760
Derivative assets:
Interest rate		—		1,915		38		1,953
Foreign exchange		86		65		—		151
Energy and commodity		—		253		—		253
Credit		—		30		7		37
Equity		—		3		—		3
Derivative assets		86		2,266		45		2,397
Netting adjustments (a)		—		—		—		(1,452)
Total derivative assets		86		2,266		45		945
Accrued income and other assets		7		105		—		112
Total assets on a recurring basis at fair value	$	192	$	19,119	$	829	$	18,688
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	292		—	$	292
Bank notes and other short-term borrowings:
Short positions		—		337		—		337
Derivative liabilities:
Interest rate		—		1,398		—		1,398
Foreign exchange	$	79		209		—		288
Energy and commodity		—		252	$	1		253
Credit		—		34		28		62
Equity		—		3		—		3
Derivative liabilities		79		1,896		29		2,004
Netting adjustments (a)		—		—		—		(978)
Total derivative liabilities		79		1,896		29		1,026
Accrued expense and other liabilities		23		22		—		45
Total liabilities on a recurring basis at fair value	$	102	$	2,547	$	29	$	1,700

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

Change in the fair values of the Level 3 consolidated education loan securitization trusts and the portfolio loans

in millions	Portfolio   Student   Loans		Trust   Student   Loans		Trust   Other   Assets		Trust   Securities		Trust Other Liabilities
Balance at January 1, 2012	$	76	$	2,726	$	34	$	2,522	$	28
Gains (losses) recognized in earnings (a)		(1)		39		—		59		—
Purchases		—		—		—		—		—
Sales		—		—		—		—		—
Issuances		—		—		—		—		—
Settlements		(2)		(185)		(3)		(208)		—
Balance at June 30, 2012	$	73	$	2,580	$	31	$	2,373	$	28

(a) Gains (losses) on the Trust Student Loans and Trust Securities were driven primarily by fair value adjustments.

Components of Income (Loss) from Discontinued Operations, Net of Taxes, of Austin Capital Management

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Noninterest income		—		—		—	$	1
Noninterest expense	$	1		—	$	9		1
Income (loss) before income taxes		(1)		—		(9)		—
Income taxes		—		—		(3)		—
Income (loss) from discontinued operations, net of taxes	$	(1)		—	$	(6)		—

Components of Assets and Liabilities of Austin Capital Management

in millions	June 30,   2012		December 31,   2011		June 30,  2011
Cash and due from banks	$	22	$	31	$	32
Total assets	$	22	$	31	$	32
Accrued expense and other liabilities		—		—	$	1
Total liabilities		—		—	$	1

Combined Results of Discontinued Operations

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Net interest income	$	30	$	35	$	61	$	71
Provision for loan and lease losses		2		30		6		62
Net interest income (expense) after provision for loan and lease losses		28		5		55		9
Noninterest income		(2)		(11)		(20)		(20)
Noninterest expense		10		9		27		21
Income (loss) before income taxes		16		(15)		8		(32)
Income taxes		6		(6)		3		(12)
Income (loss) from discontinued operations, net of taxes (a)	$	10	$	(9)	$	5	$	(20)

(a) Includes after-tax charges of $12 million and $12 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $26 million and $25 million for the six-month periods ended June 30, 2012 and 2011, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

Combined Assets and Liabilities of Discontinued Operations

in millions	June 30,  2012		December 31,  2011		June 30,  2011
Cash and due from banks	$	22	$	31	$	32
Trust loans at fair value		2,580		2,726		3,100
Portfolio loans at fair value		73		76		—
Loans, net of unearned income of ($2), ($2) and $1		2,830		3,010		3,161
Less: Allowance for loan and lease losses		79		104		109
Net loans		5,404		5,708		6,152
Trust accrued income and other assets at fair value		31		34		34
Accrued income and other assets		76		87		110
Total assets	$	5,533	$	5,860	$	6,328
Trust accrued expense and other liabilities at fair value	$	28	$	28	$	31
Trust securities at fair value		2,373		2,522		2,919
Total liabilities	$	2,401	$	2,550	$	2,950

Trust [Member]

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Consolidated assets and liabilities at fair value on a recurring basis

June 30, 2012 in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	73	$	73
Trust loans		—		—		2,580		2,580
Trust other assets		—		—		31		31
Total assets on a recurring basis at fair value		—		—	$	2,684	$	2,684
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities		—		—	$	2,373	$	2,373
Trust other liabilities		—		—		28		28
Total liabilities on a recurring basis at fair value		—		—	$	2,401	$	2,401

XML

Acquisition and Discontinued Operations (Details Textual) (USD $)	3 Months Ended				6 Months Ended											3 Months Ended		6 Months Ended
	Sep. 30, 2011	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Jun. 30, 2012 HSBC Bank Branches [Member]	Jul. 13, 2012 HSBC Bank Branches [Member]	Jan. 11, 2012 HSBC Bank Branches [Member] Branch	Jun. 30, 2012 Retained Earnings [Member]	Dec. 31, 2011 Retained Earnings [Member]	Sep. 30, 2011 Retained Earnings [Member]	Jun. 30, 2011 Retained Earnings [Member]	Dec. 31, 2010 Retained Earnings [Member]	Jan. 01, 2010 Retained Earnings [Member]	Sep. 30, 2011 LIHTC funds [Member] Retained Earnings [Member]	Dec. 31, 2010 LIHTC funds [Member] Retained Earnings [Member]	Jun. 30, 2012 Segment, Discontinued Operations [Member]	Jun. 30, 2011 Segment, Discontinued Operations [Member]	Jun. 30, 2012 Segment, Discontinued Operations [Member]	Jun. 30, 2011 Segment, Discontinued Operations [Member]	Jan. 01, 2010 Segment, Discontinued Operations [Member] Trust	Jun. 30, 2012 Segment, Discontinued Operations [Member] Contractual Values [Member]	Jun. 30, 2012 Segment, Discontinued Operations [Member] Contractual Values [Member] Maximum [Member]	Jun. 30, 2012 Segment, Discontinued Operations [Member] Fair Value [Member]	Jun. 30, 2012 Segment, Discontinued Operations [Member] Fair Value [Member] Maximum [Member]
Divestiture and Discontinued Operations (Textual) [Abstract]
Economic interest or risk of loss associated with Education loan securitization trusts																$ 210,000,000		$ 210,000,000
Charges determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations, after tax																12,000,000	12,000,000	26,000,000	25,000,000
Loans held by the trust in nonaccrual status																					16,000,000		15,000,000
Loans held by portfolio in nonaccrual status																						1,000,000		1,000,000
Loans held by trusts with unpaid balances ninety days or more past due																					39,000,000		37,000,000
Loans held by portfolio with unpaid balances ninety days or more past due																					2,000,000		2,000,000
Number of outstanding securitization trusts																				10
Cumulative effect adjustment to beginning balance of Retained Earnings		10,176,000,000	9,922,000,000	9,737,000,000				6,595,000,000	6,246,000,000	45,000,000	5,926,000,000	5,557,000,000	45,000,000	45,000,000	45,000,000
Unearned Income		2,000,000	2,000,000	1,000,000
Overstate accrued income and other assets	30,000,000
Loans held by the trusts with unpaid principal balances due date																90 days or more		90 days or more
Loans held by the portfolio with unpaid principal balances due date																90 days or more		90 days or more
Divestiture and Discontinued Operations (Additional Textual) [Abstract]
Number of retail banking branches acquired in purchase and assumption agreement							37
Deposits assumed associated with branches acquired in purchase and assumption agreement						2,100,000,000
Loans purchased associated with branches acquired in purchase and assumption agreement						260,000,000
Percentage of premium paid on deposits					4.40%
Amount of premium paid on deposits					95,000,000
Business acquisition credit cards receivables assumed						$ 70,000,000

XML

Employee Benefits

6 Months Ended

Jun. 30, 2012

Employee Benefits [Abstract]

Employee Benefits

14.  Employee Benefits

Pension Plans

Effective December 31, 2009, we amended our cash balance pension plan and other defined benefit plans to freeze all benefit accruals and close the plans to new employees. We will continue to credit participants’ existing account balances for interest until they receive their plan benefits. We changed certain pension plan assumptions after freezing the plans.

The components of net pension cost for all funded and unfunded plans are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Interest cost on PBO	$	12	$	14	$	24	$	28
Expected return on plan assets		(18)		(20)		(36)		(40)
Amortization of losses		4		3		8		6
Net pension cost	$	(2)	$	(3)	$	(4)		(6)

Other Postretirement Benefit Plans

We sponsor a retiree healthcare plan in which all employees age 55 with five years of service (or employees age 50 with 15 years of service who are terminated under conditions that entitle them to a severance benefit) are eligible to participate. Participant contributions are adjusted annually. Key may provide a subsidy towards the cost of coverage for certain employees hired before 2001 with a minimum of 15 years of service at the time of termination. We also maintain a death benefit plan that provides a death benefit for a very limited number of (i) former Key employees who retired from their employment with Key prior to 1994; (ii) former Key employees who elect a grandfathered pension benefit under the KeyCorp Cash Balance Pension Plan; and (iii) Key employees who otherwise were provided a historical death benefit at the time of their termination. The death benefit plan is noncontributory. We use separate VEBA trusts to fund the healthcare plan and the death benefit plan.

The components of net postretirement benefit cost for all funded and unfunded plans are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Interest cost on APBO	$	1	$	1	$	2	$	2
Expected return on plan assets		(1)		(1)		(2)		(2)
Net postretirement benefit cost		—		—		—		—

The “Patient Protection and Affordable Care Act” and “Education Reconciliation Act of 2010,” which were both signed into law in March 2010, changed the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide a benefit that is at least “actuarially equivalent” to the benefits under Medicare Part D. As a result of these laws, these subsidy payments become taxable in tax years beginning after December 31, 2012. The accounting guidance applicable to income taxes requires the impact of a change in tax law to be immediately recognized in the period that includes the enactment date. The changes to the tax law regarding these subsidies did not affect us as we did not have a deferred tax asset recorded for Medicare Part D subsidies received.

XML

Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
SECURITIES AVAILABLE FOR SALE
Amortized Cost	$ 12,768	$ 15,490	$ 18,117
Gross Unrealized Gains	438	522	563
Gross Unrealized Losses	1
Fair Value	13,205	16,012	18,680
HELD-TO-MATURITY SECURITIES
Held-to-maturity securities	4,352	2,109	19
Held-to-maturity Securities, Unrecognized Holding Gains	44	24
Held-to-maturity Securities, Unrecognized Holding Losses
Held-to-maturity securities, fair value	4,396	2,133	19
US Treasury and Government [Member]
SECURITIES AVAILABLE FOR SALE
Amortized Cost			9
Fair Value			9
States and political subdivisions [Member]
SECURITIES AVAILABLE FOR SALE
Amortized Cost	53	60	126
Gross Unrealized Gains	3	3	3
Gross Unrealized Losses
Fair Value	56	63	129
HELD-TO-MATURITY SECURITIES
Held-to-maturity securities			1
Held-to-maturity securities, fair value			1
Collateralized mortgage obligations [Member]
SECURITIES AVAILABLE FOR SALE
Amortized Cost	12,098	14,707	17,124
Gross Unrealized Gains	379	455	485
Gross Unrealized Losses
Fair Value	12,477	15,162	17,609
HELD-TO-MATURITY SECURITIES
Held-to-maturity securities	4,334	2,091
Held-to-maturity Securities, Unrecognized Holding Gains	44	24
Held-to-maturity Securities, Unrecognized Holding Losses
Held-to-maturity securities, fair value	4,378	2,115
Other mortgage-backed securities [Member]
SECURITIES AVAILABLE FOR SALE
Amortized Cost	597	715	845
Gross Unrealized Gains	55	63	72
Gross Unrealized Losses
Fair Value	652	778	917
Other securities [Member]
SECURITIES AVAILABLE FOR SALE
Amortized Cost	20	8	13
Gross Unrealized Gains	1	1	3
Gross Unrealized Losses	1
Fair Value	20	9	16
HELD-TO-MATURITY SECURITIES
Held-to-maturity securities	18	18	18
Held-to-maturity Securities, Unrecognized Holding Gains
Held-to-maturity Securities, Unrecognized Holding Losses
Held-to-maturity securities, fair value	$ 18	$ 18	$ 18

XML

Line of Business Results (Details 1) (USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011		Jun. 30, 2012	Jun. 30, 2011
Supplementary information (Key Corporate Bank lines of business)
Provision (credit) for loan and lease losses	$ 21	$ (8)		$ 63	$ (48)
Noninterest expense	714	680		1,417	1,381
Net income (loss) attributable to Key	236	240		436	503
Real Estate Capital and Corporate Banking Services [Member]
Supplementary information (Key Corporate Bank lines of business)
Total revenue (TE)	176	156		337	324
Provision (credit) for loan and lease losses	5	(49)		4	(39)
Noninterest expense	63	50	[1]	122	118
Net income (loss) attributable to Key	65	97		129	154
Average loans and leases	7,343	7,713		7,521	8,146
Average loans held for sale	337	229		314	185
Average deposits	9,190	7,371		8,705	7,987
Net loan charge-offs	7	26		23	91
Net loan charge-offs to average loans	0.38%	1.35%		0.61%	2.25%
Nonperforming assets at period end	186	245		186	245
Return on average allocated equity	30.90%	31.13%		29.15%	22.72%
Average full-time equivalent employees	950	902		951	892
Equipment Finance [Member]
Supplementary information (Key Corporate Bank lines of business)
Total revenue (TE)	57	63		122	126
Provision (credit) for loan and lease losses	6	(30)		4	(56)
Noninterest expense	37	45		75	98
Net income (loss) attributable to Key	9	30		27	53
Average loans and leases	4,886	4,545		4,833	4,583
Average loans held for sale	23			23	2
Average deposits	7	12		7	9
Net loan charge-offs	4	2		9	12
Net loan charge-offs to average loans	0.33%	0.18%		0.37%	0.53%
Nonperforming assets at period end	33	39		33	39
Return on average allocated equity	14.48%	35.81%		20.88%	31.34%
Average full-time equivalent employees	464	511		466	516
Institutional and Capital Markets [Member]
Supplementary information (Key Corporate Bank lines of business)
Total revenue (TE)	159	172		334	346
Provision (credit) for loan and lease losses	(7)	3		9	(2)
Noninterest expense	118	112		252	219
Net income (loss) attributable to Key	31	37		49	83
Average loans and leases	6,303	4,910		6,204	4,692
Average loans held for sale	154	73		174	102
Average deposits	3,212	2,812		3,270	2,740
Net loan charge-offs	(2)	1		2	1
Net loan charge-offs to average loans	0.13%	0.08%		0.06%	0.04%
Nonperforming assets at period end	$ 29	$ 55		$ 29	$ 55
Return on average allocated equity	17.99%	20.00%		14.10%	22.29%
Average full-time equivalent employees	843	778		839	765

[1]

XML

Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Income taxes effect on net unrealized (losses) gains on securities available for sale	$ (25)	$ 73	$ (31)	$ 61
Income taxes effect on net unrealized (losses) gains on derivative financial instruments	$ (2)	$ 9	$ 5	$ 4

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended			12 Months Ended
	Jun. 30, 2012		Jun. 30, 2011	Dec. 31, 2011
Held-to-maturity securities, fair value	$ 4,396		$ 19	$ 2,133
Unearned income on loans	1,155		1,460	1,388
Consolidated guaranteed funds VIEs, for accrued income and other assets	91	[1]
Consolidated education loan securitizations trust VIEs at fair value, Discontinued assets	2,611	[1]
Loan securitization trust VIEs	73
Aggregate amount of certificates of deposit	$100,000 or more		$100,000 or more	$100,000 or more
Consolidated education loan securitization trust VIEs at fair value, Discontinued liabilities	$ 2,401	[1]
Preferred stock, par value	$ 1		$ 1	$ 1
Preferred stock, shares authorized	25,000,000		25,000,000	25,000,000
Common shares, par value	$ 1		$ 1	$ 1
Common shares, shares authorized	1,400,000,000		1,400,000,000	1,400,000,000
Common shares, shares issued	1,016,969,905		1,016,969,905	1,016,969,905
Treasury stock, shares	71,496,550		63,147,538	63,962,113
Series A Preferred Stock
Preferred stock, liquidation preference	$ 100		$ 100	$ 100
Preferred stock, shares authorized	7,475,000		7,475,000	7,475,000
Preferred stock, dividend rate	7.75%		7.75%	7.75%
Preferred stock, shares issued, Total	2,904,839		2,904,839	2,904,839

[1] The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

XML

Derivatives and Hedging Activities

6 Months Ended

Jun. 30, 2012

Derivatives and Hedging Activities [Abstract]

Derivatives and Hedging Activities

7.  Derivatives and Hedging Activities

We are a party to various derivative instruments, mainly through our subsidiary, KeyBank. Derivative instruments are contracts between two or more parties that have a notional amount and an underlying variable, require a small or no net investment, and allow for the net settlement of positions. A derivative’s notional amount serves as the basis for the payment provision of the contract, and takes the form of units, such as shares or dollars. A derivative’s underlying variable is a specified interest rate, security price, commodity price, foreign exchange rate, index, or other variable. The interaction between the notional amount and the underlying variable determines the number of units to be exchanged between the parties and influences the fair value of the derivative contract.

The primary derivatives that we use are interest rate swaps, caps, floors, and futures; foreign exchange contracts; energy derivatives; credit derivatives; and equity derivatives. Generally, these instruments help us manage exposure to interest rate risk, mitigate the credit risk inherent in the loan portfolio, hedge against changes in foreign currency exchange rates, and meet client financing and hedging needs. As further discussed in this note:

• interest rate risk represents the possibility that the EVE or net interest income will be adversely affected by fluctuations in interest rates;

• credit risk is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms; and

• foreign exchange risk is the risk that an exchange rate will adversely affect the fair value of a financial instrument.

Derivative assets and liabilities are recorded at fair value on the balance sheet, after taking into account the effects of bilateral collateral and master netting agreements. These agreements allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. As a result, we could have derivative contracts with negative fair values included in derivative assets on the balance sheet and contracts with positive fair values included in derivative liabilities.

At June 30, 2012, after taking into account the effects of bilateral collateral and master netting agreements, we had $183 million of derivative assets and a negative $61 million of derivative liabilities that relate to contracts entered into for hedging purposes. Our hedging derivative liabilities are in an asset position largely due to contracts with positive fair values as a result of master netting agreements. As of the same date, after taking into account the effects of bilateral collateral and master netting agreements and a reserve for potential future losses, we had derivative assets of $635 million and derivative liabilities of $824 million that were not designated as hedging instruments.

The Dodd-Frank Act, which is currently being implemented, may limit the types of derivative activities that KeyBank and other insured depository institutions may conduct. As a result, we may not continue to use all of the types of derivatives noted above in the future.

Additional information regarding our accounting policies for derivatives is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Derivatives” on page 121 of our 2011 Annual Report on Form 10-K.

Derivatives Designated in Hedge Relationships

Net interest income and the EVE change in response to changes in the mix of assets, liabilities, and off-balance sheet instruments; associated interest rates tied to each instrument; differences in the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities; and changes in interest rates. We utilize derivatives that have been designated as part of a hedge relationship in accordance with the applicable accounting guidance to minimize the exposure and volatility of net interest income and EVE to interest rate fluctuations. The primary derivative instruments used to manage interest rate risk are interest rate swaps, which convert the contractual interest rate index of agreed-upon amounts of assets and liabilities (i.e., notional amounts) to another interest rate index.

We designate certain “receive fixed/pay variable” interest rate swaps as fair value hedges. These swaps are used primarily to modify our consolidated exposure to changes in interest rates. These contracts convert certain fixed-rate long-term debt into variable-rate obligations. As a result, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts.

Similarly, we designate certain “receive fixed/pay variable” interest rate swaps as cash flow hedges. These contracts effectively convert certain floating-rate loans into fixed-rate loans to reduce the potential adverse effect of interest rate decreases on future interest income. Again, we receive fixed-rate interest payments in exchange for making variable-rate payments over the lives of the contracts without exchanging the notional amounts. We also designate certain “pay fixed/receive variable” interest rate swaps as cash flow hedges. These swaps convert certain floating-rate debt into fixed-rate debt.

We also use interest rate swaps to hedge the floating-rate debt that funds fixed-rate leases entered into by our Equipment Finance line of business. These swaps are designated as cash flow hedges to mitigate the interest rate mismatch between the fixed-rate lease cash flows and the floating-rate payments on the debt.

The derivatives used for managing foreign currency exchange risk are cross currency swaps. During 2011 and prior years, Key had outstanding issuances of medium-term notes that were denominated in foreign currencies. The notes were subject to translation risk, which represented the possibility that the fair value of the foreign-denominated debt would change based on movement of the underlying foreign currency spot rate. It has been our practice to hedge against potential fair value volatility caused by changes in foreign currency exchange rates and interest rates. The hedge converted the notes to a variable-rate U.S. currency-denominated debt, which was designated as a fair value hedge of foreign currency exchange risk. As of June 30, 2012, Key has no debt being hedged in this manner.

Derivatives Not Designated in Hedge Relationships

On occasion, we enter into interest rate swap contracts to manage economic risks but do not designate the instruments in hedge relationships. Excluding contracts addressing customer exposures, the amount of derivatives hedging risks on an economic basis at June 30, 2012, was not significant.

Like other financial services institutions, we originate loans and extend credit, both of which expose us to credit risk. We actively manage our overall loan portfolio and the associated credit risk in a manner consistent with asset quality objectives. This process entails the use of credit derivatives — primarily credit default swaps. Credit default swaps enable us to transfer to a third party a portion of the credit risk associated with a particular extension of credit, and to manage portfolio concentration and correlation risks. Occasionally, we also provide credit protection to other lenders through the sale of credit default swaps. This objective is accomplished primarily through the use of an investment-grade diversified dealer-traded basket of credit default swaps. These transactions may generate fee income, and diversify and reduce overall portfolio credit risk volatility. Although we use credit default swaps for risk management purposes, they are not treated as hedging instruments.

We also enter into derivative contracts for other purposes, including:

¿ interest rate swap, cap, and floor contracts entered into generally to accommodate the needs of commercial loan clients;

¿ energy swap and options contracts entered into to accommodate the needs of clients;

¿ futures contracts and positions with third parties that are intended to offset or mitigate the interest rate or market risk related to client positions discussed above; and

¿ foreign exchange forward contracts and options entered into primarily to accommodate the needs of clients.

These contracts are not designated as part of hedge relationships.

Fair Values, Volume of Activity and Gain/Loss Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross basis as of June 30, 2012, December 31, 2011, and June 30, 2011. The change in the notional amounts of these derivatives by type from December 31, 2011, to June 30, 2012, indicates the volume of our derivative transaction activity during the first half of 2012. The notional amounts are not affected by bilateral collateral and master netting agreements. Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:

	June 30, 2012						December 31, 2011						June 30, 2011
			Fair Value						Fair Value						Fair Value
in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	15,903	$	586	$	32	$	15,067	$	589	$	27	$	9,713	$	459	$	1
Foreign exchange		431		2		8		554		—		147		1,188		—		150
Total		16,334		588		40		15,621		589		174		10,901		459		151
Derivatives not designated as hedging instruments:
Interest rate		58,222		1,273		1,278		48,537		1,364		1,371		46,355		1,149		1,180
Foreign exchange		5,579		105		97		5,549		151		141		6,001		178		169
Energy and commodity		1,691		209		204		1,610		253		253		1,896		295		303
Credit		2,613		25		24		3,210		37		62		2,934		34		31
Equity		18		—		—		17		3		3		32		4		4
Total		68,123		1,612		1,603		58,923		1,808		1,830		57,218		1,660		1,687
Netting adjustments (a)		—		(1,382)		(880)		—		(1,452)		(978)		—		(1,219)		(847)
Total derivatives	$	84,457	$	818	$	763	$	74,544	$	945	$	1,026	$	68,119	$	900	$	991

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral.

Fair value hedges. Instruments designated as fair value hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. The effective portion of a change in the fair value of an instrument designated as a fair value hedge is recorded in earnings at the same time as a change in fair value of the hedged item, resulting in no effect on net income. The ineffective portion of a change in the fair value of such a hedging instrument is recorded in “other income” on the income statement with no corresponding offset. During the six-month period ended June 30, 2012, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some ineffectiveness in our hedging relationships, all of our fair value hedges remained “highly effective” as of June 30, 2012.

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the six-month periods ended June 30, 2012 and 2011, and where they are recorded on the income statement.

	Six months ended June 30, 2012
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains     (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on     Hedged Item
Interest rate	Other income	$	(13)	Long-term debt	Other income	$	10	(a)
Interest rate	Interest expense – Long-term debt		89
Foreign exchange	Other income		5	Long-term debt	Other income		(6)	(a)
Foreign exchange	Interest expense – Long-term debt		1	Long-term debt	Interest expense – Long-term debt		(1)	(b)
Total		$	82			$	3
	Six months ended June 30, 2011
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains     (Losses) on Derivative		Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on     Hedged Item
Interest rate	Other income	$	(12)	Long-term debt	Other income	$	8	(a)
Interest rate	Interest expense – Long-term debt		112
Foreign exchange	Other income		90	Long-term debt	Other income		(95)	(a)
Foreign exchange	Interest expense – Long-term debt		5	Long-term debt	Interest expense – Long-term debt		(8)	(b)
Total		$	195			$	(95)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Cash flow hedges. Instruments designated as cash flow hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a cash flow hedge is recorded as a component of AOCI on the balance sheet and is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we pay variable-rate interest on debt, receive variable-rate interest on commercial loans or sell commercial real estate loans). The ineffective portion of cash flow hedging transactions is included in “other income” on the income statement. During the six-month period ended June 30, 2012, we did not exclude any portion of these hedging instruments from the assessment of hedge effectiveness. While there is some ineffectiveness in our hedging relationships, all of our cash flow hedges remained “highly effective” as of June 30, 2012.

Net Investment Hedges. In May 2012, we entered into foreign currency forward contracts to hedge our exposure to changes in the carrying value of our investments as a result of changes in the related foreign exchange rates. Instruments designated as net investment hedges are recorded at fair value and included in “derivative assets” or “derivative liabilities” on the balance sheet. Initially, the effective portion of a gain or loss on a net investment hedge is recorded as a component of AOCI on the balance sheet when the terms of the derivative match the notional and currency risk being hedged. The effective portion is subsequently reclassified into income when the hedged transaction affects earnings (e.g., when we dispose of a foreign subsidiary). At June 30, 2012, AOCI reflected unrecognized after-tax losses totaling $6 million related to cumulative changes in the fair value of our net investment hedge, which offset the unrecognized after-tax gains on net investment balances. The ineffective portion of net investment hedging transactions is included in “other income” on the income statement. However, there was no net investment hedge ineffectiveness as of June 30, 2012. We did not exclude any portion of our hedging instruments from the assessment of hedge effectiveness while these hedges were outstanding during the second quarter of 2012.

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the six-month periods ended June 30, 2012 and 2011, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

	Six months ended June 30, 2012
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified     From OCI Into Income (Effective  Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income     (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	50	Interest income – Loans	$	29		Other income		—
Interest rate		(7)	Interest expense – Long-term debt		(5)		Other income		—
Interest rate		—	Net gains (losses) from loan sales		—		Other income		—
Net Investment Hedges
Foreign exchange contracts		(6)	Other Income		—		Other income		—
Total	$	37		$	24				—
	Six months ended June 30, 2011
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified     From OCI Into Income (Effective Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income     (Ineffective Portion)
Interest rate	$	42	Interest income – Loans	$	27		Other income		—
Interest rate		(9)	Interest expense – Long-term debt		(5)		Other income		—
Interest rate		—	Net gains (losses) from loan sales		—		Other income		—
Total	$	33		$	22				—

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

in millions		December 31, 2011				2012 Hedging Activity			Reclassification of Gains to Net Income				June 30, 2012
AOCI resulting from cash flow and net investment hedges	$		(2	)	$		23	$		(15	)	$		6

Considering the interest rates, yield curves, and notional amounts as of June 30, 2012, we would expect to reclassify an estimated $5 million of net losses on derivative instruments from AOCI to income during the next twelve months. In addition, we expect to reclassify approximately $11 million of net gains related to terminated cash flow hedges from AOCI to income during the next twelve months. The maximum length of time over which we hedge forecasted transactions is 17 years.

Nonhedging instruments. Our derivatives that are not designated as hedging instruments are recorded at fair value in “derivative assets” and “derivative liabilities” on the balance sheet. Adjustments to the fair values of these instruments, as well as any premium paid or received, are included in “investment banking and capital markets income (loss)” on the income statement.

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the six-month periods ended June 30, 2012 and 2011, and where they are recorded on the income statement.

		Six months ended June 30,
in millions		2012		2011
NET GAINS (LOSSES) (a)
Interest rate	$		10	$	6
Foreign exchange			19		20
Energy and commodity			6		2
Credit			(9)		(10)
Total net gains (losses)	$		26	$	18

(a) Recorded in “investment banking and capital markets income (loss)” on the income statement.

Counterparty Credit Risk

Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected positive replacement value of the contracts. We use several means to mitigate and manage exposure to credit risk on derivative contracts. We generally enter into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. Additionally, we monitor counterparty credit risk exposure on each contract to determine appropriate limits on our total credit exposure across all product types. We review our collateral positions on a daily basis and exchange collateral with our counterparties in accordance with ISDA and other related agreements. We generally hold collateral in the form of cash and highly rated securities issued by the U.S. Treasury, government-sponsored enterprises or GNMA. The collateral netted against derivative assets on the balance sheet totaled $513 million at June 30, 2012, $486 million at December 31, 2011, and $354 million at June 30, 2011. The collateral netted against derivative liabilities totaled $11 million at June 30, 2012, $11 million at December 31, 2011 and $19 million at June 30, 2011.

The following table summarizes our largest exposure to an individual counterparty at the dates indicated.

in millions	June 30,   2012		December 31,   2011		June 30,   2011
Largest gross exposure (derivative asset) to an individual counterparty	$	196	$	194	$	147
Collateral posted by this counterparty		70		64		33
Derivative liability with this counterparty		217		250		250
Collateral pledged to this counterparty		93		127		137
Net exposure after netting adjustments and collateral		2		7		2
The following table summarizes the fair value of our derivative assets by type. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.
in millions	June 30,   2012		December 31,   2011		June 30,   2011
Interest rate	$	1,221	$	1,257	$	1,026
Foreign exchange		22		64		110
Energy and commodity		82		96		105
Credit		6		12		10
Equity		—		2		3
Derivative assets before collateral		1,331		1,431		1,254
Less:  Related collateral		513		486		354
Total derivative assets	$	818	$	945	$	900

We enter into derivative transactions with two primary groups: broker-dealers and banks, and clients. Since these groups have different economic characteristics, we have different methods for managing counterparty credit exposure and credit risk.

We enter into transactions with broker-dealers and banks for various risk management purposes. These types of transactions generally are high dollar volume. We generally enter into bilateral collateral and master netting agreements with these counterparties. At June 30, 2012, for derivatives that have associated bilateral collateral and master netting agreements, we had gross exposure of $1 billion to broker-dealers and banks. We had net exposure of $244 million after the application of master netting agreements and collateral; our net exposure to broker-dealers and banks at June 30, 2012, was reduced to $13 million with $231 million of additional collateral held in the form of securities.

We enter into transactions with clients to accommodate their business needs. These types of transactions generally are low dollar volume. We generally enter into master netting agreements with these counterparties. In addition, we mitigate our overall portfolio exposure and market risk by buying and selling U.S. Treasuries and Eurodollar futures, and entering into offsetting positions and other derivative contracts. Due to the smaller size and magnitude of the individual contracts with clients, collateral generally is not exchanged in connection with these derivative transactions. To address the risk of default associated with the uncollateralized contracts, we have established a default reserve (included in “derivative assets”) in the amount of $24 million at June 30, 2012, which we estimate to be the potential future losses on amounts due from client counterparties in the event of default. At December 31, 2011, the default reserve was $22 million. At June 30, 2012, for derivatives that have associated master netting agreements, we had gross exposure of $625 million to client counterparties. We had net exposure of $574 million on our derivatives with clients after the application of master netting agreements, collateral and the related reserve.

Credit Derivatives

We are both a buyer and seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations. We also sell credit derivatives, mainly index credit default swaps, to diversify the concentration risk within our loan portfolio.

The following table summarizes the fair value of our credit derivatives purchased and sold by type. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.

	June 30, 2012						December 31, 2011						June 30, 2011
in millions	Purchased		Sold		Net		Purchased		Sold		Net		Purchased		Sold		Net
Single name credit default swaps	$	(4)	$	1	$	(3)	$	3	$	(1)	$	2	$	(10)	$	9	$	(1)
Traded credit default swap indices		—		3		3		6		(6)		—		—		2		2
Other		1		(1)		—		1		(1)		—		3		—		3
Total credit derivatives	$	(3)	$	3	$	—	$	10	$	(8)	$	2	$	(7)	$	11	$	4

Single name credit default swaps are bilateral contracts whereby the seller agrees, for a premium, to provide protection against the credit risk of a specific entity (the “reference entity”) in connection with a specific debt obligation. The protected credit risk is related to adverse credit events, such as bankruptcy, failure to make payments, and acceleration or restructuring of obligations, identified in the credit derivative contract. As the seller of a single name credit derivative, we would be required to pay the purchaser the difference between the par value and the market price of the debt obligation (cash settlement) or receive the specified referenced asset in exchange for payment of the par value (physical settlement) if the underlying reference entity experiences a predefined credit event. For a single name credit derivative, the notional amount represents the maximum amount that a seller could be required to pay. If we effect a physical settlement and receive our portion of the related debt obligation, we will join other creditors in the liquidation process, which may enable us to recover a portion of the amount paid under the credit default swap contract. We also may purchase offsetting credit derivatives for the same reference entity from third parties that will permit us to recover the amount we pay should a credit event occur.

A traded credit default swap index represents a position on a basket or portfolio of reference entities. As a seller of protection on a credit default swap index, we would be required to pay the purchaser if one or more of the entities in the index had a credit event. For a credit default swap index, the notional amount represents the maximum amount that a seller could be required to pay. Upon a credit event, the amount payable is based on the percentage of the notional amount allocated to the specific defaulting entity.

The majority of transactions represented by the “other” category shown in the above table are risk participation agreements. In these transactions, the lead participant has a swap agreement with a customer. The lead participant (purchaser of protection) then enters into a risk participation agreement with a counterparty (seller of protection), under which the counterparty receives a fee to accept a portion of the lead participant’s credit risk. If the customer defaults on the swap contract, the counterparty to the risk participation agreement must reimburse the lead participant for the counterparty’s percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, the counterparty has no reimbursement requirements. The notional amount represents the maximum amount that the seller could be required to pay. If the customer defaults on the swap contract and the seller fulfills its payment obligations under the risk participation agreement, the seller is entitled to a pro rata share of the lead participant’s claims against the customer under the terms of the swap agreement.

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at June 30, 2012, December 31, 2011, and June 30, 2011. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	June 30, 2012							December 31, 2011							June 30, 2011
dollars in millions	Notional Amount		Average Term (Years)		Payment /     Performance Risk			Notional Amount		Average Term (Years)		Payment /     Performance Risk			Notional Amount		Average Term (Years)		Payment /     Performance Risk
Single name credit default swaps	$	550		2.42		4.40	%	$	878		2.18		4.98	%	$	844		2.40		4.45	%
Traded credit default swap indices		478		2.76		1.87			343		3.20		4.58			318		3.88		3.47
Other		23		5.48		9.74			18		5.74		10.89			17		5.56		9.04
Total credit derivatives sold	$	1,051		—		—		$	1,239		—		—		$	1,179		—		—

Credit Risk Contingent Features

We have entered into certain derivative contracts that require us to post collateral to the counterparties when these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a limited number of instances, counterparties also have the right to terminate their ISDA Master Agreements with us if our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for S&P). At June 30, 2012, KeyBank’s ratings with Moody’s and S&P were “A3” and “A-,” respectively, and KeyCorp’s ratings with Moody’s and S&P were “Baa1” and “BBB+,” respectively. If there were a downgrade of our ratings, we could be required to post additional collateral under those ISDA Master Agreements where we are in a net liability position. As of June 30, 2012, the aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) held by KeyBank that were in a net liability position totaled $589 million, which includes $542 million in derivative assets and $1.1 billion in derivative liabilities. We had $537 million in cash and securities collateral posted to cover those positions as of June 30, 2012. The aggregate fair value of all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination provisions based on our ratings) as of June 30, 2012, held by KeyCorp that were in a net liability position totaled $29 million, which is comprised solely of $29 million in derivative liabilities. We had $29 million in cash and securities collateral posted to cover those positions as of June 30, 2012.

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of June 30, 2012, December 31, 2011, and June 30, 2011. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two or three ratings as of June 30, 2012, and take into account all collateral already posted. A similar calculation was performed for KeyCorp and additional collateral of $3 million would have been required as of June 30, 2012. No additional collateral was required in prior periods.

		June 30, 2012				December 31, 2011				June 30, 2011
in millions		Moody’s		S&P		Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings			A3		A-		A3		A-		A3		A-
One rating downgrade	$		6	$	6	$	11	$	11	$	11	$	11
Two rating downgrades			11		11		16		16		16		16
Three rating downgrades			17		17		16		16		16		16

KeyBank’s long-term senior unsecured credit rating currently is four ratings above noninvestment grade at Moody’s and S&P. If KeyBank’s ratings had been downgraded below investment grade as of June 30, 2012, payments of up to $18 million would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted. If KeyCorp’s ratings had been downgraded below investment grade as of June 30, 2012, payments of up to $3 million would have been required to either terminate the contracts or post additional collateral for those contracts in a net liability position, taking into account all collateral already posted.

XML

Employee Benefits (Details) (Pension Plans, Defined Benefit [Member], USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Plans, Defined Benefit [Member]
Net pension and post retirement benefit cost for all funded and unfunded plans
Interest cost on PBO	$ 12	$ 14	$ 24	$ 28
Expected return on plan assets	(18)	(20)	(36)	(40)
Amortization of losses	4	3	8	6
Net pension cost	$ (2)	$ (3)	$ (4)	$ (6)

XML

Acquisition and Discontinued Operations (Details 5) (Segment, Discontinued Operations [Member], Education Lending [Member], USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Portfolio Student Loans [Member]
Change in the fair values of the Level 3 consolidated education loan securitization trusts
Beginning Balance	$ 76
Gains (losses) recognized in earnings	(1)
Purchases
Sales
Issuances
Settlements	(2)
Ending Balance	73
Trust Student Loans [Member]
Change in the fair values of the Level 3 consolidated education loan securitization trusts
Beginning Balance	2,726
Gains (losses) recognized in earnings	39
Purchases
Sales
Issuances
Settlements	(185)
Ending Balance	2,580
Trust Other Assets [Member]
Change in the fair values of the Level 3 consolidated education loan securitization trusts
Beginning Balance	34
Purchases
Sales
Issuances
Settlements	(3)
Ending Balance	31
Trust Securities [Member]
Change in the fair values of the Level 3 consolidated education loan securitization trusts
Beginning Balance	2,522
Gains (losses) recognized in earnings	59
Purchases
Sales
Issuances
Settlements	(208)
Ending Balance	2,373
Trust Other Liabilities [Member]
Change in the fair values of the Level 3 consolidated education loan securitization trusts
Beginning Balance	28
Purchases
Sales
Issuances
Ending Balance	$ 28

XML

Acquisition and Discontinued Operations (Details 3) (Segment, Discontinued Operations [Member], Trust [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
ASSETS
Trust loans accounted for at fair value	$ 2,580	$ 2,726	$ 3,100
LIABILITIES
Trust fair value of securities	2,373	2,522	2,919
Education Lending [Member]
ASSETS
Portfolio contractual amount of loans	70
Portfolio fair value of loans	73
Trust contractual amount of loans	2,712
Trust loans accounted for at fair value	2,580	2,726	3,100
Trust contractual amount of other assets	31
Trust fair value of other assets	31
LIABILITIES
Trust contractual amount of securities	2,772
Trust fair value of securities	2,373	2,522	2,919
Trust contractual amount of other liabilities	28
Trust fair value of other liabilities	$ 28

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	KEYCORP /NEW/
Entity Central Index Key	0000091576
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding (actual number)		943,463,119

XML

Mortgage Servicing Assets

6 Months Ended

Jun. 30, 2012

Mortgage Servicing Assets [Abstract]

Mortgage Servicing Assets

8.  Mortgage Servicing Assets

We originate and periodically sell commercial mortgage loans but continue to service those loans for the buyers. We also may purchase the right to service commercial mortgage loans for other lenders. A servicing asset is recorded if we purchase or retain the right to service loans in exchange for servicing fees that exceed the going market rate. Changes in the carrying amount of mortgage servicing assets are summarized as follows:

	Six months ended June  30,
in millions	2012		2011
Balance at beginning of period	$	173	$	196
Servicing retained from loan sales		20		11
Purchases		24		2
Amortization		(29)		(29)
Impairments		(2)		—
Balance at end of period	$	186	$	180
Fair value at end of period	$	237	$	247

The fair value of mortgage servicing assets is determined by calculating the present value of future cash flows associated with servicing the loans. This calculation uses a number of assumptions that are based on current market conditions. The primary economic assumptions used to measure the fair value of our mortgage servicing assets at June 30, 2012, and 2011, generally are:

¿ prepayment speed at an annual rate of 0.00% to 25.00%;

¿ expected credit losses at a static rate of 1.00% to 3.00%;

¿ residual cash flows discount rate of 7.00% to 15.00%; and

¿ value assigned to escrow funds at an interest rate of .50% to 3.75%.

If these economic assumptions change or prove incorrect, the fair value of mortgage servicing assets may as a result change in the future. The volume of loans serviced, expected credit losses, and the value assigned to escrow deposits are critical to the valuation of servicing assets. At June 30, 2012, a 1.00% decrease in the value assigned to the escrow deposits would cause a $36 million decrease in the fair value of our mortgage servicing assets. An increase in the assumed default rate of commercial mortgage loans of 1.00% would cause a $7 million decrease in the fair value of our mortgage servicing assets.

Contractual fee income from servicing commercial mortgage loans totaled $45 million for the six-month period ended June 30, 2012 and $48 million for the six-month period ended June 30, 2011. We have elected to account for servicing assets using the amortization method. The amortization of servicing assets is determined in proportion to, and over the period of, the estimated net servicing income. The amortization of servicing assets for each period, as shown in the preceding table, is recorded as a reduction to fee income. Both the contractual fee income and the amortization are recorded in “other income” on the income statement.

Subsequent to its January 19, 2011, publicly issued announcement, Moody’s, a credit rating agency that rates KeyCorp and KeyBank debt securities, indicated to KeyBank that certain escrow deposits associated with our mortgage servicing operations had to be moved to another financial institution that meets Moody’s minimum ratings threshold. As a result of this decision by Moody’s, during the first quarter of 2011, KeyBank transferred approximately $1.5 billion of these escrow deposit balances to an acceptably-rated institution resulting in an immaterial impairment of the related mortgage servicing assets. We funded this movement of the escrow deposits by selling a similar amount of securities available for sale at the time of the transfer. KeyBank had ample liquidity reserves to offset the loss of these deposits.

Additional information pertaining to the accounting for mortgage and other servicing assets is included in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Servicing Assets” on page 119 of our 2011 Annual Report on Form 10-K and Note 11 (“Acquisition and Discontinued Operations”) under the heading “Education lending” in this report.

XML

Derivatives and Hedging Activities (Details 6) (USD $) In Millions, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Fair value of credit derivatives purchased and sold
Credit derivatives purchased	$ (3)	$ (7)	$ 10
Credit derivatives sold	3	11	(8)
Credit derivative, net	0	4	2
Credit derivatives sold and held
Credit derivative, notional amount	1,051	1,179	1,239
Credit derivative payment/performance risk percentage		9.04%
Single name credit default swaps [Member]
Fair value of credit derivatives purchased and sold
Credit derivatives purchased	(4)	(10)	3
Credit derivatives sold	1	9	(1)
Credit derivative, net	(3)	(1)	2
Credit derivatives sold and held
Credit derivative, notional amount	550	844	878
Credit derivative, average term (years)	2 years 5 months 1 day	2 years 4 months 24 days	2 years 2 months 5 days
Credit derivative payment/performance risk percentage	4.40%	4.45%	4.98%
Traded credit default swap indices [Member]
Fair value of credit derivatives purchased and sold
Credit derivatives purchased			6
Credit derivatives sold	3	2	(6)
Credit derivative, net	3	2
Credit derivatives sold and held
Credit derivative, notional amount	478	318	343
Credit derivative, average term (years)	2 years 9 months 4 days	3 years 10 months 17 days	3 years 2 months 12 days
Credit derivative payment/performance risk percentage	1.87%	3.47%	4.58%
Others [Member]
Fair value of credit derivatives purchased and sold
Credit derivatives purchased	1	3	1
Credit derivatives sold	(1)		(1)
Credit derivative, net		3
Credit derivatives sold and held
Credit derivative, notional amount	$ 23	$ 17	$ 18
Credit derivative, average term (years)	5 years 5 months 23 days	5 years 6 months 22 days	5 years 8 months 27 days
Credit derivative payment/performance risk percentage	9.74%		10.89%

XML

Acquisition and Discontinued Operations (Details 2) (Fair Value, Inputs, Level 3 [Member], USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Prepayment speed trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	10.22%
Expected credit losses trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	52.34%
Discount rate trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	5.30%
Expected defaults trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	12.40%
Discount rate trust securities [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	4.80%
Trust Loans [Member]
Quantitative Information about Level 3 Fair Value Measurements
Trust loans and portfolio loans accounted for at fair value	$ 2,653
Valuation Techniques	Discounted cash flow
Trust Securities [Member]
Quantitative Information about Level 3 Fair Value Measurements
Trust securities at fair value	$ 2,373
Valuation Techniques	Discounted cash flow
Maximum [Member] | Prepayment speed trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	26.00%
Maximum [Member] | Expected credit losses trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	80.00%
Maximum [Member] | Discount rate trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	8.10%
Maximum [Member] | Expected defaults trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	20.64%
Maximum [Member] | Discount rate trust securities [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	6.90%
Minimum [Member] | Prepayment speed trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	4.00%
Minimum [Member] | Expected credit losses trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	2.00%
Minimum [Member] | Discount rate trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	3.00%
Minimum [Member] | Expected defaults trust loan [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	8.00%
Minimum [Member] | Discount rate trust securities [Member]
Quantitative Information about Level 3 Fair Value Measurements
Percentage of significant unobservable input weighted-average	2.10%

XML

Consolidated Statements of Income (Unaudited) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
INTEREST INCOME
Loans	$ 518		$ 551		$ 1,054		$ 1,121
Loans held for sale	5		3		10		7
Securities available for sale	105		149		221		315
Held-to-maturity securities	17		1		29		1
Trading account assets	5		9		11		16
Short-term investments	2		1		3		2
Other investments	10		12		18		24
Total interest income	662		726		1,346		1,486
INTEREST EXPENSE
Deposits	71		100		148		210
Federal funds purchased and securities sold under repurchase agreements	1		2		2		3
Bank notes and other short-term borrowings	2		3		4		6
Long-term debt	50		57		101		106
Total interest expense	124		162		255		325
NET INTEREST INCOME	538		564		1,091		1,161
Provision (credit) for loan and lease losses	21		(8)		63		(48)
Net interest income (expense) after provision for loan and lease losses	517		572		1,028		1,209
NONINTEREST INCOME
Trust and investment services income	102		113		211		223
Service charges on deposit accounts	70		69		138		137
Operating lease income	20		32		42		67
Letter of credit and loan fees	56		47		110		102
Corporate-owned life insurance income	30		28		60		55
Net securities gains (losses)(a)			2	[1]			1	[1]
Electronic banking fees	19		33		36		63
Gains on leased equipment	36		5		63		9
Insurance income	11		14		23		29
Net gains (losses) from loan sales	32		11		54		30
Net gains (losses) from principal investing	24		17		59		52
Investment banking and capital markets income (loss)	37		42		80		85
Other income	48		41		81		58
Total noninterest income	485		454		957		911
NONINTEREST EXPENSE
Personnel	389		380		774		751
Net occupancy	62		62		126		127
Operating lease expense	15		25		32		53
Computer processing	43		42		84		84
Business services and professional fees	51		44		89		82
FDIC assessment	8		9		16		38
OREO expense, net	7		(3)		13		7
Equipment	27		26		53		52
Marketing	17		10		30		20
Provision (credit) for losses on lending-related commitments	6		(12)		6		(16)
Other expense	89		97		194		183
Total noninterest expense	714		680		1,417		1,381
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	288		346		568		739
Income taxes	57		94		132		205
INCOME (LOSS) FROM CONTINUING OPERATIONS	231		252		436		534
Income (loss) from discontinued operations, net of taxes of $6, ($6), $3 and ($12) (see Note 11)	10		(9)		5		(20)
NET INCOME (LOSS)	241		243		441		514
Less: Net income (loss) attributable to noncontrolling interests	5		3		5		11
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	236		240		436		503
Income (loss) from continuing operations attributable to Key common shareholders	221		243		420		427
Net income (loss) attributable to Key common shareholders	$ 231		$ 234		$ 425		$ 407
Per common share:
Income (loss) from continuing operations attributable to Key common shareholders	$ 0.23		$ 0.26		$ 0.44		$ 0.47
Income (loss) from discontinued operations, net of taxes	$ 0.01		$ (0.01)		$ 0.01		$ (0.02)
Net income (loss) attributable to Key common shareholders	$ 0.24		$ 0.25		$ 0.45		$ 0.44
Per common share - assuming dilution:
Income (loss) from continuing operations attributable to Key common shareholders	$ 0.23		$ 0.26		$ 0.44		$ 0.46
Income (loss) from discontinued operations, net of taxes	$ 0.01		$ (0.01)		$ 0.01		$ (0.02)
Net income (loss) attributable to Key common shareholders (c)	$ 0.24	[2]	$ 0.25	[2]	$ 0.45	[2]	$ 0.44	[2]
Cash dividends declared per common share	$ 0.05		$ 0.03		$ 0.08		$ 0.04
Weighted-average common shares outstanding (000) (b)	944,648	[3]	947,565	[3]	946,995	[3]	914,911	[3]
Weighted-average common shares and potential common shares outstanding (000)	948,087		952,133		951,029		920,162

[1] For the three months ended June 30, 2012 and 2011, we did not have any impairment losses related to securities.

[2] EPS may not foot due to rounding.

[3] Assumes conversion of stock options and/or Preferred Series A, as applicable.

XML

Earnings Per Common Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Common Share

2. Earnings Per Common Share

Our basic and diluted earnings per Common Share are calculated as follows:

		Three months ended June 30,				Six months ended June 30,
dollars in millions, except per share amounts		2012		2011		2012		2011
EARNINGS
Income (loss) from continuing operations		$	231	$	252	$	436	$	534
Less:	Net income (loss) attributable to noncontrolling interests		5		3		5		11
Income (loss) from continuing operations attributable to Key			226		249		431		523
Less:	Dividends on Series A Preferred Stock		5		6		11		12
	Cash dividends on Series B Preferred Stock (b)		—		—		—		31
	Amortization of discount on Series B Preferred Stock(b)		—		—		—		53
Income (loss) from continuing operations attributable to Key common shareholders			221		243		420		427
Income (loss) from discontinued operations, net of taxes (a)			10		(9)		5		(20)
Net income (loss) attributable to Key common shareholders		$	231	$	234	$	425	$	407
WEIGHTED-AVERAGE COMMON SHARES
Weighted-average common shares outstanding (000)			944,648		947,565		946,995		914,911
Effect of dilutive convertible preferred stock, common share options and other stock awards (000)			3,439		4,568		4,034		5,251
Weighted-average common shares and potential common shares outstanding (000)			948,087		952,133		951,029		920,162
EARNINGS PER COMMON SHARE
Income (loss) from continuing operations attributable to Key common shareholders		$	.23	$	.26	$	.44	$	.47
Income (loss) from discontinued operations, net of taxes (a)			.01		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders (c)			.24		.25		.45		.44
Income (loss) from continuing operations attributable to Key common shareholders — assuming dilution		$	.23	$	.26	$	.44	$	.46
Income (loss) from discontinued operations, net of taxes (a)			.01		(.01)		.01		(.02)
Net income (loss) attributable to Key common shareholders — assuming dilution (c)			.24		.25		.45		.44

(a) In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. In September 2009, we decided to discontinue the education lending business conducted through Key Education Resources, the education payment and financing unit of KeyBank. As a result of these decisions, we have accounted for these businesses as discontinued operations. The income from discontinued operations for the quarter ended June 30, 2012, and the six months ended June 30, 2012, was primarily attributable to fair value adjustments related to the education lending securitization trusts.

(b) Includes a $49 million deemed dividend recorded in the first quarter of 2011 related to the repurchase of the $2.5 billion Series B Preferred Stock.

(c) EPS may not foot due to rounding.

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation and Variable Interest Entities [Abstract]

Basis of Presentation

1. Basis of Presentation

As used in these Notes, references to “Key,” “we,” “our,” “us” and similar terms refer to the consolidated entity consisting of KeyCorp and its subsidiaries. KeyCorp refers solely to the parent holding company, and KeyBank refers to KeyCorp’s subsidiary, KeyBank National Association.

The acronyms and abbreviations identified below are used in the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion & Analysis of Financial Condition & Results of Operations. You may find it helpful to refer back to this page as you read this report.

References to our “2011 Annual Report on Form 10-K” refer to our Annual Report on Form 10-K for the year ended December 31, 2011, that has been filed with the U.S. Securities and Exchange Commission and is available on its website (www.sec.gov) or on our website (www.key.com/ir).

ABO: Accumulated benefit obligation.	N/A: Not applicable.
AICPA: American Institute of Certified Public Accountants.	NASDAQ: National Association of Securities Dealers
ALCO: Asset/Liability Management Committee.	Automated Quotation System.
ALLL: Allowance for loan and lease losses.	N/M: Not meaningful.
A/LM: Asset/liability management.	NOW: Negotiable Order of Withdrawal.
AOCI: Accumulated other comprehensive income (loss).	NPR: Notice of proposed rulemaking.
APBO: Accumulated postretirement benefit obligation.	NYSE: New York Stock Exchange.
Austin: Austin Capital Management, Ltd.	OCC: Office of the Comptroller of the Currency.
BHCs: Bank holding companies.	OCI: Other comprehensive income (loss).
CCAR: Comprehensive Capital Analysis and Review.	OREO: Other real estate owned.
CMO: Collateralized mortgage obligation.	OTTI: Other-than-temporary impairment.
Common Shares: Common Shares, $1 par value.	QSPE: Qualifying special purpose entity.
CPP: Capital Purchase Program of the U.S. Treasury.	PBO: Projected Benefit Obligation.
DIF: Deposit Insurance Fund.	S&P: Standard and Poor’s Ratings Services, a Division of The
Dodd-Frank Act: Dodd-Frank Wall Street Reform and	McGraw-Hill Companies, Inc.
Consumer Protection Act of 2010.	SCAP: Supervisory Capital Assessment Program administered
ERISA: Employee Retirement Income Security Act of 1974.	by the Federal Reserve.
ERM: Enterprise risk management.	SEC: U.S. Securities & Exchange Commission.
EVE: Economic value of equity.	Series A Preferred Stock: KeyCorp’s 7.750% Noncumulative
FASB: Financial Accounting Standards Board.	Perpetual Convertible Preferred Stock, Series A.
FDIC: Federal Deposit Insurance Corporation.	Series B Preferred Stock: KeyCorp’s Fixed-Rate Cumulative
Federal Reserve: Board of Governors of the Federal Reserve	Perpetual Preferred Stock, Series B issued to the U.S. Treasury
System.	under the CPP.
FHLMC: Federal Home Loan Mortgage Corporation.	SILO: Sale in, lease out transaction.
FNMA: Federal National Mortgage Association.	SPE: Special purpose entity.
FVA: Fair Value of pension plan assets.	TAG: Transaction Account Guarantee program of the FDIC.
GAAP: U.S. generally accepted accounting principles.	TARP: Troubled Asset Relief Program.
GNMA: Government National Mortgage Association.	TDR: Troubled debt restructuring.
IRS: Internal Revenue Service.	TE: Taxable equivalent.
ISDA: International Swaps and Derivatives Association.	TLGP: Temporary Liquidity Guarantee Program of the FDIC.
KAHC: Key Affordable Housing Corporation.	U.S. Treasury: United States Department of the Treasury.
LIBOR: London Interbank Offered Rate.	VAR: Value at risk.
LIHTC: Low-income housing tax credit.	VEBA: Voluntary Employee Beneficiary Association.
LILO: Lease in, lease out transaction.	VIE: Variable interest entity.
Moody’s: Moody’s Investor Services, Inc.	XBRL: eXtensible Business Reporting Language.

The consolidated financial statements include the accounts of KeyCorp and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Some previously reported amounts have been reclassified to conform to current reporting practices.

The consolidated financial statements include any voting rights entities in which we have a controlling financial interest. In accordance with the applicable accounting guidance for consolidations, we consolidate a VIE if we have: (i) a variable interest in the entity; (ii) the power to direct activities of the VIE that most significantly impact the entity’s economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE (i.e., we are considered to be the primary beneficiary). Variable interests can include equity interests, subordinated debt, derivative contracts, leases, service agreements, guarantees, standby letters of credit, loan commitments, and other contracts, agreements and financial instruments. See Note 9 (“Variable Interest Entities”) for information on our involvement with VIEs.

We use the equity method to account for unconsolidated investments in voting rights entities or VIEs if we have significant influence over the entity’s operating and financing decisions (usually defined as a voting or economic interest of 20% to 50%, but not controlling). Unconsolidated investments in voting rights entities or VIEs in which we have a voting or economic interest of less than 20% generally are carried at cost. Investments held by our registered broker-dealer and investment company subsidiaries (primarily principal investments) are carried at fair value.

We believe that the unaudited consolidated interim financial statements reflect all adjustments of a normal recurring nature and disclosures that are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our 2011 Annual Report on Form 10-K. See Note 11 (“Acquisition and Discontinued Operations”) for further information regarding an error correction that was made during the third quarter of 2011.

In preparing these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users, or filed with the SEC.

On August 1, 2012, we announced certain new strategic actions to further strengthen our consumer and commercial payments businesses. We have acquired Key-branded credit card assets from Elan Financial Services and will begin to self-issue credit cards. The acquired credit card portfolio of approximately 400,000 consumer and business accounts is comprised of current and former Key clients and has approximately $725 million in credit card assets. We also announced that we entered into a new third party processing agreement with Elavon, Inc. This new agreement continues the legacy arrangement with Elavon while providing Key the opportunity to more fully integrate merchant processing services into our overall payment solutions for business clients. This new arrangement with Elavon is expected to become effective in the first half of 2013.

Offsetting Derivative Positions

In accordance with the applicable accounting guidance, we take into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. Additional information regarding derivative offsetting is provided in Note 7 (“Derivatives and Hedging Activities”).

Accounting Guidance Adopted in 2012

Fair value measurement. In May 2011, the FASB issued accounting guidance that changed the wording used to describe many of the current accounting requirements for measuring fair value and disclosing information about fair value measurements. This accounting guidance clarified the FASB’s intent about the application of existing fair value measurement requirements. It was effective for the interim and annual periods beginning on or after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations. As required by this accounting guidance, additional information regarding the classification is provided in Note 5 (“Fair Value Measurements”).

Presentation of comprehensive income. In June 2011, the FASB issued new accounting guidance that required all nonowner changes in shareholders’ equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new accounting guidance did not change any of the components currently recognized in net income or comprehensive income. It was effective for public entities for interim and annual periods beginning after December 15, 2011 (effective January 1, 2012, for us) as well as interim and annual periods thereafter. As required by this accounting guidance, Consolidated Statements of Comprehensive Income (Unaudited) are now included as part of our financial statements.

Testing goodwill for impairment. In September 2011, the FASB issued new accounting guidance that simplified how an entity tests goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether additional goodwill impairment testing is required. This accounting guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.

Repurchase agreements. In April 2011, the FASB issued accounting guidance that changed the accounting for repurchase agreements and other similar arrangements by eliminating the collateral maintenance requirement when assessing effective control in these transactions. This change could result in more of these transactions being accounted for as secured borrowings instead of sales. This accounting guidance was effective for new transactions and transactions modified on or after the first interim or annual period beginning after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations since we do not account for these types of arrangements as sales.

Accounting Guidance Pending Adoption at June 30, 2012

Testing indefinite-lived intangible assets for impairment. In July 2012, the FASB issued new accounting guidance that simplifies how an entity tests indefinite-lived intangible assets other than goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether further testing for impairment of indefinite-lived intangible assets other than goodwill is required. This accounting guidance will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (January 1, 2013, for us). Early adoption is permitted. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Offsetting disclosures. In December 2011, the FASB issued new accounting guidance that requires an entity to disclose information about offsetting and related arrangements to enable financial statement users to understand the effect of those arrangements on the entity’s financial position. This new accounting guidance will be effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (effective January 1, 2013, for us).

XML

Trust Preferred Securities Issued by Unconsolidated Subsidiaries

6 Months Ended

Jun. 30, 2012

Trust Preferred Securities Issued by Unconsolidated Subsidiaries [Abstract]

Trust Preferred Securities Issued by Unconsolidated Subsidiaries

13.  Trust Preferred Securities Issued by Unconsolidated Subsidiaries

We own the outstanding common stock of business trusts formed by us that issued corporation-obligated mandatorily redeemable trust preferred securities. The trusts used the proceeds from the issuance of their trust preferred securities and common stock to buy debentures issued by KeyCorp. These debentures are the trusts’ only assets; the interest payments from the debentures finance the distributions paid on the mandatorily redeemable trust preferred securities.

We unconditionally guarantee the following payments or distributions on behalf of the trusts:

¿ required distributions on the trust preferred securities;

¿ the redemption price when a capital security is redeemed; and

¿ the amounts due if a trust is liquidated or terminated.

The Dodd-Frank Act changes the regulatory capital standards that apply to BHCs by requiring the phase-out of the treatment of trust preferred securities and cumulative preferred securities as Tier 1 eligible capital. This three-year phase-out period, which commences January 1, 2013, ultimately will require us to treat our mandatorily redeemable trust preferred securities as Tier 2 capital. On June 12, 2012, the Federal Reserve, the FDIC, and the OCC jointly announced three notices of proposed rulemaking (each an “NPR”) that would revise and replace the agencies’ current capital rules in a manner consistent with implementing the final framework for strengthening international capital and liquidity regulation (“Basel III”) adopted by the Basel Committee on Banking Supervision (the “Basel Committee”). One NPR proposes rules implementing the phase-out of trust preferred securities as Tier 1 capital, consistent with the Dodd-Frank Act, as part of the implementation of Basel III. A more thorough discussion of current rulemaking underway in the U.S. to implement Basel III is in the “Supervision and Regulation” portion of this report.

As of June 30, 2012, the trust preferred securities issued by the KeyCorp capital trusts represent $339 billion or 3.5% of our total qualifying Tier 1 capital, net of goodwill. During the quarter, the announcement of the redemptions of the trust preferred securities issued by KeyCorp Capital VII and KeyCorp Capital X resulted in such securities no longer qualifying as Tier 1 capital. On July 12, 2012, we completed the redemption in full of the securities issued by KeyCorp Capital VII and X, with an aggregate liquidation preference of $707 million.

The trust preferred securities, common stock and related debentures are summarized as follows:

dollars in millions	Trust Preferred Securities, Net of Discount		(a)	Common Stock		Principal Amount of Debentures, Net of Discount		(b)	Interest Rate         of Trust Preferred Securities and Debentures			(c)	Maturity         of Trust Preferred Securities and Debentures
June 30, 2012
KeyCorp Capital I	$	156		$	6	$	162			1.208	%			2028
KeyCorp Capital II		116			4		120			6.875				2029
KeyCorp Capital III		151			4		155			7.750				2029
KeyCorp Capital VII(e)		189			5		194			5.700				2035
KeyCorp Capital X (d), (e)		589			—		589			8.000				2068
Total	$	1,201		$	19	$	1,220			6.616	%			—
December 31, 2011	$	1,206		$	19	$	1,225			6.610	%			—
June 30, 2011	$	1,912		$	26	$	1,935			6.570	%			—

(a) The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $155 million at June 30, 2012, $160 million at December 31, 2011, and $121 million at June 30, 2011. See Note 7 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b) We have the right to redeem these debentures: (i) in whole or in part, on or after July 1, 2008 (for debentures owned by KeyCorp Capital I); March 18, 1999 (for debentures owned by KeyCorp Capital II); and July 16, 1999 (for debentures owned by KeyCorp Capital III). If the debentures purchased by KeyCorp Capital I are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (a) the principal amount, plus any accrued but unpaid interest or (b) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points (25 basis points or 50 basis points in the case of redemption upon either a tax event or a capital treatment event for KeyCorp Capital III), plus any accrued but unpaid interest. When debentures are redeemed in response to tax or capital treatment events, the redemption price for KeyCorp Capital II and KeyCorp Capital III generally is slightly more favorable to us. The principal amount of debentures shown above includes adjustments related to hedging with financial instruments totaling $155 million at June 30, 2012, $160 million at December 31, 2011, and $118 million at June 30, 2011.

(c) The interest rates for the trust preferred securities issued by KeyCorp Capital II, KeyCorp Capital III, KeyCorp Capital VII, and KeyCorp Capital X are fixed. KeyCorp Capital I has a floating interest rate equal to three-month LIBOR plus 74 basis points that reprices quarterly. The total interest rates are weighted-average rates.

(d) In connection with the issuances of these trust preferred securities, KeyCorp entered into a replacement capital covenant. On April 16, 2012, KeyCorp commenced a consent solicitation from the holders of record as of April 10, 2012, of the outstanding 5.70% trust preferred securities of KeyCorp Capital VII to terminate the Replacement Capital Covenant, dated as of February 27, 2008, as amended (the “RCC”) by KeyCorp in favor of and for the benefit of each Covered Debt holder (as defined in such RCC). On April 27, 2012, KeyCorp announced that, effective as of April 26, 2012, a majority of the holders of record of the trust preferred securities in liquidation amount of KeyCorp Capital VII consented to terminate the RCC. Pursuant to the terms of the consent solicitation, the termination of the RCC became effective on April 26, 2012.

(e) On June 12, 2012, KeyCorp announced the redemption, in full, of 5.70% trust preferred securities of KeyCorp Capital VII and 8.000% enhanced trust preferred securities of KeyCorp Capital X. On July 12, 2012, KeyCorp completed such redemptions.

XML

Variable Interest Entities

6 Months Ended

Jun. 30, 2012

Basis of Presentation and Variable Interest Entities [Abstract]

Variable Interest Entities

9.  Variable Interest Entities

A VIE is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria:

¿ The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

¿ The entity’s investors lack the power to direct the activities that most significantly impact the entity’s economic performance.

¿ The entity’s equity at risk holders do not have the obligation to absorb losses or the right to receive residual returns.

¿ The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

Our VIEs are summarized below. We define a “significant interest” in a VIE as a subordinated interest that exposes us to a significant portion, but not the majority, of the VIE’s expected losses or residual returns, even though we do not have the power to direct the activities that most significantly impact the entity’s economic performance.

		Consolidated VIEs					Unconsolidated VIEs
in millions		Total         Assets		Total             Liabilities			Total     Assets		Total               Liabilities		Maximum       Exposure to Loss
June 30, 2012
LIHTC funds	$		91		84	$		119		—		—
Education loan securitization trusts			2,611	$	2,401			N/A		N/A		N/A
LIHTC investments			N/A		N/A			1,012		—	$	494

Our involvement with VIEs is described below.

Consolidated VIEs

LIHTC guaranteed funds. KAHC formed limited partnerships, known as funds, that invested in LIHTC operating partnerships. Interests in these funds were offered in syndication to qualified investors who paid a fee to KAHC for a guaranteed return. We also earned syndication fees from the funds and continue to earn asset management fees. The funds’ assets primarily are investments in LIHTC operating partnerships, which totaled $52 million at June 30, 2012. These investments are recorded in “accrued income and other assets” on the balance sheet and serve as collateral for the funds’ limited obligations.

We have not formed new funds or added LIHTC partnerships since October 2003. However, we continue to act as asset manager and to provide occasional funding for existing funds under a guarantee obligation. As a result of this guarantee obligation, we have determined that we are the primary beneficiary of these funds. Additional information on return guarantee agreements with LIHTC investors is presented in Note 12 (“Contingent Liabilities and Guarantees”) under the heading “Guarantees.”

In accordance with the applicable accounting guidance for distinguishing liabilities from equity, third-party interests associated with our LIHTC guaranteed funds are considered mandatorily redeemable instruments and are recorded in “accrued expense and other liabilities” on the balance sheet. However, the FASB has indefinitely deferred the measurement and recognition provisions of this accounting guidance for mandatorily redeemable third-party interests associated with finite-lived subsidiaries, such as our LIHTC guaranteed funds. We adjust our financial statements each period for the third-party investors’ share of the funds’ profits and losses. At June 30, 2012, we estimated the settlement value of these third-party interests to be between $12 million and $21 million, while the recorded value, including reserves, totaled $84 million. The partnership agreement for each of our guaranteed funds requires the fund to be dissolved by a certain date.

Education loan securitization trusts. In September 2009, we decided to exit the government-guaranteed education lending business. Therefore, we have accounted for this business as a discontinued operation. In the past, as part of our education lending business model, we originated and securitized education loans. As the transferor, we retained a portion of the risk in the form of a residual interest and also retained the right to service the securitized loans and receive servicing fees. We have not securitized any education loans since 2006.

We consolidated our ten outstanding education loan securitization trusts as of January 1, 2010, and made a corresponding $45 million cumulative effect adjustment. We were required to consolidate these trusts because we hold the residual interests and, as the master servicer we have the power to direct the activities that most significantly influence the trusts’ economic performance. We elected to consolidate these trusts at fair value. The trust assets can be used only to settle the obligations or securities that the trusts issue; we cannot sell the assets or transfer the liabilities. The security holders or beneficial interest holders do not have recourse to us, and we do not have any liability recorded related to their securities. During the third quarter of 2011, we determined that the $45 million adjustment was incorrect. Further information regarding this error and how we corrected it as well as additional information about these education loan securitization trusts is generally provided in Note 11 (“Acquisition and Discontinued Operations”) under the heading “Education lending.”

Unconsolidated VIEs

LIHTC nonguaranteed funds. Although we hold significant interests in certain nonguaranteed funds that we formed and funded, we have determined that we are not the primary beneficiary because we do not absorb the majority of the funds’ expected losses and do not have the power to direct activities that most significantly influence the economic performance of these entities. At June 30, 2012, assets of these unconsolidated nonguaranteed funds totaled $119 million. Our maximum exposure to loss in connection with these funds is minimal, and we do not have any liability recorded related to the funds. We have not formed nonguaranteed funds since October 2003.

LIHTC investments. Through Key Community Bank, we have made investments directly in LIHTC operating partnerships formed by third parties. As a limited partner in these operating partnerships, we are allocated tax credits and deductions associated with the underlying properties. We have determined that we are not the primary beneficiary of these investments because the general partners have the power to direct the activities that most significantly influence the economic performance of their respective partnerships and have the obligation to absorb expected losses and the right to receive benefits.

At June 30, 2012, assets of these unconsolidated LIHTC operating partnerships totaled approximately $1 billion. At June 30, 2012, our maximum exposure to loss in connection with these partnerships is the unamortized investment balance of $399 million plus $95 million of tax credits claimed but subject to recapture. We do not have any liability recorded related to these investments because we believe the likelihood of any loss is remote. During the first six months of 2012, we did not obtain significant direct investments (either individually or in the aggregate) in LIHTC operating partnerships.

We have additional investments in unconsolidated LIHTC operating partnerships that are held by the consolidated LIHTC guaranteed funds. Total assets of these operating partnerships were approximately $987 million at June 30, 2012. The tax credits and deductions associated with these properties are allocated to the funds’ investors based on their ownership percentages. We have determined that we are not the primary beneficiary of these partnerships because the general partners have the power to direct the activities that most significantly impact their economic performance and the obligation to absorb expected losses and right to receive residual returns. Information regarding our exposure to loss in connection with these guaranteed funds is included in Note 12 under the heading “Return guarantee agreement with LIHTC investors.”

Commercial and residential real estate investments and principal investments. Our Principal Investing unit and the Real Estate Capital line of business make equity and mezzanine investments, some of which are in VIEs. These investments are held by nonregistered investment companies subject to the provisions of the AICPA Audit and Accounting Guide, “Audits of Investment Companies.” We are not currently applying the accounting or disclosure provisions in the applicable accounting guidance for consolidations to these investments, which remain unconsolidated. The FASB has indefinitely deferred the effective date of this guidance for such nonregistered investment companies.

XML

Mortgage Servicing Assets (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011
Mortgage Servicing Assets (Textual) [Abstract]
Prepayment speed, rate, min	0.00%	0.00%
Prepayment speed, rate, max	25.00%	25.00%
Expected credit losses, rate, min	1.00%	1.00%
Expected credit losses, rate, max	3.00%	3.00%
Residual cash flows discount rate, min	7.00%	7.00%
Residual cash flows discount rate, max	15.00%	15.00%
Interest rate for mortgage funds, min	0.50%	0.50%
Interest rate for mortgage funds, max	3.75%	3.75%
Increase (decrease) in value assigned to escrow deposits	1.00%
Increase (decrease) in assumed default rate of commercial mortgage loans	1.00%
Increase (decrease) in the fair value of mortgage servicing assets	$ (36,000,000)
Increase (decrease) in the fair value of mortgage servicing assets due to change in the assumed default rate of commercial mortgage loans	(7,000,000)
Contractual fee income from servicing commercial mortgage loans	45,000,000	48,000,000
Escrow Deposit			$ 1,500,000,000

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

5. Fair Value Measurements

Fair Value Determination

As defined in the applicable accounting guidance, fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants in our principal market. We have established and documented our process for determining the fair values of our assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, we determine the fair value of our assets and liabilities using valuation models or third-party pricing services. Both of these approaches rely on market-based parameters, when available, such as interest rate yield curves, option volatilities, and credit spreads, or unobservable inputs. Unobservable inputs may be based on our judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs.

Valuation adjustments, such as those pertaining to counterparty and our own credit quality and liquidity, may be necessary to ensure that assets and liabilities are recorded at fair value. Credit valuation adjustments are made when market pricing does not accurately reflect the counterparty’s credit quality. We make liquidity valuation adjustments to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when we are unable to observe recent market transactions for identical or similar instruments. Liquidity valuation adjustments are based on the following factors:

¿ the amount of time since the last relevant valuation;

¿ whether there is an actual trade or relevant external quote available at the measurement date; and

¿ volatility associated with the primary pricing components.

We ensure that our fair value measurements are accurate and appropriate by relying upon various controls, including:

¿ an independent review and approval of valuation models and assumptions;

¿ recurring detailed reviews of profit and loss; and

¿ a validation of valuation model components against benchmark data and similar products, where possible.

We recognize transfers between levels of the fair value hierarchy at the end of the reporting period. Quarterly, we review any changes to our valuation methodologies to ensure they are appropriate and justified, and refine our valuation methodologies if more market-based data becomes available. The Fair Value Committee, which is governed by ALCO, oversees the valuation process for all lines of business and support areas, as applicable. Various Working Groups that report to the Fair Value Committee analyze and approve the valuation methodologies used to fair value assets and liabilities managed within specific areas. The Working Groups are discussed in more detail in the qualitative disclosures within this footnote and in Note 11 (“Acquisition and Discontinued Operations”). Formal documentation in the form of fair value valuation methodologies are prepared by the lines of business and support areas as appropriate detailing the asset or liability class and related general ledger accounts, valuation techniques, fair value hierarchy level, market participants, accounting methods, valuation methodology, group responsible for valuations, and valuation inputs.

Additional information regarding our accounting policies for determining fair value is provided in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Fair Value Measurements” on page 122 of our 2011 Annual Report on Form 10-K.

Qualitative Disclosures of Valuation Techniques

Loans. Most loans recorded as trading account assets are valued based on market spreads for identical assets since they are actively traded. Therefore, these loans are classified as Level 2 because the fair value recorded is based on observable market data for similar assets.

Securities (trading and available for sale). We own several types of securities, requiring a range of valuation methods:

¿ Securities are classified as Level 1 when quoted market prices are available in an active market for the identical securities. Level 1 instruments include exchange-traded equity securities.

¿ Securities are classified as Level 2 if quoted prices for identical securities are not available, and fair value is determined using pricing models (either by a third-party pricing service or internally) or quoted prices of similar securities. These instruments include municipal bonds; bonds backed by the U.S. government; corporate bonds; certain mortgage-backed securities; securities issued by the U.S. Treasury; money markets; and certain agency and corporate CMOs. Inputs to the pricing models include actual trade data (i.e., spreads, credit ratings, and interest rates) for comparable assets, spread tables, matrices, high-grade scales, option-adjusted spreads, and standard inputs, such as yields, benchmark securities, bids, and offers.

¿ Securities are classified as Level 3 when there is limited activity in the market for a particular instrument. In such cases, we use internal models based on certain assumptions to determine fair value. Level 3 instruments consist of certain commercial mortgage-backed securities. Our Real Estate Capital line of business is responsible for the valuation process for these commercial mortgage-backed securities, which is conducted on a quarterly basis. The methodology incorporates a loan-by-loan credit review in combination with discounting the risk-adjusted bond cash flows. A detailed credit review of the underlying loans involves a screening process using a multitude of filters to identify the highest risk loans associated with these commercial mortgage-backed securities. Each of the highest risk loans identified is re-underwritten and loan specific defaults and recoveries are assigned. A matrix approach is used to assign an expected default and recovery percentage for the loans which are not individually re-underwritten. Bond classes will then be run through a discounted cash flow analysis, taking into account the expected default and recovery percentages as well as discount rates developed by our Finance area. Inputs for the Level 3 internal models include expected cash flows from the underlying loans, which take into account expected default and recovery percentages, market research, and discount rates commensurate with current market conditions. Changes in the credit quality of the underlying loans or market discount rate would impact the value of the bonds. An increase in the underlying loan credit quality or decrease in the market discount rate would positively impact the bond value. A decrease in the underlying loan credit quality or increase in the market discount rate would negatively impact the bond value.

The fair values of our Level 2 securities available for sale are determined by a third-party pricing service. The valuations provided by the third-party pricing service are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, and reference data obtained from market research publications. Inputs used by the third-party pricing service in valuing CMOs and other mortgage-backed securities also include new issue data, monthly payment information, whole loan collateral performance, and “To Be Announced” prices. In valuations of state and political subdivisions securities, inputs used by the third-party pricing service also include material event notices.

On a quarterly basis, we validate the pricing methodologies utilized by our third-party pricing service to ensure the fair value determination is consistent with the applicable accounting guidance and that our assets are properly classified in the fair value hierarchy. To perform this validation, we:

¿ review documentation received from our third-party pricing service regarding the inputs used in their valuations and determine a level assessment for each category of securities;

¿ substantiate actual inputs used for a sample of securities by comparing the actual inputs used by our third-party pricing service to comparable inputs for similar securities; and

¿ substantiate the fair values determined for a sample of securities by comparing the fair values provided by our third-party pricing service to prices from other independent sources for the same and similar securities. We analyze variances and conduct additional research with our third-party pricing service and take appropriate steps based on our findings.

Private equity and mezzanine investments. Private equity and mezzanine investments consist of investments in debt and equity securities through our Real Estate Capital line of business. They include direct investments made in specific properties, as well as indirect investments made in funds that pool assets of many investors to invest in properties. There is no active market for these investments, so we employ other valuation methods.

Private equity and mezzanine investments are classified as Level 3 assets since our judgment significantly influences the determination of fair value. Our Fund Management, Asset Management, and Accounting groups are responsible for reviewing the valuation models and determining the fair value of these investments on a quarterly basis. Direct investments in properties are initially valued based upon the transaction price. This amount is then adjusted to fair value based on current market conditions using the discounted cash flow method based on the expected investment exit date. The fair value of the assets are reviewed and adjusted quarterly. Periodically, a third-party appraisal is obtained for the investment to validate the specific inputs for determining fair value.

Inputs used in calculating future cash flows include the cost of build-out, future selling prices, current market outlook, and operating performance of the investment. Investment income and expense assumptions are based on market inputs, such as rental/leasing rates and vacancy rates for the geographic- and property type-specific markets. For investments under construction, investment income and expense assumptions are determined using expected future build-out costs and anticipated future rental prices based on current market conditions, discount rates, holding period, the terminal cap rate and sales commissions paid in the terminal cap year. For investments that are in lease-up or are fully leased, income and expense assumptions are based on the current geographic market lease rates, underwritten expenses, market lease terms, and historical vacancy rates. Asset Management validates these inputs on a quarterly basis through the use of industry publications, third-party broker opinions, and comparable property sales, where applicable. Changes in the significant inputs (rental/leasing rates, vacancy rates, valuation capitalization rate, discount rate, and terminal cap rate) would significantly affect the fair value measurement. Increases in rental/leasing rates would increase fair value while increases in the vacancy rates, the valuation capitalization rate, the discount rate, and the terminal cap rate would decrease fair value.

Indirect investments are valued using a methodology that is consistent with accounting guidance that allows us to use statements from the investment manager to calculate net asset value per share. A primary input used in estimating fair value is the most recent value of the capital accounts as reported by the general partners of the funds in which we invest. The calculation to determine the investment’s fair value is based on our percentage ownership in the fund multiplied by the net asset value of the fund, as provided by the fund manager.

Investments in real estate private equity funds are included within private equity and mezzanine investments. The main purpose of these funds is to acquire a portfolio of real estate investments that provides attractive risk-adjusted returns and current income for investors. Certain of these investments do not have readily determinable fair values and represent our ownership interest in an entity that follows measurement principles under investment company accounting. The following table presents the fair value of our indirect investments and related unfunded commitments at June 30, 2012:

June 30, 2012			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Passive funds (a)	$	18	$	3
Co-managed funds (b)		25		3
Total	$	43	$	6

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to seven years.

(b) We are a manager or co-manager of these funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. In addition, we receive management fees. We can sell or transfer our interest in any of these funds with the written consent of a majority of the fund’s investors. In one instance, the other co-manager of the fund must consent to the sale or transfer of our interest in the fund. The funds will mature over a period of two to five years.

Principal investments. Principal investments consist of investments in equity and debt instruments made by our principal investing entities. They include direct investments (investments made in a particular company), as well as indirect investments (investments made through funds that include other investors). During the first half of 2011, employees who managed our various principal investments formed two independent entities that serve as investment managers of these investments going forward. Under this new arrangement, which was mutually agreeable to both parties, these individuals are no longer employees of Key.

Each investment is adjusted to fair value with any net realized or unrealized gain/loss recorded in the current period’s earnings. This process is a coordinated and documented effort by the Principal Investing Entities Deal Team (comprised of individuals from one of the independent investment managers noted above), the Key Principal Partners (“KPP”) Controller and certain members of the KPP Controller’s staff, a member of Key’s senior management team, and the Investment Committee (members comprised of individuals from Key and one of the independent investment managers). This process involves an in-depth review of the condition of each investment depending on the type of investment.

Our direct investments include investments in debt and equity instruments of both private and public companies. When quoted prices are available in an active market for the identical direct investment, we use the quoted prices in the valuation process, and the related investments are classified as Level 1 assets. However, in most cases, quoted market prices are not available for our direct investments, and we must perform valuations using other methods. These direct investment valuations are an in-depth analysis of the condition of each investment and are based on the unique facts and circumstances related to each individual investment. There is a certain amount of subjectivity surrounding the valuation of these investments due to the combination of quantitative and qualitative factors that are used in the valuation models. Therefore, these direct investments are classified as Level 3 assets. The specific inputs used in the valuations of each type of direct investment are described below.

Interest-bearing securities (i.e., loans) are valued on a quarterly basis. Valuation adjustments are determined by the Principal Investing Entities Deal Team and are subject to approval by the Investment Committee. Valuations of debt instruments are based on the Principal Investing Entities Deal Team’s knowledge of the current financial status of the subject company, which is regularly monitored throughout the term of the investment. Significant unobservable inputs used in the valuations of these investments include the company’s payment history, adequacy of cash flows from operations, and current operating results, including market multiples, and historical and forecast earnings before interest, taxation, depreciation, and amortization. Inputs can also include the seniority of the debt, the nature of any pledged collateral, the extent to which the security interest is perfected and the net liquidation value of collateral.

Valuations of equity instruments of private companies, which are prepared on a quarterly basis, are based on current market conditions and the current financial status of each company. A valuation analysis is performed to value each investment that is reviewed by the Principal Investing Entities Deal Team Member as well as reviewed and approved by the Chief Administrative Officer of one of the independent investment managers. Significant unobservable inputs used in these valuations include adequacy of the company’s cash flows from operations, any significant change in the company’s performance since the prior valuation and any significant equity issuances by the company. Equity instruments of public companies are valued using quoted prices in an active market for the identical security. If the instrument is restricted, the fair value is determined considering the number of shares traded daily, the number of the company’s total restricted shares, and price volatility.

Our indirect investments are classified as Level 3 assets since our significant inputs are not observable in the marketplace. Indirect investments include primary and secondary investments in private equity funds engaged mainly in venture- and growth-oriented investing. These investments do not have readily determinable fair values. Indirect investments are valued using a methodology that is consistent with accounting guidance that allows us to estimate fair value based upon net asset value per share (or its equivalent, such as member units or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed). The significant unobservable input used in estimating fair value is primarily the most recent value of the capital accounts as reported by the general partners of the funds in which we invest.

For indirect investments, management makes adjustments as deemed appropriate to the net asset value and only if it is determined that the net asset value does not properly reflect fair value. In determining the need for an adjustment to net asset value, management performs an analysis of the private equity funds based on the independent fund manager’s valuations as well as management’s own judgment. Significant unobservable inputs used in these analyses include current fund financial information provided by the fund manager, an estimate of future proceeds expected to be received on the investment, and market multiples. Management also considers whether the independent fund manager adequately marks down an impaired investment, maintains financial statements in accordance with GAAP, or follows a practice of holding all investments at cost.

The following table presents the fair value of our indirect investments and related unfunded commitments at June 30, 2012:

June 30, 2012			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Private equity funds (a)	$	478	$	106
Hedge fund(b)		4		—
Total	$	482	$	106

(a) Consists of buyout, venture capital, and fund of funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to ten years.

(b) Consists of a fund invested in long and short positions of “stressed and distressed” fixed income-oriented securities, with the goal of producing attractive risk-adjusted returns. The investments can be redeemed quarterly with 45 days notice. However, the fund’s general partners may impose quarterly redemption limits that may delay receipt of requested redemptions.

Derivatives. Exchange-traded derivatives are valued using quoted prices and, therefore, are classified as Level 1 instruments. However, only a few types of derivatives are exchange-traded. The majority of our derivative positions are valued using internally developed models based on market convention that use observable market inputs, such as interest rate curves, yield curves, LIBOR discount rates and curves, index pricing curves, foreign currency curves, and volatility surfaces (a three-dimensional graph of implied volatility against strike price and maturity). These derivative contracts, which are classified as Level 2 instruments, include interest rate swaps, certain options, cross currency swaps, and credit default swaps.

In addition, we have several customized derivative instruments and risk participations that are classified as Level 3 instruments. These derivative positions are valued using internally developed models, with inputs consisting of available market data, such as bond spreads and asset values, as well as unobservable internally-derived assumptions, such as loss probabilities and internal risk ratings of customers. These derivatives are priced monthly by our Market Risk Management group using a credit valuation adjustment methodology. Swap details with the customer and our related participation percentage, if applicable, are obtained from our derivatives accounting system, which is the system of record. Applicable customer rating information is obtained from the particular loan system and represents an unobservable input to this valuation process. Using these various inputs, a valuation of these Level 3 derivatives is performed using a model that was acquired from a third party. In summary, the fair value represents an estimate of the amount that the risk participation counterparty would need to pay/receive as of the measurement date based on the probability of customer default on the swap transaction and the fair value of the underlying customer swap. Therefore, a higher loss probability and a lower credit rating would negatively affect the fair value of the risk participations and a lower loss probability and higher credit rating would positively affect the fair value of the risk participations.

Market convention implies a credit rating of “AA” equivalent in the pricing of derivative contracts, which assumes all counterparties have the same creditworthiness. To reflect the actual exposure on our derivative contracts related to both counterparty and our own creditworthiness, we record a fair value adjustment in the form of a default reserve. The credit component is determined by individual counterparty based on the probability of default, and considers master netting and collateral agreements. The default reserve is classified as Level 3. Our Market Risk Management group is responsible for the valuation policies and procedure related to this default reserve. A weekly reconciliation process is performed to ensure that all applicable derivative positions are covered in the calculation, which includes transmitting customer exposures and reserve reports to trading management, derivative traders and marketers, derivatives middle office, and corporate accounting personnel. On a quarterly basis, Market Risk Management prepares the reserve calculation. A detailed reserve comparison with the previous quarter, an analysis for change in reserve and a reserve forecast are provided by Market Risk Management to ensure that the default reserve recorded at period end is sufficient.

Other assets and liabilities. The value of our repurchase and reverse repurchase agreements, trade date receivables and payables, and short positions is driven by the valuation of the underlying securities. The underlying securities may include equity securities, which are valued using quoted market prices in an active market for identical securities, resulting in a Level 1 classification. If quoted prices for identical securities are not available, fair value is determined by using pricing models or quoted prices of similar securities, resulting in a Level 2 classification. For the interest rate-driven products, such as government bonds, U.S. Treasury bonds and other products backed by the U.S. government, inputs include spreads, credit ratings and interest rates. For the credit-driven products, such as corporate bonds and mortgage-backed securities, inputs include actual trade data for comparable assets, and bids and offers.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. The following tables present these assets and liabilities at June 30, 2012 and December 31, 2011.

June 30, 2012
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short-term investments:
Securities purchased under resale agreements		—	$	338		—	$	338
Trading account assets:
U.S. Treasury, agencies and corporations		—		438		—		438
States and political subdivisions		—		27	$	57		84
Collateralized mortgage obligations		—		16		—		16
Other mortgage-backed securities		—		100		1		101
Other securities	$	3		37		—		40
Total trading account securities		3		618		58		679
Commercial loans		—		—		—		—
Total trading account assets		3		618		58		679
Securities available for sale:
States and political subdivisions		—	$	56		—	$	56
Collateralized mortgage obligations		—		12,477		—		12,477
Other mortgage-backed securities		—		652		—		652
Other securities	$	20		—		—		20
Total securities available for sale		20		13,185		—		13,205
Other investments:
Principal investments:
Direct	$	11		—	$	231	$	242
Indirect		—		—		482		482
Total principal investments		11		—		713		724
Equity and mezzanine investments:
Direct		—		—	$	18	$	18
Indirect		—		—		43		43
Total equity and mezzanine investments		—		—		61		61
Total other investments		11		—		774		785
Derivative assets:
Interest rate		—	$	1,824	$	35	$	1,859
Foreign exchange	$	81		26		—		107
Energy and commodity		—		209		—		209
Credit		—		19		6		25
Equity		—		—		—		—
Derivative assets		81		2,078		41		2,200
Netting adjustments(a)		—		—		—		(1,382)
Total derivative assets		81		2,078		41		818
Accrued income and other assets		2		134		—		136
Total assets on a recurring basis at fair value	$	117	$	16,353	$	873	$	15,961
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	481		—	$	481
Bank notes and other short-term borrowings:
Short positions	$	3		360		—		363
Derivative liabilities:
Interest rate		—		1,310		—		1,310
Foreign exchange		81		24		—		105
Energy and commodity		—		203	$	1		204
Credit		—		23		1		24
Equity		—		—		—		—
Derivative liabilities		81		1,560		2		1,643
Netting adjustments(a)		—		—		—		(880)
Total derivative liabilities		81		1,560		2		763
Accrued expense and other liabilities		—		4		—		4
Total liabilities on a recurring basis at fair value	$	84	$	2,405	$	2	$	1,611

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2011
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short term investments:
Securities purchased under resale agreements		—	$	236		—	$	236
Trading account assets:
U.S. Treasury, agencies and corporations		—		353		—		353
States and political subdivisions		—		81		—		81
Collateralized mortgage obligations		—		19		—		19
Other mortgage-backed securities		—		27	$	35		62
Other securities	$	79		29		—		108
Total trading account securities		79		509		35		623
Commercial loans		—		—		—		—
Total trading account assets		79		509		35		623
Securities available for sale:
States and political subdivisions		—		63		—		63
Collateralized mortgage obligations		—		15,162		—		15,162
Other mortgage-backed securities		—		778		—		778
Other securities		9		—		—		9
Total securities available for sale		9		16,003		—		16,012
Other investments:
Principal investments:
Direct		11		—		225		236
Indirect		—		—		473		473
Total principal investments		11		—		698		709
Equity and mezzanine investments:
Direct		—		—		15		15
Indirect		—		—		36		36
Total equity and mezzanine investments		—		—		51		51
Total other investments		11		—		749		760
Derivative assets:
Interest rate		—		1,915		38		1,953
Foreign exchange		86		65		—		151
Energy and commodity		—		253		—		253
Credit		—		30		7		37
Equity		—		3		—		3
Derivative assets		86		2,266		45		2,397
Netting adjustments (a)		—		—		—		(1,452)
Total derivative assets		86		2,266		45		945
Accrued income and other assets		7		105		—		112
Total assets on a recurring basis at fair value	$	192	$	19,119	$	829	$	18,688
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	292		—	$	292
Bank notes and other short-term borrowings:
Short positions		—		337		—		337
Derivative liabilities:
Interest rate		—		1,398		—		1,398
Foreign exchange	$	79		209		—		288
Energy and commodity		—		252	$	1		253
Credit		—		34		28		62
Equity		—		3		—		3
Derivative liabilities		79		1,896		29		2,004
Netting adjustments (a)		—		—		—		(978)
Total derivative liabilities		79		1,896		29		1,026
Accrued expense and other liabilities		23		22		—		45
Total liabilities on a recurring basis at fair value	$	102	$	2,547	$	29	$	1,700

(a) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

Changes in Level 3 Fair Value Measurements

The following table shows the change in the fair values of our Level 3 financial instruments for the three and six months ended June 30, 2012 and 2011. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.

	Trading Account Assets						Other Investments												Derivative Instruments							(a)
in millions	Other Mortgage- Backed Securities			Other Securities			Principal Investments						Equity and Mezzanine Investments						Interest Rate			Energy and Commodity			Credit
							Direct			Indirect			Direct			Indirect
Balance at December 31, 2011	$	35			—		$	225		$	473		$	15		$	36		$	38		$	(1)		$    (21)
Gains (losses) included in earnings		2	(b)	$	(2	)  (b)		8	(c)		43	(c)		3	(c)		6	(c)		(3)	(b)		—	(b)	(7)	(b)
Purchases		—			—			10			20			—			4			1			—		—
Sales		(32)			—			(12)			(54)			—			—			(1)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			2			—			—			—			(3)			—			—		33
Transfers into Level 3		—			57	(d)		—			—			—			—			4	(d)		—		—
Transfers out of Level 3		(4)	(d)		—			—			—			—			—			(4)	(d)		—		—
Balance at June 30, 2012	$	1			57		$	231		$	482		$	18		$	43		$	35		$	(1)		$       5
Unrealized gains (losses) included in earnings		—	(b)	$	(2)	(b)	$	8	(c)	$	28	(c)	$	10	(c)	$	6	(c)		—	(b)		—	(b)	—	(b)
Balance at March 31, 2012	$	1		$	—		$	226		$	485		$	15		$	42		$	36			(1)		$       5
Gains (losses) included in earnings		—	(b)		(5)	(b)		7	(c)		20	(c)		3	(c)		5	(c)		2	(b)		—	(b)	(2)	(b)
Purchases		—			—			9			10			—			1			—			—		—
Sales		—			—			(11)			(33)			—			—			—			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			5			—			—			—			(2)			—			—		2
Transfers into Level 3		—			57	(d)		—			—			—			(3)	(d)		—			—		—
Transfers out of Level 3		—			—			—			—			—			—			(3)	(d)		—		—
Balance at June 30, 2012	$	1			57		$	231		$	482		$	18		$	43		$	35			(1)		$       5
Unrealized gains (losses) included in earnings		—	(b)		(5)	(b)	$	7	(c)	$	9	(c)	$	4	(c)	$	2	(c)		—	(b)		—	(b)	—	(b)
Balance at December 31, 2010	$	1		$	21		$	372		$	526		$	20		$	30		$	75		$	1		$     11
Gains (losses) included in earnings		—	(b)		—	(b)		2	(c)		43	(c)		13	(c)		—	(c)		14	(b)		(1)	(b)	(10)	(b)
Purchases		—			3			30			46			—			9			11			—		—
Sales		—			—			(9)			(36)			—			—			(20)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			(24)			—			—			(19)			(3)			—			—		7
Transfers into Level 3		—			—			—			—			—			—			10			—		—
Transfers out of Level 3		—			—			(125)	(e)		(109)	(e)		—			(3)			(9)			—		—
Balance at June 30, 2011	$	1		$	—		$	270		$	470		$	14		$	33		$	81		$	—		$       8
Unrealized gains (losses) included in earnings		—	(b)	$	3	(b)	$	8	(c)	$	28	(c)	$	32	(c)	$	(3)	(c)		—	(b)		—	(b)	—	(b)
Balance at March 31, 2011	$	1			—		$	395		$	548		$	25		$	27		$	81			—		$       4
Gains (losses) included in earnings		—	(b)	$	3	(b)		—	(c)		10	(c)		8	(c)		1	(c)		10	(b)		—	(b)	(9)	(b)
Purchases		—			—			2			32			—			7			11			—		6
Sales		—			—			(2)			(11)			—			—			(18)			—		—
Issuances		—			—			—			—			—			—			—			—		—
Settlements		—			(3)			—			—			(19)			(2)			—			—		7
Transfers into Level 3		—			—			—			—			—			—			3			—		—
Transfers out of Level 3		—			—			(125)	(e)		(109)	(e)		—			—			(6)			—		—
Balance at June 30, 2011	$	1			—		$	270		$	470		$	14		$	33		$	81			—		$       8
Unrealized gains (losses) included in earnings		—	(b)	$	3	(b)	$	6	(c)	$	4	(c)	$	22	(c)	$	1	(c)		—	(b)		—	(b)	—	(b)

(a) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(b) Realized and unrealized gains and losses on trading account assets and derivative instruments are reported in “investment banking and capital markets income (loss)” on the income statement.

(c) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized gains and losses on private equity and mezzanine investments are reported in “investment banking and capital markets income (loss)” on the income statement.

(d) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

(e) Transfers out of Level 3 for principal investments represent investments that were deconsolidated during the second quarter of 2011 when employees who managed our various principal investments left Key and formed two independent entities that will serve as investment managers of these investments.

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. The following table presents our assets measured at fair value on a nonrecurring basis at June 30, 2012 and December 31, 2011:

	June 30, 2012								December 31, 2011
in millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	81	$	81		—		—	$	149	$	149
Loans held for sale (a)		—		—		15		15		—		—		15		15
Accrued income and other assets		—	$	17		25		42		—	$	19		25		44
Total assets on a nonrecurring basis at fair value		—	$	17	$	121	$	138		—	$	19	$	189	$	208

(a) During the first half of 2012, we transferred $38 million of commercial and consumer loans and leases from held-for-sale status to the held-to-maturity portfolio at their current fair value.

Impaired loans. We typically adjust the carrying amount of our impaired loans when there is evidence of probable loss and the expected fair value of the loan is less than its contractual amount. The amount of the impairment may be determined based on the estimated present value of future cash flows, the fair value of the underlying collateral or the loan’s observable market price. Impaired loans with a specifically allocated allowance based on cash flow analysis or the value of the underlying collateral are classified as Level 3 assets, while those with a specifically allocated allowance based on an observable market price that reflects recent sale transactions for similar loans and collateral are classified as Level 2.

The evaluations for impairment are prepared by the responsible relationship managers in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. The Asset Recovery Group is part of the Risk Management Group and reports to our Chief Credit Officer. These evaluations are performed in conjunction with the quarterly ALLL process.

Subject loans are evaluated for impairment on a quarterly basis. Loans included in the previous quarter’s review are reevaluated and if their values are materially different from the prior quarter evaluation, the underlying information (loan balance and in most cases, collateral value) are compared. Material differences are evaluated for reasonableness, and discussions are held between the relationship manager and their senior manager to understand the difference and determine if any adjustment is necessary. The inputs are developed and substantiated on a quarterly basis, based on current borrower developments, market conditions and collateral values.

The following two internal methods are used to value impaired loans:

¿ Cash flow analysis considers internally developed inputs, such as discount rates, default rates,

 costs of foreclosure and changes in collateral values.

¿ The fair value of the collateral, which may take the form of real estate or personal property, is based on internal estimates, field observations and assessments provided by third-party appraisers. We perform or reaffirm appraisals of collateral-dependent impaired loans at least annually. Appraisals may occur more frequently if the most recent appraisal does not accurately reflect the current market, the debtor is seriously delinquent or chronically past due, or there has been a material deterioration in the performance of the project or condition of the property. Adjustments to outdated appraisals that result in an appraisal value less than the carrying amount of a collateral-dependent impaired loan are reflected in the ALLL.

Impairment valuations are back-tested each quarter, based on a look-back of actual incurred losses on closed deals previously evaluated for impairment. The overall percent variance of actual net charge-offs on closed deals as compared to the specific allocations on such deals is considered in determining each quarter’s specific allocations.

Loans held for sale. Through a quarterly analysis of our loan portfolios held for sale, which include both performing and nonperforming loans, we determined that adjustments were necessary to record some of the portfolios at the lower of cost or fair value in accordance with GAAP. Loans held for sale portfolios adjusted to fair value totaled $15 million at June 30, 2012 and $15 million at December 31, 2011.

Current market conditions, including updated collateral values, and reviews of our borrowers’ financial condition influenced the inputs used in our internal models and other valuation methodologies, resulting in these adjustments. The valuations are prepared by the responsible relationship managers or analysts in our Asset Recovery Group and are reviewed and approved by the Asset Recovery Group Executive. Actual gains or losses realized on the sale of various loans held for sale provide a back-testing mechanism for determining the appropriateness of our valuations of these loans held for sale that are adjusted to fair value.

Valuations of performing commercial mortgage and construction loans held for sale are conducted using internal models that rely on market data from sales or nonbinding bids on similar assets, including credit spreads, treasury rates, interest rate curves and risk profiles, as well as our own assumptions about the exit market for the loans and details about individual loans within the respective portfolios. Therefore, we have classified these loans as Level 3 assets. The inputs related to our assumptions and other internal loan data include changes in real estate values, costs of foreclosure, prepayment rates, default rates and discount rates.

Valuations of nonperforming commercial mortgage and construction loans held for sale are based on current agreements to sell the loans or approved discounted payoffs. If a negotiated value is not available, we use third-party appraisals, adjusted for current market conditions. Since valuations are based on unobservable data, these loans have been classified as Level 3 assets.

Direct financing leases and operating lease assets held for sale. Our Key Equipment Finance (KEF) Accounting and Capital Markets groups are responsible for the valuation policies and procedures related to these assets. The Managing Director of the KEF Capital Markets group reports to the President of our Equipment Finance line of business. A weekly report is distributed to both groups that lists all Equipment Finance deals booked in the warehouse portfolio. On a quarterly basis, the KEF Accounting group prepares a detailed held for sale roll forward schedule that is reconciled to the general ledger and the above mentioned weekly report. The held for sale roll forward schedule is used by KEF management to determine if an impairment adjustment is necessary in accordance with lower of cost or fair value guidelines.

Valuations of direct financing leases and operating lease assets held for sale are performed using an internal model that relies on market data, such as swap rates and bond ratings, as well as our own assumptions about the exit market for the leases and details about the individual leases in the portfolio. The inputs based on our assumptions include changes in the value of leased items and internal credit ratings. These leases have been classified as Level 3 assets. Leases also may be valued using current nonbinding bids when they are available. These leases are classified as Level 2 assets. In a distressed market where market data is not available, an estimate of the fair value of the leased asset may be used to value the lease, resulting in a Level 3 classification. In an inactive market, the market value of the assets held for sale is determined as the present value of the future cash flows discounted at the current buy rate. Equipment Finance Accounting calculates an estimated fair value buy rate based on the credit premium inherent in the relevant bond index and the appropriate swap rate on the measurement date. The amount of the adjustment is calculated as book value minus the present value of future cash flows discounted at the calculated buy rate.

Goodwill and other intangible assets. On a quarterly basis, we review impairment indicators to determine whether we need to evaluate the carrying amount of the goodwill and other intangible assets assigned to Key Community Bank and Key Corporate Bank. We also perform an annual impairment test for goodwill. Fair value of our reporting units is determined using both an income approach (discounted cash flow method) and a market approach (using publicly traded company and recent transactions data), which are weighted equally.

Inputs used include market-available data, such as industry, historical and expected growth rates, and peer valuations, as well as internally driven inputs, such as forecasted earnings and market participant insights. Since this valuation relies on a significant number of unobservable inputs, we have classified goodwill as Level 3. We use a third party valuation services provider to perform the annual, and if necessary, any interim, Step 1 valuation process, and to perform a Step 2 analysis, if needed, on our reporting units. Annual and any interim valuations prepared by the third-party valuation service provider are reviewed by the appropriate individuals within Key to ensure that the assumptions used in preparing the analysis are appropriate and properly supported. For additional information on the results of recent goodwill impairment testing, see Note 10 (“Goodwill and Other Intangible Assets”) on page 161 of our 2011 Annual Report on Form 10-K.

The fair value of other intangible assets is calculated using a cash flow approach. While the calculation to test for recoverability uses a number of assumptions that are based on current market conditions, the calculation is based primarily on unobservable assumptions. Accordingly, these assets are classified as Level 3. Our lines of business, with oversight from our Accounting group are responsible for routinely, at least quarterly, assessing whether impairment indicators are present. All indicators that signal impairment may exist are appropriately considered in this analysis. An impairment loss is only recognized for a held and used long lived asset if the sum of its estimated future undiscounted cash flows used to test for recoverability is less than its carrying value.

Our primary assumptions include attrition rates, alternative costs of funds and rates paid on deposits. For additional information on the results of other intangible assets impairment testing, see Note 10 (“Goodwill and Other Intangible Assets”) on page 161 of our 2011 Annual Report on Form 10-K.

Other assets.  OREO and other repossessed properties are valued based on inputs such as appraisals and third-party price opinions, less estimated selling costs. Generally, we classify these assets as Level 3, but OREO and other repossessed properties for which we receive binding purchase agreements are classified as Level 2. Returned lease inventory is valued based on market data for similar assets and is classified as Level 2. Assets that are acquired through, or in lieu of, loan foreclosures are recorded initially as held for sale at fair value less estimated selling costs at the date of foreclosure. After foreclosure, valuations are updated periodically, and current market conditions may require the assets to be marked down further to a new cost basis.

¿ Commercial Real Estate Valuation Process:  When a loan is reclassified from loan status to OREO due to our taking possession of the collateral, the Asset Recovery Group Loan Officer, in consultation with our OREO group, obtains a broker price opinion or a third-party appraisal, which is used to establish the fair value of the underlying collateral. The determined fair value of the underlying collateral less estimated selling costs becomes the carrying value of the OREO asset. In addition to valuations from independent third party sources, our OREO group also writes down the carrying balance of OREO assets once a bona fide offer is contractually accepted, through execution of a Purchase and Sale Agreement, where the accepted price is lower than the current balance of the particular OREO asset. The fair value of OREO property is re-evaluated every 90 days and the OREO asset is adjusted as necessary.

¿ Consumer Real Estate Valuation Process:  The Asset Management team within our Risk Operations group is responsible for valuation policies and procedures in this area. The current vendor partner provides monthly reporting of all broker price opinion evaluations, appraisals and the monthly market plans. Market plans are reviewed monthly, and valuations are reviewed and tested monthly to ensure proper pricing has been established and guidelines are being met. Risk Operations Compliance validates and provides periodic testing of the valuation process. The Asset Management team reviews changes in fair value measurements. The current vendor partner managed brokers review pricing monthly, while third-party broker price opinions are reviewed every 90 days, and the fair value is written down based on changes to the valuation. External factors are documented and monitored as appropriate.

Mortgage servicing assets are valued based on inputs such as prepayment speeds, earn rates, credit default rates, discount rates and servicing advances. We classify these assets as Level 3. Additional information regarding the valuation of mortgage servicing assets is provided in Note 8 (“Mortgage Servicing Assets”).

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted-average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets during the second quarter of 2012, along with the valuation techniques used, are shown in the following table:

June 30, 2012 dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	220	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple		4.8 - 8.2% (6.1%)
Equity instruments of private companies				EBITDA multiple (where applicable)		5.5 - 12.0% (4.8%)
				Revenue multiple (where applicable)		0.2 - 4.4% (0.6%)
Nonrecurring
Impaired loans		81	Fair value of underlying collateral	Discount		0.00 - 100.00% (32%)
Goodwill		917	Discounted cash flow and market data	Earnings multiple of peers		8.30 - 11.90 (10.01)
				Equity multiple of peers		1.21 - 1.32 (1.27)
				Control premium		N/A (32.00%)
				Weighted-average cost of capital		N/A (15.00%)
Mortgage servicing assets		237	Discounted cash flow	Prepayment speed		0.00 - 25.00% (11.70%)
				Expected credit losses		1.00 - 3.00% (2.40%)
				Residual cash flows discount rate		7.00 - 15.00% (9.40%)
				Value assigned to escrow funds		0.50 - 3.75% (1.80%)
				Servicing cost		700 - 17,000 (2,512)
				Loan assumption rate		0.00 - 3.00% (2.18%)
				Percentage late		0.00 - 2.00% (0.22%)

Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments at June 30, 2012, along with the related carrying amounts and fair values at June 30, 2012 and December 31, 2011, are shown in the following table.

		June 30, 2012													December 31, 2011
				Fair Value
in millions		Carrying Amount		Level 1		Level 2		Level 3		Netting Adjustment			Total		Carrying Amount		Fair Value
ASSETS
Cash and short-term investments (a)	$		2,933	$	2,595	$	338		—		—		$	2,933	$	4,213	$	4,213
Trading account assets (e)			679		3		618	$	58		—			679		623		623
Securities available for sale (e)			13,205		20		13,185		—		—			13,205		16,012		16,012
Held-to-maturity securities (b)			4,352		—		4,396		—		—			4,396		2,109		2,133
Other investments (e)			1,186		11		401		774		—			1,186		1,163		1,163
Loans, net of allowance (c)			48,717		—		—		47,912		—			47,912		48,571		47,561
Loans held for sale (e)			656		—		—		656		—			656		728		728
Mortgage servicing assets (d)			186		—		—		237		—			237		173		245
Derivative assets (e)			818		81		2,078		41	$	(1,382	)     (f)		818		945		945
LIABILITIES
Deposits with no stated maturity (a)	$		52,495		—	$	52,495		—		—		$	52,495	$	51,014	$	51,014
Time deposits (d)			9,672	$	617		9,271		—		—			9,888		10,942		11,253
Short-term borrowings (a)			2,078		3		2,075		—		—			2,078		2,048		2,048
Long-term debt (d)			7,521		3,890		3,955		—		—			7,845		9,520		9,792
Derivative liabilities (e)			763		81		1,560	$	2	$	(880	)    (f)		763		1,026		1,026

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities and certain prepayment assumptions. We review the valuations derived from the models to ensure they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(c) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(d) Fair values of mortgage servicing assets, time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(e) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets Measured at Fair Value on a Nonrecurring Basis” in this note.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related collateral. Total derivative assets and liabilities include these netting adjustments.

We use valuation methods based on exit market prices in accordance with applicable accounting guidance. We determine fair value based on assumptions pertaining to the factors a market participant would consider in valuing the asset. A substantial portion of our fair value adjustments are related to liquidity. During 2011 and into 2012, the fair values of our loan portfolios improved, primarily due to increasing liquidity in the loan markets. If we were to use different assumptions, the fair values shown in the preceding table could change significantly. If a nonexit price methodology were used for valuing our loan portfolio for continuing operations, it would result in a premium of .4%. Also, because the applicable accounting guidance for financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements, the fair value amounts shown in the table above do not, by themselves, represent the underlying value of our company as a whole.

Education lending business.  The discontinued education lending business consists of assets and liabilities (recorded at fair value) in the securitization trusts, as well as loans in portfolio (recorded at fair value), loans in portfolio (recorded at carrying value with appropriate valuation reserves) and loans held for sale (prior to the second quarter of 2011), all of which are outside the trusts. The fair value of loans held for sale was identical to the aggregate carrying amount of the loans. All of these loans were excluded from the table above as follows:

• Loans at carrying value, net of allowance, of $2.8 billion ($2.4 billion at fair value) at June 30, 2012 and $2.9 billion ($2.5 billion at fair value) at December 31, 2011;

• Portfolio loans at fair value of $73 million at June 30, 2012 and $76 million at December 31, 2011;

• There were no loans held for sale at June 30, 2012 or December 31, 2011; and

• Loans in the trusts at fair value of $2.6 billion at June 30, 2012 and $2.7 billion at December 31, 2011.

Securities issued by the education lending securitization trusts, which are the primary liabilities of the trusts, totaling $2.4 billion in fair value at June 30, 2012, and $2.5 billion in fair value at December 31, 2011, are also excluded from the above table.

These loans and securities are classified as Level 3 because we rely on unobservable inputs when determining fair value since observable market data is not available. Additional information regarding the consolidation of the education lending securitization trusts is provided in Note 11 (“Acquisition and Discontinued Operations”).

Residential real estate mortgage loans.  Residential real estate mortgage loans with carrying amounts of $2 billion at June 30, 2012 and $1.9 billion at December 31, 2011 are included in “Loans, net of allowance” in the above table.

Short-term financial instruments.  For financial instruments with a remaining average life to maturity of less than six months, carrying amounts were used as an approximation of fair values.

XML

Asset Quality (Details Textual) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2012 Loan	Jun. 30, 2011	Dec. 31, 2011	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2010
Asset Quality (Textual) [Abstract]
Performing home equity second liens including nonperforming loans	$ 36,000,000
Number of days subordinate to first liens	120 days
Percentage of carrying amount of our commercial nonperforming loans outstanding	59.00%
Percentage of nonperforming loans outstanding face value	70.00%
Percentage of loans held for sale and other nonperforming assets	64.00%
Number of largest nonperforming loans	20
Aggregate carrying amount of largest nonperforming loans	220,000,000
Percentage of total loans on nonperforming status	34.00%
Total loans on nonperforming status from continuing operations		276,000,000
Percentage of total loans on nonperforming status prior year	33.00%
Net reduction to interest income	12,000,000		31,000,000
Interest income recognized on outstanding balances	2,000,000	2,000,000
Total Restructured loans	274,000,000	252,000,000	276,000,000
Addition in restructured loans	109,000,000
Restructured loans partially in payments and charge-offs	111,000,000
Trial period HAMP loans included in TDR amounts	4,000,000
Total current loan	48,455,000,000	46,415,000,000
Additional funds to borrowers related to lending related commitments	45,000,000	45,000,000	25,000,000
Percent of total current loan	98.00%
Total Past Due Loan	1,150,000,000	1,425,000,000
Percent of total past due loans	2.00%
Minimum outstanding impaired commercial loans	2,500,000
Number of days to designate commercial loans will be charged off in full or charged down to the fair value of the underlying collateral payment due period	180 days
Number of days to designate the charge-off policy for most consumer loans taking effect, payment due period	120 days
Number of days to designate home equity and residential mortgage loans to get charged down to the fair value of the underlying collateral payment due period	180 days
ALLL	888,000,000	1,230,000,000	1,004,000,000
ALLL percentage	1.79%	2.57%
ALLL of non performing loans percentage	135.16%	146.08%
Foreign currency translation adjustment	(1,000,000)	1,000,000
Increase (decrease) in allowance for loan losses	(342,000,000)
Percentage decrease in allowance for loan losses	28.00%
Individually Evaluated for Impairment Allowance	48,000,000	46,000,000
Individually Evaluated for Impairment corresponding allowance	411,000,000	488,000,000
Collectively Evaluated for Impairment, Outstanding	49,194,000,000	47,352,000,000
Collectively evaluated for current corresponding allowance	840,000,000
Loans carried at fair value	2,800,000,000
Increase (decrease) in liability for credit losses on lending-related commitments		6,000,000
Liability for credit losses on lending-related commitments	$ 51,000,000	$ 57,000,000	$ 45,000,000	$ 45,000,000	$ 69,000,000	$ 73,000,000
Percentage of total allowance for credit losses	1.89%	2.69%

XML

Loans and Loans Held for Sale

6 Months Ended

Jun. 30, 2012

Asset Quality and Loans and Loans Held for Sale [Abstract]

Loans and Loans Held for Sale

3. Loans and Loans Held for Sale

Our loans by category are summarized as follows:

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Commercial, financial and agricultural	$	20,386	$	19,378	$	16,883
Commercial real estate:
Commercial mortgage		7,409		8,037		8,069
Construction		1,172		1,312		1,631
Total commercial real estate loans		8,581		9,349		9,700
Commercial lease financing		5,636		6,055		6,105
Total commercial loans		34,603		34,782		32,688
Residential — prime loans:
Real estate — residential mortgage		2,016		1,946		1,838
Home equity:
Key Community Bank		9,601		9,229		9,431
Other		479		535		595
Total home equity loans		10,080		9,764		10,026
Total residential — prime loans		12,096		11,710		11,864
Consumer other — Key Community Bank		1,263		1,192		1,157
Consumer other:
Marine		1,542		1,766		1,989
Other		101		125		142
Total consumer other		1,643		1,891		2,131
Total consumer loans		15,002		14,793		15,152
Total loans (a)	$	49,605	$	49,575	$	47,840

(a) Excluded at June 30, 2012, December 31, 2011, and June 30, 2011, are loans in the amount of $5.5 billion, $5.8 billion and $6.3 billion, respectively, related to the discontinued operations of the education lending business.

Our loans held for sale are summarized as follows:

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Commercial, financial and agricultural	$	18	$	19	$	80
Real estate — commercial mortgage		523		567		198
Real estate — construction		12		35		39
Commercial lease financing		13		12		6
Real estate — residential mortgage		90		95		58
Total loans held for sale	$	656	$	728	$	381
Our quarterly summary of changes in loans held for sale as follows:
	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Balance at beginning of the period	$	511	$	479	$	426
New originations		1,308		1,235		914
Transfers from held to maturity, net		7		19		16
Loan sales		(1,165)		(932)		(1,039)
Loan draws (payments), net		(4)		(72)		73
Transfers to OREO / valuation adjustments		(1)		(1)		(9)
Balance at end of perod	$	656	$	728	$	381

XML

Asset Quality

6 Months Ended

Jun. 30, 2012

Asset Quality and Loans and Loans Held for Sale [Abstract]

Asset Quality

4. Asset Quality

We manage our exposure to credit risk by closely monitoring loan performance trends and general economic conditions. A key indicator of the potential for future credit losses is the level of nonperforming assets and past due loans.

Our nonperforming assets and past due loans were as follows:

	June 30,		December 31,		June 30,
in millions	2012		2011		2011
Total nonperforming loans (a)	$	657	$	727	$	842
Nonperforming loans held for sale		38		46		42
OREO		28		65		52
Other nonperforming assets		28		21		14
Total nonperforming assets	$	751	$	859	$	950
Restructured loans included in nonperforming loans (b)	$	163	$	191	$	144
Restructured loans with an allocated specific allowance (c)		71		50		19
Specifically allocated allowance for restructured loans (d)		34		10		5
Accruing loans past due 90 days or more	$	131	$	164	$	118
Accruing loans past due 30 through 89 days		362		441		465

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are: subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January, 2012. This policy related to the classification of second lien home equity loans was implemented prospectively, and therefore prior periods were not presented.

(b) A loan is “restructured” (i.e., TDRs) when the borrower is experiencing financial difficulty and we grant a concession that we would not otherwise have considered to improve the collectability of the loan. Typical concessions include: reducing the interest rate, extending the maturity date, or reducing the principal balance.

(c) Included in individually impaired loans allocated a specific allowance.

(d) Included in allowance for individually evaluated impaired loans.

At June 30, 2012, the approximate carrying amount of our commercial nonperforming loans outstanding represented 59% of their original contractual amount, total nonperforming loans outstanding represented 70% of their original contractual amount owed, and nonperforming assets in total were carried at 64% of their original contractual amount.

At June 30, 2012, our twenty largest nonperforming loans totaled $220 million, representing 33% of total loans on nonperforming status from continuing operations. At June 30, 2011, the twenty largest nonperforming loans totaled $276 million, representing 33% of total loans on nonperforming status.

The amount by which nonperforming loans and loans held for sale reduced expected interest income was $12 million for the six months ended June 30, 2012, and $31 million for the year ended December 31, 2011.

The following tables set forth a further breakdown of individually impaired loans as of June 30, 2012, December 31, 2011 and June 30, 2011:

				Unpaid					Average
June 30, 2012	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	59		$	142			—	$	68
Commercial real estate:
Commercial mortgage		112			199			—		113
Construction		51			204			—		49
Total commercial real estate loans		163			403			—		162
Total commercial loans with no related allowance recorded		222			545			—		230
Real estate — residential mortgage		1			1			—		1
Total consumer loans		1			1			—		1
Total loans with no related allowance recorded		223			546			—		231
With an allowance recorded:
Commercial, financial and agricultural		43			53		$	12		46
Commercial real estate:
Commercial mortgage		56			98			15		63
Construction		4			4			3		4
Total commercial real estate loans		60			102			18		67
Total commercial loans with an allowance recorded		103			155			30		113
Real estate — residential mortgage		16			17			2		8
Home equity:
Key Community Bank		11			11			3		6
Other		6			6			1		3
Total home equity loans		17			17			4		9
Consumer other — Key Community Bank		2			2			1		1
Consumer other:
Marine		50			50			11		25
Other		—			—			—		—
Total consumer other		50			50			11		25
Total consumer loans		85			86			18		43
Total loans with an allowance recorded		188			241			48		156
Total	$	411		$	787		$	48	$	387

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

				Unpaid					Average
December 31, 2011	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	88		$	195			—	$	75
Commercial real estate:
Commercial mortgage		100			240			—		131
Construction		30			113			—		98
Total commercial real estate loans		130			353			—		229
Total loans with no related allowance recorded		218			548			—		304
With an allowance recorded:
Commercial, financial and agricultural		62			70		$	26		75
Commercial real estate:
Commercial mortgage		96			115			21		91
Construction		12			18			4		29
Total commercial real estate loans		108			133			25		120
Total loans with an allowance recorded		170			203			51		201
Total	$	388		$	751		$	51	$	505

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

				Unpaid					Average
June 30, 2011	Recorded			Principal			Specific		Recorded
in millions	Investment		(a)	Balance		(b)	Allowance		Investment
With no related allowance recorded:
Commercial, financial and agricultural	$	116		$	217			—	$	89
Commercial real estate:
Commercial mortgage		123			207			—		143
Construction		83			226			—		124
Total commercial real estate loans		206			433			—		267
Total loans with no related allowance recorded		322			650			—		356
With an allowance recorded:
Commercial, financial and agricultural		43			71		$	14		66
Commercial real estate:
Commercial mortgage		89			174			21		88
Construction		34			73			11		39
Total commercial real estate loans		123			247			32		127
Commercial lease financing		—			—			—		6
Total loans with an allowance recorded		166			318			46		199
Total	$	488		$	968		$	46	$	555

(a) The Recorded Investment in impaired loans represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our consolidated balance sheet.

(b) The Unpaid Principal Balance represents the customer’s legal obligation to us.

For the six months ended June 30, 2012 and 2011, interest income recognized on the outstanding balances of accruing impaired loans totaled $2 million for each period presented.

At June 30, 2012, aggregate restructured loans (accrual, nonaccrual and held-for-sale loans) totaled $274 million, compared to $276 million at December 31, 2011, and $252 million at June 30, 2011. We added $109 million in restructured loans during the first six months of 2012, which were partially offset by $111 million in payments and charge-offs.

A further breakdown of restructured loans (TDRs) included in nonperforming loans by loan category as of June 30, 2012, follows:

				Pre-modification			Post-modification
				Outstanding			Outstanding
June 30, 2012	Number			Recorded			Recorded
dollars in millions	of loans			Investment			Investment
LOAN TYPE
Nonperforming:
Commercial, financial and agricultural		95	$		108	$		59
Commercial real estate:
Real estate — commercial mortgage		16			47			31
Real estate — construction		11			60			43
Total commercial real estate loans		27			107			74
Total commercial loans		122			215			133
Real estate — residential mortgage		56			7			7
Home equity:
Key Community Bank		50			4			4
Other		74			2			1
Total home equity loans		124			6			5
Consumer other — Key Community Bank		11			1			1
Consumer other:
Marine		139			17			17
Other		11			1			—
Total consumer other		150			18			17
Total consumer loans		341			32			30
Total nonperforming TDRs		463			247			163
Prior-year accruing (a)
Commercial, financial and agricultural		115			8			6
Commercial real estate:
Real estate — commercial mortgage		7			71			48
Real estate — construction		1			15			1
Total commercial real estate loans		8			86			49
Total commercial loans		123			94			55
Real estate — residential mortgage		111			11			11
Home equity:
Key Community Bank		88			7			7
Other		101			3			3
Total home equity loans		189			10			10
Consumer other — Key Community Bank		20			1			—
Consumer other:
Marine		135			34			33
Other		53			2			2
Total consumer other		188			36			35
Total consumer loans		508			58			56
Total prior-year accruing TDRs		631			152			111
Total TDRs		1,094	$		399	$		274

(a) All TDRs that were restructured prior to January 1, 2012 and are fully accruing.

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession to the borrower without commensurate financial, structural, or legal consideration. All commercial and consumer loan TDRs, regardless of size, are evaluated for impairment individually to determine the probable loss content and are assigned a specific loan allowance if deemed appropriate. The financial effects of TDRs are reflected in the components that comprise the allowance for loan and lease losses in either the amount of charge-offs or loan loss provision and appropriately impact the ultimate allowance level.

Commercial and consumer loan TDRs are considered subsequently defaulted at 90 days past due and when they are greater than 60 days past due, respectively, for principal and interest payments. There were no significant commercial or consumer loans that were designated as TDRs during calendar year 2011, for which there was a payment default during the first six months of 2012.

Our loan modifications are handled on a case by case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet our client’s financial needs. A majority of our concessions granted to borrowers are in the form of interest rate reductions. Other concession types include forgiveness of principal and other modifications of loan terms. Consumer loan concessions include Home Affordable Modification Program (“HAMP”) loans of approximately $4 million as of June 30, 2012. These loan concessions have successfully completed the required trial period under HAMP and as a result have been permanently modified and are included in consumer TDRs.

The following table shows the concession types for our commercial accruing and nonaccruing TDRs.

	June 30,			December 31,			June 30,
dollars in millions	2012			2011			2011
Interest rate reduction	$	155		$	177		$	175
Forgiveness of principal		13			23			10
Other modification of loan terms		20			8			6
Total	$	188		$	208		$	191
Total commercial and consumer TDRs (a)	$	274		$	276		$	252
Total commercial TDRs to total commercial loans		.54	%		.60	%		.58	%
Total commercial TDRs to total loans		.38			.42			.40
Total commercial loans	$	34,603		$	34,782		$	32,688
Total loans		49,605			49,575			47,840

(a) Commitments outstanding to lend additional funds to borrowers whose terms have been modified in TDRs are $45 million, $25 million, and $45 million at June 30, 2012, December 31, 2011, and June 30, 2011, respectively.

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” on page 117 of our 2011 Annual Report on Form 10-K. Pursuant to regulatory guidance issued in January 2012, the above-mentioned policy for nonperforming loans was revised effective for the second quarter of 2012. As of June 30, 2012, any second lien home equity loan with an associated first lien that is: 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan. This policy was implemented prospectively, and, therefore, prior periods were not presented.

At June 30, 2012, approximately $48.5 billion, or 98%, of our total loans are current. At June 30, 2012, total past due loans and nonperforming loans of $1.2 billion represent approximately 2% of total loans.

The following aging analysis as of June 30, 2012 and 2011, of past due and current loans provides further information regarding Key’s credit exposure.

			30-59		60-89		90 and Greater				Total Past Due and
June 30, 2012			Days Past		Days Past		Days Past		Nonperforming		Nonperforming		Total
in millions	Current		Due		Due		Due		Loans (a)		Loans		Loans
LOAN TYPE
Commercial, financial and agricultural	$	20,148	$	60	$	13	$	24	$	141	$	238	$	20,386
Commercial real estate:
Commercial mortgage		7,182		15		16		24		172		227		7,409
Construction		1,033		12		24		35		68		139		1,172
Total commercial real estate loans		8,215		27		40		59		240		366		8,581
Commercial lease financing		5,581		22		8		7		18		55		5,636
Total commercial loans	$	33,944	$	109	$	61	$	90	$	399	$	659	$	34,603
Real estate — residential mortgage	$	1,895	$	24	$	10	$	9	$	78	$	121	$	2,016
Home equity:
Key Community Bank		9,361		56		26		17		141		240		9,601
Other		445		10		4		3		17		34		479
Total home equity loans		9,806		66		30		20		158		274		10,080
Consumer other — Key Community Bank		1,237		13		4		7		2		26		1,263
Consumer other:
Marine		1,478		31		10		4		19		64		1,542
Other		95		2		2		1		1		6		101
Total consumer other		1,573		33		12		5		20		70		1,643
Total consumer loans	$	14,511	$	136	$	56	$	41	$	258	$	491	$	15,002
Total loans	$	48,455	$	245	$	117	$	131	$	657	$	1,150	$	49,605

(a) Includes $36 million of performing home equity second liens at June 30, 2012, that are subordinate to first liens that are 120 days or more past due; in foreclosure; or when the first mortgage delinquency is unknown. Such second liens are now being reported as nonperforming loans based upon regulatory guidance issued in January, 2012.

			30-59		60-89		90 and Greater				Total Past Due and
June 30, 2011			Days Past		Days Past		Days Past		Nonperforming		Nonperforming		Total
in millions	Current		Due		Due		Due		Loans		Loans		Loans
LOAN TYPE
Commercial, financial and agricultural	$	16,599	$	35	$	17	$	19	$	213	$	284	$	16,883
Commercial real estate:
Commercial mortgage		7,743		34		51		11		230		326		8,069
Construction		1,437		11		24		28		131		194		1,631
Total commercial real estate loans		9,180		45		75		39		361		520		9,700
Commercial lease financing		5,983		20		40		21		41		122		6,105
Total commercial loans	$	31,762	$	100	$	132	$	79	$	615	$	926	$	32,688
Real estate — residential mortgage	$	1,713	$	24	$	14	$	8	$	79	$	125	$	1,838
Home equity:
Key Community Bank		9,216		66		32		16		101		215		9,431
Other		559		13		7		5		11		36		595
Total home equity loans		9,775		79		39		21		112		251		10,026
Consumer other — Key Community Bank		1,129		14		4		7		3		28		1,157
Consumer other:
Marine		1,898		42		14		3		32		91		1,989
Other		138		2		1		—		1		4		142
Total consumer other		2,036		44		15		3		33		95		2,131
Total consumer loans	$	14,653	$	161	$	72	$	39	$	227	$	499	$	15,152
Total loans	$	46,415	$	261	$	204	$	118	$	842	$	1,425	$	47,840

The risk characteristic prevalent to both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the assigned loan risk rating grades for the commercial loan portfolios and the regulatory risk ratings assigned for the consumer loan portfolios. This risk rating stratification assists in the determination of the ALLL. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically reevaluated thereafter.

Most extensions of credit are subject to loan grading or scoring. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk within the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Credit quality indicators for loans are updated on an ongoing basis. Bond rating classifications are indicative of the credit quality of our commercial loan portfolios and are determined by converting our internally assigned risk rating grades to bond rating categories. Payment activity and the regulatory classifications of pass and substandard are indicators of the credit quality of our consumer loan portfolios.

Credit quality indicators for our commercial and consumer loan portfolios based on bond rating, regulatory classification and payment activity as of June 30, 2012, and June 30, 2011, are as follows:

Commercial Credit Exposure

Credit Risk Profile by Creditworthiness Category ^(a)

June 30,
in millions
	Commercial, financial and  agricultural				RE — Commercial				RE — Construction				Commercial Lease				Total
RATING (b) (c)	2012		2011		2012		2011		2012		2011		2012		2011		2012		2011
AAA — AA	$	165	$	100		—	$	2	$	1	$	3	$	605	$	655	$	771	$	760
A		680		671	$	64		63		1		1		992		1,245		1,737		1,980
BBB — BB		17,652		13,546		5,925		5,553		791		747		3,709		3,590		28,077		23,436
B		868		955		553		941		58		262		197		343		1,676		2,501
CCC — C		1,021		1,611		867		1,510		321		618		133		272		2,342		4,011
Total	$	20,386	$	16,883	$	7,409	$	8,069	$	1,172	$	1,631	$	5,636	$	6,105	$	34,603	$	32,688

(a)  Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b)  Our bond rating to internal loan grade conversion system is as follows: AAA - AA = 1, A = 2, BBB - BB = 3 - 13, B = 14 - 16, and CCC - C = 17 - 20.

(c)  Our internal loan grade to regulatory-defined classification is as follows: Pass = 1-16, Special Mention = 17, Substandard = 18, Doubtful = 19, and Loss = 20.

Consumer Credit Exposure

Credit Risk Profile by Regulatory Classifications ^(a) (b)

June 30,
in millions
	Residential — Prime
GRADE	2012		2011
Pass	$	11,831	$	11,644
Substandard		265		220
Total	$	12,096	$	11,864

Credit Risk Profile Based on Payment Activity ^(a) (b)

June 30,	Consumer — Key Community  Bank				Consumer — Marine				Consumer — Other				Total
in millions	2012		2011		2012		2011		2012		2011		2012		2011
Performing	$	1,261	$	1,154	$	1,523	$	1,957	$	100	$	141	$	2,884	$	3,252
Nonperforming		2		3		19		32		1		1		22		36
Total	$	1,263	$	1,157	$	1,542	$	1,989	$	101	$	142	$	2,906	$	3,288

(a) Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.

(b) Our past due payment activity to regulatory classification conversion is as follows: pass = less than 90 days; and substandard = 90 days and greater plus nonperforming loans. As of June 30, 2012, any second lien home equity loan with an associated first lien: that is 120 days or more past due; in foreclosure; or when the first mortgage delinquency timeframe is unknown, is reported as a nonperforming loan in accordance with regulatory guidance issued in January 2012.

We determine the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 117 of our 2011 Annual Report on Form 10-K. We apply expected loss rates to existing loans with similar risk characteristics as noted in the credit quality indicator table above and exercise judgment to assess the impact of factors such as changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets.

For all commercial and consumer loan TDRs, regardless of size, as well as impaired commercial loans with an outstanding balance greater than $2.5 million, we conduct further analysis to determine the probable loss content and assign a specific allowance to the loan if deemed appropriate. We estimate the extent of impairment by comparing the recorded investment of the loan with the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. A specific allowance also may be assigned — even when sources of repayment appear sufficient — if we remain uncertain about whether the loan will be repaid in full. On at least a quarterly basis, we evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. The ALLL at June 30, 2012 represents our best estimate of the probable credit losses inherent in the loan portfolio at that date

While quantitative modeling factors such as default probability and expected recovery rates are constantly changing as the financial strength of the borrower and overall economic conditions change, there have been no changes to the accounting policies or methodology we used to estimate the ALLL.

Commercial loans generally are charged off in full or charged down to the fair value of the underlying collateral when the borrower’s payment is 180 days past due. Our charge-off policy for most consumer loans is similar but takes effect when payments are 120 days past due. Home equity and residential mortgage loans generally are charged down to the fair value of the underlying collateral when payment is 180 days past due.

At June 30, 2012, the ALLL was $888 million, or 1.79% of loans, compared to $1.2 billion, or 2.57% of loans, at June 30, 2011. At June 30, 2012, the ALLL was 135.16% of nonperforming loans compared to 146.08% at June 30, 2011.

A summary of the allowance for loan and lease losses for the periods indicated is presented in the table below:

		Three months ended  June 30,					Six months ended  June 30,
in millions		2012		2011			2012		2011
Balance at beginning of period — continuing operations	$		944	$	1,372	$		1,004	$	1,604
Charge-offs			(131)		(177)			(263)		(409)
Recoveries			54		43			85		82
Net loans charged off			(77)		(134)			(178)		(327)
Provision for loan and lease losses from continuing operations			21		(8)			63		(48)
Foreign currency translation adjustment			—		—			(1)		1
Balance at end of period — continuing operations	$		888	$	1,230	$		888	$	1,230

The changes in the ALLL by loan category for the periods indicated are as follows:

in millions	December 31,  2011		Provision			Charge-offs		Recoveries		June 30,  2012
Commercial, financial and agricultural	$	334	$	(12)		$	(49)	$	31	$	304
Real estate — commercial mortgage		272		8			(46)		16		250
Real estate — construction		63		6			(16)		2		55
Commercial lease financing		78		—			(20)		10		68
Total commercial loans		747		2			(131)		59		677
Real estate — residential mortgage		37		—			(13)		2		26
Home equity:
Key Community Bank		103		21			(48)		4		80
Other		29		9			(17)		3		24
Total home equity loans		132		30			(65)		7		104
Consumer other — Key Community Bank		41		10			(20)		3		34
Consumer other:
Marine		46		15			(30)		13		44
Other		1		5			(4)		1		3
Total consumer other:		47		20			(34)		14		47
Total consumer loans		257		60			(132)		26		211
Total ALLL — continuing operations		1,004		62	(a)		(263)		85		888
Discontinued operations		104		6			(39)		8		79
Total ALLL — including discontinued operations	$	1,108	$	68		$	(302)	$	93	$	967

(a) Includes $1 million of foreign currency translation adjustment.

in millions	December 31,  2010		Provision			Charge-offs		Recoveries		June 30,  2011
Commercial, financial and agricultural	$	485	$	(22)		$	(93)	$	25	$	395
Real estate — commercial mortgage		416		(18)			(62)		7		343
Real estate — construction		145		15			(62)		8		106
Commercial lease financing		175		(53)			(26)		11		107
Total commercial loans		1,221		(78)			(243)		51		951
Real estate — residential mortgage		49		7			(17)		2		41
Home equity:
Key Community Bank		120		30			(53)		2		99
Other		57		4			(26)		2		37
Total home equity loans		177		34			(79)		4		136
Consumer other — Key Community Bank		57		9			(23)		4		47
Consumer other:
Marine		89		(14)			(42)		19		52
Other		11		(5)			(5)		2		3
Total consumer other:		100		(19)			(47)		21		55
Total consumer loans		383		31			(166)		31		279
Total ALLL — continuing operations		1,604		(47)	(a)		(409)		82		1,230
Discontinued operations		114		62			(73)		6		109
Total ALLL — including discontinued operations	$	1,718	$	15		$	(482)	$	88	$	1,339

(a) Includes $1 million of foreign currency translation adjustment.

Our ALLL decreased by $342 million, or 28%, since the second quarter of 2011. This contraction was associated with the improvement in credit quality of our loan portfolios, which has trended more favorably over the past six quarters. Our asset quality metrics have showed continued improvement and, therefore, resulted in favorable risk rating migration and a reduction in our general allowance. Our general allowance encompasses the application of expected loss rates to our existing loans with similar risk characteristics and an assessment of factors such as changes in economic conditions and changes in credit policies or underwriting standards. Our delinquency trends showed continued improvement during 2011 and the first-half of 2012. We attribute this improvement to a more moderate level of lending activity, more favorable conditions in the capital markets, improvement in client income statements, and continued run off in our exit loan portfolio.

For continuing operations, the loans outstanding individually evaluated for impairment totaled $411 million, with a corresponding allowance of $48 million at June 30, 2012. Loans outstanding collectively evaluated for impairment totaled $49.2 billion, with a corresponding allowance of $840 million at June 30, 2012.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of June 30, 2012 follows:

	Allowance (a)				Outstanding (a)
June 30, 2012	Individually Evaluated for		Collectively Evaluated for					Individually Evaluated for		Collectively  Evaluated for
in millions	Impairment		Impairment		Loans			Impairment		Impairment
Commercial, financial and agricultural	$	12	$	292	$	20,386		$	102	$	20,284
Commercial real estate:
Commercial mortgage		15		235		7,409			168		7,241
Construction		3		52		1,172			55		1,117
Total commercial real estate loans		18		287		8,581			223		8,358
Commercial lease financing		—		68		5,636			—		5,636
Total commercial loans		30		647		34,603			325		34,278
Real estate — residential mortgage		2		24		2,016			17		1,999
Home equity:
Key Community Bank		3		77		9,601			11		9,590
Other		1		23		479			6		473
Total home equity loans		4		100		10,080			17		10,063
Consumer other — Key Community Bank		1		33		1,263			2		1,261
Consumer other:
Marine		11		33		1,542			50		1,492
Other		—		3		101			—		101
Total consumer other		11		36		1,643			50		1,593
Total consumer loans		18		193		15,002			86		14,916
Total ALLL — continuing operations		48		840		49,605			411		49,194
Discontinued operations		—		79		5,483	(b)		—		5,483
Total ALLL — including discontinued operations	$	48	$	919	$	55,088		$	411	$	54,677

(a) There were no loans acquired with deteriorated credit quality at June 30, 2012.

(b) Amount includes $2.8 billion of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of June 30, 2011 follows:

	Allowance (a)				Outstanding (a)
June 30, 2011	Individually Evaluated for		Collectively Evaluated for				Individually Evaluated for		Collectively  Evaluated for
in millions	Impairment		Impairment		Loans		Impairment		Impairment
Commercial, financial and agricultural	$	14	$	381	$	16,883	$	159	$	16,724
Commercial real estate:
Commercial mortgage		21		322		8,069		213		7,856
Construction		11		95		1,631		116		1,515
Total commercial real estate loans		32		417		9,700		329		9,371
Commercial lease financing		—		107		6,105		—		6,105
Total commercial loans		46		905		32,688		488		32,200
Real estate — residential mortgage		—		41		1,838		—		1,838
Home equity:
Key Community Bank		—		99		9,431		—		9,431
Other		—		37		595		—		595
Total home equity loans		—		136		10,026		—		10,026
Consumer other — Key Community Bank		—		47		1,157		—		1,157
Consumer other:
Marine		—		52		1,989		—		1,989
Other		—		3		142		—		142
Total consumer other		—		55		2,131		—		2,131
Total consumer loans		—		279		15,152		—		15,152
Total ALLL — continuing operations		46		1,184		47,840		488		47,352
Discontinued operations		—		109		6,261		—		6,261
Total ALLL — including discontinued operations	$	46	$	1,293	$	54,101	$	488	$	53,613

(a) There were no loans acquired with deteriorated credit quality at June 30, 2011.

The liability for credit losses inherent in lending-related commitments, such as letters of credit and unfunded loan commitments, is included in “accrued expense and other liabilities” on the balance sheet. We establish the amount of this reserve by considering both historical trends and current market conditions quarterly, or more often if deemed necessary. Our liability for credit losses on lending-related commitments has decreased by $6 million since the second quarter of 2011 to $51 million at June 30, 2012. When combined with our ALLL, our total allowance for credit losses represented 1.89% of loans at June 30, 2012, compared to 2.69% at June 30, 2011.

Changes in the liability for credit losses on lending-related commitments are summarized as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Balance at beginning of period	$	45	$	69	$	45	$	73
Provision (credit) for losses on lending-related commitments		6		(12)		6		(16)
Balance at end of period	$	51	$	57	$	51	$	57

XML

Securities

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Securities

6. Securities

Securities available for sale.  These are securities that we intend to hold for an indefinite period of time; they may, however be sold in response to changes in interest rates, prepayment risk, liquidity needs or other factors. Securities available for sale are reported at fair value. Unrealized gains and losses (net of income taxes) deemed temporary are recorded in equity as a component of AOCI on the balance sheet. Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “net securities gains (losses)” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “net securities gains (losses)” on the income statement or AOCI in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

“Other securities” held in the available-for-sale portfolio are primarily marketable equity securities that are traded on a public exchange such as the NYSE or NASDAQ.

Held-to-maturity securities.  These are debt securities that we have the intent and ability to hold until maturity. Debt securities are carried at cost and adjusted for amortization of premiums and accretion of discounts using the interest method. This method produces a constant rate of return on the adjusted carrying amount.

“Other securities” held in the held-to-maturity portfolio consist of foreign bonds, capital securities and preferred equity securities.

Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “net securities gains (losses)” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “net securities gains (losses)” on the income statement or AOCI in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.

The increase in our held-to-maturity securities is invested in Federal Agency CMOs as we increased this portfolio in response to potential future changes in regulatory capital rules.

		June 30, 2012
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$		53	$	3		—	$	56
Collateralized mortgage obligations			12,098		379		—		12,477
Other mortgage-backed securities			597		55		—		652
Other securities			20		1	$	1		20
Total securities available for sale	$		12,768	$	438	$	1	$	13,205
HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$		4,334	$	44		—	$	4,378
Other securities			18		—		—		18
Total held-to-maturity securities	$		4,352	$	44		—	$	4,396
		December 31, 2011
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$		60	$	3		—	$	63
Collateralized mortgage obligations			14,707		455		—		15,162
Other mortgage-backed securities			715		63		—		778
Other securities			8		1		—		9
Total securities available for sale	$		15,490	$	522		—	$	16,012
HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$		2,091	$	24		—	$	2,115
Other securities			18		—		—		18
Total held-to-maturity securities	$		2,109	$	24		—	$	2,133
		June 30, 2011
in millions		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury, agencies and corporations	$		9		—		—	$	9
States and political subdivisions			126	$	3		—		129
Collateralized mortgage obligations			17,124		485		—		17,609
Other mortgage-backed securities			845		72		—		917
Other securities			13		3		—		16
Total securities available for sale	$		18,117	$	563		—	$	18,680
HELD-TO-MATURITY SECURITIES
States and political subdivisions	$		1		—		—	$	1
Other securities			18		—		—		18
Total held-to-maturity securities	$		19		—		—	$	19

The following table summarizes our securities that were in an unrealized loss position as of June 30, 2012, December 31, 2011, and June 30, 2011.

	Duration of Unrealized Loss Position
	Less than 12 Months				12 Months or Longer				Total
in millions	Fair Value		Gross   Unrealized   Losses		Fair Value		Gross   Unrealized   Losses		Fair Value		Gross Unrealized Losses
June 30, 2012
Securities available for sale:
Collateralized mortgage obligations	$	1		—		—		—	$	1		—
Other securities		12	$	1		—		—		12	$	1
Held-to-maturity:
Collateralized mortgage obligations		200		—		—		—		200		—
Total temporarily impaired securities	$	213	$	1		—		—	$	213	$	1
December 31, 2011
Securities available for sale:
Collateralized mortgage obligations	$	1		—		—		—	$	1		—
Other securities		3		—		—		—		3		—
Total temporarily impaired securities	$	4		—		—		—	$	4		—
June 30, 2011
Securities available for sale:
Collateralized mortgage obligations	$	126		—		—		—	$	126		—
Total temporarily impaired securities	$	126		—		—		—	$	126		—

We had $1 million of gross unrealized losses at June 30, 2012 that related to one fixed-rate CMO, which we had invested in as part of an overall A/LM strategy. Since this security has a fixed interest rate, its fair value is sensitive to movements in market interest rates. This unrealized loss is considered temporary since we expect to collect all contractually due amounts from this security. Accordingly, this investment has been reduced to its fair value through OCI, not earnings. This security had a weighted-average maturity of .2 years at June 30, 2012.

We regularly assess our securities portfolio for OTTI. The assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery.

The debt securities identified to have OTTI are written down to their current fair value. For those debt securities that we intend to sell, or more-likely-than-not will be required to sell, prior to the expected recovery of the amortized cost, the entire impairment (i.e., the difference between amortized cost and the fair value) is recognized in earnings. For those debt securities that we do not intend to sell, or more-likely-than-not will not be required to sell, prior to expected recovery, the credit portion of OTTI is recognized in earnings, while the remaining OTTI is recognized in equity as a component of AOCI on the balance sheet. As shown in the following table, we did not have any impairment losses recognized in earnings for the three months ended June 30, 2012.

Three months ended June 30, 2012

in millions
Balance at March 31, 2012	$	4
Impairment recognized in earnings		—
Balance at June 30, 2012	$	4

Realized gains and losses related to securities available for sale were as follows:

Six months ended June 30, 2012

in millions
Realized gains	—
Realized losses	—
Net securities gains (losses)	—

At June 30, 2012, securities available for sale and held-to-maturity securities totaling $10 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

The following table shows securities by remaining maturity. CMOs and other mortgage-backed securities — both of which are included in the securities available-for-sale portfolio — are presented based on their expected average lives. The remaining securities, including all of those in the held-to-maturity portfolio, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.

	Securities         Available for Sale				Held-to-Maturity          Securities
June 30, 2012 in millions	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	950	$	966	$	5	$	5
Due after one through five years		11,748		12,163		4,347		4,391
Due after five through ten years		66		72		—		—
Due after ten years		4		4		—		—
Total	$	12,768	$	13,205	$	4,352	$	4,396

XML

Fair Value Measurements (Details 3) (Nonrecurring [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]
Impaired Loans Fair Value Disclosure	$ 81	$ 149
Loans Held-for-sale, Fair Value Disclosure	15	15
Accrued Income and Other Assets Fair Value Disclosure	42	44
Total assets on a recurring basis at fair value	138	208
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]
Impaired Loans Fair Value Disclosure
Loans Held-for-sale, Fair Value Disclosure
Accrued Income and Other Assets Fair Value Disclosure
Total assets on a recurring basis at fair value
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]
Impaired Loans Fair Value Disclosure
Loans Held-for-sale, Fair Value Disclosure
Accrued Income and Other Assets Fair Value Disclosure	17	19
Total assets on a recurring basis at fair value	17	19
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]
Impaired Loans Fair Value Disclosure	81	149
Loans Held-for-sale, Fair Value Disclosure	15	15
Accrued Income and Other Assets Fair Value Disclosure	25	25
Total assets on a recurring basis at fair value	$ 121	$ 189

XML

Variable Interest Entities (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
LIHTC funds [Member]
Variable Interest Entities Information
Variable Interest Entity, Carrying Amount of Assets, Consolidated VIE	$ 91
Variable Interest Entity, Carrying Amount of Liabilities, Consolidated VIE	84
Variable Interest Entity, Carrying Amount of Assets, Unconsolidated VIE	119
Variable Interest Entity, Carrying Amount of Liabilities, Unconsolidated VIE
Education Loan Securitization Trusts [Member]
Variable Interest Entities Information
Variable Interest Entity, Carrying Amount of Assets, Consolidated VIE	2,611
Variable Interest Entity, Carrying Amount of Liabilities, Consolidated VIE	2,401
LIHTC investments [Member]
Variable Interest Entities Information
Variable Interest Entity, Carrying Amount of Assets, Unconsolidated VIE	1,012
Variable Interest Entity, Carrying Amount of Liabilities, Unconsolidated VIE
Maximum Exposure To Loss, Unconsolidated VIE	$ 494

XML

Fair Value Measurements (Details 5) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
ASSETS
Total Derivative assets	$ 818	$ 945	$ 900
LIABILITIES
Derivative liabilities	763	1,026	991
Carrying Amount [Member]
ASSETS
Cash and short-term investments	2,933	4,213
Trading account assets	679	623
Securities available for sale	13,205	16,012
Held-to-maturity securities	4,352	2,109
Other investments	1,186	1,163
Loans, net of allowance	48,717	48,571
Loans held for sale	656	728
Mortgage servicing assets	186	173
Total Derivative assets	818	945
LIABILITIES
Deposits with no stated maturity	52,495	51,014
Time deposits	9,672	10,942
Short-term borrowings	2,078	2,048
Long-term debt	7,521	9,520
Derivative liabilities	763	1,026
Fair Value [Member]
ASSETS
Cash and short-term investments	2,933	4,213
Trading account assets	679	623
Securities available for sale	13,205	16,012
Held-to-maturity securities	4,396	2,133
Other investments	1,186	1,163
Loans, net of allowance	47,912	47,561
Loans held for sale	656	728
Mortgage servicing assets	237	245
Total Derivative assets	818	945
LIABILITIES
Deposits with no stated maturity	52,495	51,014
Time deposits	9,888	11,253
Short-term borrowings	2,078	2,048
Long-term debt	7,845	9,792
Derivative liabilities	763	1,026
Fair Value [Member] | Level 1 [Member]
ASSETS
Cash and short-term investments	2,595
Trading account assets	3
Securities available for sale	20
Held-to-maturity securities
Other investments	11
Loans, net of allowance
Loans held for sale
Mortgage servicing assets
Total Derivative assets	81
LIABILITIES
Deposits with no stated maturity
Time deposits	617
Short-term borrowings	3
Long-term debt	3,890
Derivative liabilities	81
Fair Value [Member] | Level 2 [Member]
ASSETS
Cash and short-term investments	338
Trading account assets	618
Securities available for sale	13,185
Held-to-maturity securities	4,396
Other investments	401
Loans, net of allowance
Loans held for sale
Mortgage servicing assets
Total Derivative assets	2,078
LIABILITIES
Deposits with no stated maturity	52,495
Time deposits	9,271
Short-term borrowings	2,075
Long-term debt	3,955
Derivative liabilities	1,560
Fair Value [Member] | Level 3 [Member]
ASSETS
Cash and short-term investments
Trading account assets	58
Securities available for sale
Held-to-maturity securities
Other investments	774
Loans, net of allowance	47,912
Loans held for sale	656
Mortgage servicing assets	237
Total Derivative assets	41
LIABILITIES
Deposits with no stated maturity
Time deposits
Short-term borrowings
Long-term debt
Derivative liabilities	2
Fair Value [Member] | Netting Adjustment [Member]
ASSETS
Cash and short-term investments
Trading account assets
Securities available for sale
Held-to-maturity securities
Other investments
Loans, net of allowance
Loans held for sale
Mortgage servicing assets
Total Derivative assets	(1,382)
LIABILITIES
Deposits with no stated maturity
Time deposits
Short-term borrowings
Long-term debt
Derivative liabilities	$ (880)

XML

Trust Preferred Securities Issued by Unconsolidated Subsidiaries (Details Textual) (USD $)	6 Months Ended				6 Months Ended				6 Months Ended
	Jun. 30, 2012	Jul. 12, 2012	Dec. 31, 2011	Jun. 30, 2011	Jun. 30, 2012 KeyCorp Capital I [Member]	Jun. 30, 2012 KeyCorp Capital II [Member]	Jun. 30, 2012 KeyCorp Capital III [Member]	Apr. 16, 2012 KeyCorp Capital VII [Member]	Jun. 30, 2012 KeyCorp Capital X [Member]	Jul. 12, 2012 KeyCorp Capital X [Member]
Capital Securities Issued by Unconsolidated Subsidiaries (Textual) [Abstract]
Floating interest rate					KeyCorp Capital I has a floating interest rate equal to three-month LIBOR plus 74 basis points that reprices quarterly
Redemption price greater of sum of the present values of principal and interest payments discounted at the Treasury Rate plus interest rate percentage						0.20%	0.20%
Redemption price greater of sum of the present values of principal and interest payments discounted at the Treasury Rate plus interest rate percentage in case of tax event						0.25%	0.25%
Redemption price greater of sum of the present values of principal and interest payments discounted at the Treasury Rate plus interest rate percentage in case of capital treatment event						0.50%	0.50%
Floating interest rate equal to three-month LIBOR plus percentage					0.74%
Consent solicitation expiry date								Apr. 27, 2012
Trust Preferred Securities Interest Rate								5.70%
Enhanced Trust Preferred Securities Interest Rate									8.00%
Redemption Date of Enhanced Trust Preferred Securities										Jul. 12, 2012
Additional Capital Securities Issued By Unconsolidated Subsidiaries (Textual) [Abstract]
Capital securities issued by the KeyCorp and Union State Bank capital trusts of Tier 1 capital	$ 339,000,000,000
Percentage of Capital securities issued by the KeyCorp and Union State Bank capital trusts of Tier 1 capital	3.50%
Liquidation preference of securities issued		707,000,000
Capital securities adjustments related to fair value hedges	155,000,000		160,000,000	121,000,000
Right to redeem debentures	(i) in whole or in part, on or after July 1, 2008 (for debentures owned by KeyCorp Capital I); March 18, 1999 (for debentures owned by KeyCorp Capital II); July 16, 1999 (for debentures owned by KeyCorp Capital III)
Debentures adjustments related to financial instrument hedging	$ 155,000,000		$ 160,000,000	$ 118,000,000
Redemption price of debentures in the form of Principal amount, if redeemed before maturity	The principal amount, plus any accrued but unpaid interest
Redemption price as the sum of the present values of principal and interest payments, if redeemed before maturity	The greater of (a) the principal amount, plus any accrued but unpaid interest or (b) the sum of the present values of principal and interest payment discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points (25 basis points or 50 basis points in the case of redemption upon either a tax event or a capital treatment event for KeyCorp Capital III), plus any accrued but unpaid interest.

XML

Fair Value Measurements (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended						3 Months Ended		6 Months Ended							3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2012 Interest rate [Member]	Jun. 30, 2011 Interest rate [Member]	Jun. 30, 2012 Interest rate [Member]	Jun. 30, 2011 Interest rate [Member]	Jun. 30, 2011 Energy and commodity [Member]	Jun. 30, 2012 Energy and commodity [Member]	Mar. 31, 2012 Energy and commodity [Member]	Dec. 31, 2011 Energy and commodity [Member]	Jun. 30, 2012 Credit [Member]	Jun. 30, 2011 Credit [Member]	Jun. 30, 2012 Credit [Member]	Jun. 30, 2011 Credit [Member]	Jun. 30, 2012 Trading Account Assets [Member] Other mortgage-backed securities [Member]	Mar. 31, 2012 Trading Account Assets [Member] Other mortgage-backed securities [Member]	Jun. 30, 2011 Trading Account Assets [Member] Other mortgage-backed securities [Member]	Mar. 31, 2011 Trading Account Assets [Member] Other mortgage-backed securities [Member]	Dec. 31, 2010 Trading Account Assets [Member] Other mortgage-backed securities [Member]	Jun. 30, 2012 Trading Account Assets [Member] Other securities [Member]	Jun. 30, 2011 Trading Account Assets [Member] Other securities [Member]	Jun. 30, 2012 Trading Account Assets [Member] Other securities [Member]	Jun. 30, 2011 Trading Account Assets [Member] Other securities [Member]	Jul. 31, 2012 Trading Account Assets [Member] Other securities [Member]	Jun. 30, 2012 Other Investments [Member] Principal Direct Investments [Member]	Jun. 30, 2011 Other Investments [Member] Principal Direct Investments [Member]	Jun. 30, 2012 Other Investments [Member] Principal Direct Investments [Member]	Jun. 30, 2011 Other Investments [Member] Principal Direct Investments [Member]	Jun. 30, 2012 Other Investments [Member] Principal Indirect Investments [Member]	Jun. 30, 2011 Other Investments [Member] Principal Indirect Investments [Member]	Jun. 30, 2012 Other Investments [Member] Principal Indirect Investments [Member]	Jun. 30, 2011 Other Investments [Member] Principal Indirect Investments [Member]	Jun. 30, 2012 Other Investments [Member] Equity and Mezzanine Direct Investments [Member]	Jun. 30, 2011 Other Investments [Member] Equity and Mezzanine Direct Investments [Member]	Jun. 30, 2012 Other Investments [Member] Equity and Mezzanine Direct Investments [Member]	Jun. 30, 2011 Other Investments [Member] Equity and Mezzanine Direct Investments [Member]	Jun. 30, 2012 Other Investments [Member] Equity and Mezzanine Indirect Investments [Member]	Jun. 30, 2011 Other Investments [Member] Equity and Mezzanine Indirect Investments [Member]	Jun. 30, 2012 Other Investments [Member] Equity and Mezzanine Indirect Investments [Member]	Jun. 30, 2011 Other Investments [Member] Equity and Mezzanine Indirect Investments [Member]
Changes in Level 3 Fair Value Measurements
Beginning Balance	$ 36	$ 81	$ 38	$ 75	$ 1	$ (1)	$ (1)	$ (1)	$ 5	$ 4	$ (21)	$ 11	$ 35	$ 1	$ 1	$ 1	$ 1				$ 21	$ 57	$ 226	$ 395	$ 225	$ 372	$ 485	$ 548	$ 473	$ 526	$ 15	$ 25	$ 15	$ 20	$ 42	$ 27	$ 36	$ 30
Gain (losses) included in earnings	2	10	(3)	14	(1)				(2)	(9)	(7)	(10)	2					(5)	3	(2)			7		8	2	20	10	43	43	3	8	3	13	5	1	6
Purchases		11	1	11						6											3		9	2	10	30	10	32	20	46					1	7	4	9
Sales		(18)	(1)	(20)									(32)										(11)	(2)	(12)	(9)	(33)	(11)	(54)	(36)
Settlements									2	7	33	7						5	(3)	2	(24)											(19)		(19)	(2)	(2)	(3)	(3)
Transfers into Level 3		3	4	10														57		57															(3)
Transfers out of Level 3	(3)	(6)	(4)	(9)									(4)											(125)		(125)		(109)		(109)								(3)
Ending Balance	35	81	35	81		(1)	(1)	(1)	5	8	5	8	1	1	1	1	1	57		57		57	231	270	231	270	482	470	482	470	18	14	18	14	43	33	43	33
Unrealized gains (losses) included in earnings																		$ (5)	$ 3	$ (2)	$ 3		$ 7	$ 6	$ 8	$ 8	$ 9	$ 4	$ 28	$ 28	$ 4	$ 22	$ 10	$ 32	$ 2	$ 1	$ 6	$ (3)

XML

Acquisition and Discontinued Operations (Details 4) (Recurring [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS MEASURED ON A RECURRING BASIS
Total assets on a recurring basis at fair value	$ 15,961	$ 18,688
LIABILITIES MEASURED ON A RECURRING BASIS
Total liabilities on a recurring basis at fair value	1,611	1,700
Segment, Discontinued Operations [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio fair value of loans	73
Trust loans	2,580
Trust other assets	31
Total assets on a recurring basis at fair value	2,684
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities	2,373
Trust other liabilities	28
Total liabilities on a recurring basis at fair value	2,401
Segment, Discontinued Operations [Member] | Level 1 [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio fair value of loans
Trust loans
Trust other assets
Total assets on a recurring basis at fair value
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities
Trust other liabilities
Total liabilities on a recurring basis at fair value
Segment, Discontinued Operations [Member] | Level 2 [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio fair value of loans
Trust loans
Trust other assets
Total assets on a recurring basis at fair value
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities
Trust other liabilities
Total liabilities on a recurring basis at fair value
Segment, Discontinued Operations [Member] | Level 3 [Member] | Education Lending [Member]
ASSETS MEASURED ON A RECURRING BASIS
Portfolio fair value of loans	73
Trust loans	2,580
Trust other assets	31
Total assets on a recurring basis at fair value	2,684
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities	2,373
Trust other liabilities	28
Total liabilities on a recurring basis at fair value	$ 2,401

XML

Mortgage Servicing Assets (Tables)

6 Months Ended

Jun. 30, 2012

Mortgage Servicing Assets [Abstract]

Changes in the carrying amount of mortgage servicing assets

	Six months ended June  30,
in millions	2012		2011
Balance at beginning of period	$	173	$	196
Servicing retained from loan sales		20		11
Purchases		24		2
Amortization		(29)		(29)
Impairments		(2)		—
Balance at end of period	$	186	$	180
Fair value at end of period	$	237	$	247

XML

Asset Quality (Details 3) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Concession types for our commercial accruing and nonaccruing TDRs
Interest rate reduction	$ 155	$ 177	$ 175
Forgiveness of principal	13	23	10
Other modification of loan terms	20	8	6
Total	188	208	191
Total commercial and consumer TDRs	274	276	252
Total commercial TDRs to total commercial loans	0.54%	0.60%	0.58%
Total commercial TDRs to total loans	0.38%	0.42%	0.40%
Total commercial loans	34,603	34,782	32,688
Total loans	$ 49,605	$ 49,575	$ 47,840

XML

Acquisition and Discontinued Operations

6 Months Ended

Jun. 30, 2012

Acquisition and Discontinued Operations [Abstract]

Acquisition and Discontinued Operations

11.  Acquisition and Discontinued Operations

Acquisition

HSBC Branches. As previously reported, in January 2012, Key signed a purchase and assumption agreement to acquire 37 retail banking branches in Buffalo and Rochester, New York, owned by HSBC Bank NA (“HSBC”). On July 13, 2012, KeyBank completed this acquisition. The acquisition, which adds approximately $2.1 billion in deposits, approximately $260 million in loans, and approximately $70 million in credit card receivables in September of 2012, strengthens Key’s ability to provide exceptional service to consumer, business banking, and wealth management clients in these markets while growing our presence and acquiring new customers.

Under the terms of the transaction, KeyBank paid a 4.4% premium on deposits, or approximately $95 million. The assumed deposits consist primarily of transaction and savings accounts and the purchased loans consist of in-market performing loans, primarily residential real estate loans.

Discontinued operations

Education lending. In September 2009, we decided to exit the government-guaranteed education lending business. As a result, we have accounted for this business as a discontinued operation.

“Income (loss) from discontinued operations, net of taxes” on the income statement includes (i) the changes in fair value of the assets and liabilities of the education loan securitization trusts and the loans at fair value in portfolio (discussed later in this note), and (ii) the interest income and expense from the loans and the securities of the trusts and the loans in portfolio at both amortized cost and fair value. These amounts are shown separately in the following table. Gains and losses attributable to changes in fair value are recorded as a component of noninterest income or expense. Interest income and expense related to the loans and securities are shown as a component of “Net interest income.”

The components of “income (loss) from discontinued operations, net of taxes” for the education lending business are as follows:

		Three months ended June 30,					Six months ended June 30,
in millions		2012		2011			2012		2011
Net interest income	$		30	$	35	$		61	$	71
Provision for loan and lease losses			2		30			6		62
Net interest income (expense) after provision for loan and lease losses			28		5			55		9
Noninterest income			(2)		(11)			(20)		(21)
Noninterest expense			9		9			18		20
Income (loss) before income taxes			17		(15)			17		(32)
Income taxes			6		(6)			6		(12)
Income (loss) from discontinued operations, net of taxes (a)	$		11	$	(9)	$		11	$	(20)

(a) Includes after-tax charges of $12 million and $12 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $26 million and $25 million for the six-month periods ended June 30, 2012 and June 30, 2011, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The discontinued assets and liabilities of our education lending business included on the balance sheet are as follows:

in millions	June 30,  2012		December 31,  2011		June 30,  2011
Trust loans at fair value	$	2,580	$	2,726	$	3,100
Portfolio loans at fair value		73		76		—
Loans, net of unearned income of ($2), ($2) and $1		2,830		3,010		3,161
Less: Allowance for loan and lease losses		79		104		109
Net loans		5,404		5,708		6,152
Trust accrued income and other assets at fair value		31		34		34
Accrued income and other assets		76		87		110
Total assets	$	5,511	$	5,829	$	6,296
Trust accrued expense and other liabilities at fair value	$	28	$	28	$	30
Trust securities at fair value		2,373		2,522		2,919
Total liabilities	$	2,401	$	2,550	$	2,949

In the past, as part of our education lending business model, we originated and securitized education loans. The process of securitization involves taking a pool of loans from our balance sheet and selling them to a bankruptcy-remote QSPE, or trust. This trust then issues securities to investors in the capital markets to raise funds to pay for the loans. The interest generated on the loans pays holders of the securities issued. As the transferor, we retain a portion of the risk in the form of a residual interest and also retain the right to service the securitized loans and receive servicing fees.

As of January 1, 2010, we consolidated our ten outstanding securitization trusts since we hold the residual interests and are the master servicer with the power to direct the activities that most significantly influence the economic performance of the trusts.

The trust assets can be used only to settle the obligations or securities the trusts issue; we cannot sell the assets or transfer the liabilities. The loans in the consolidated trusts consist of both private and government-guaranteed loans. The security holders or beneficial interest holders do not have recourse to Key. Our economic interest or risk of loss associated with these education loan securitization trusts is approximately $210 million as of June 30, 2012. We record all income and expense (including fair value adjustments) through the “income (loss) from discontinued operations, net of tax” line item in our income statement.

We elected to consolidate these trusts at fair value. Carrying the assets and liabilities of the trusts at fair value better depicts our economic interest. The fair value of the assets and liabilities of the trusts is determined by calculating the present value of the future expected cash flows. We rely on unobservable inputs (Level 3) when determining the fair value of the assets and liabilities of the trusts because observable market data is not available. See further discussion regarding our valuation process later in this note.

A cumulative effect adjustment of approximately $45 million, which increased our beginning balance of retained earnings at January 1, 2010, was recorded when the trusts were consolidated. The amount of this cumulative effect adjustment was driven primarily by derecognizing the residual interests and servicing assets related to these trusts and consolidating the assets and liabilities at fair value.

During the third quarter of 2011, we corrected an error related to the $45 million cumulative effect adjustment recorded to beginning retained earnings upon consolidation of the education loan securitization trusts on January 1, 2010. Deferred taxes had not been appropriately recognized for the assets and liabilities of the trusts consolidated which were accounted for at fair value for book purposes but not for tax. We assessed the materiality of the error in accordance with the applicable SEC guidance and concluded that the error was not material, individually or in the aggregate, to our financial position for any prior period or the quarter ending September 30, 2011, to trends for those periods affected, or to a fair presentation of our financial statements for those periods. The error had no impact on our results of operations. Accordingly, results for periods prior to the quarter ending September 30, 2011 were not restated. Instead, accrued income and other assets and retained earnings were reduced by $30 million to correct this error in the third quarter of 2011.

On September 27, 2011, we purchased the government-guaranteed loans from one of the education loan securitization trusts pursuant to the legal terms of the particular trust. The trust used the cash proceeds from the sale of these loans to retire the outstanding securities related to these government-guaranteed loans. This particular trust remains in existence and continues to maintain the private education loan portfolio and has securities related to these loans outstanding. The government-guaranteed loans we purchased are held as portfolio loans and continue to be accounted for at fair value. The portfolio loans were valued using an internal discounted cash flow model, which was affected by assumptions for defaults, expected credit losses, discount rates and prepayments. The portfolio loans are considered to be Level 3 assets since we rely on unobservable inputs when determining fair value. See following discussion regarding our valuation process for these loans as well as the trust loans and securities.

Corporate Treasury, within our Finance area, is responsible for the quarterly valuation process that determines the fair value of the loans and securities in our education loan securitization trusts as well as our student loans held in portfolio that are accounted for at fair value. Corporate Treasury provides these fair values to a Working Group Committee (“the Working Group”) that is comprised of representatives from the line of business, Credit and Market Risk Management, Accounting, Business Finance (part of our Finance area), and Corporate Treasury. The Working Group is a subcommittee of the Fair Value Committee that is discussed in more detail in Note 5 (“Fair Value Measurements”). The Working Group reviews all significant inputs and assumptions and approves the resulting fair values.

The Working Group reviews actual performance trends of the loans and securities on a quarterly basis and uses statistical analysis and qualitative measures to determine assumptions for future performance. Predictive models that incorporate delinquency and charge-off trends along with economic outlooks assist the Working Group to forecast future defaults. The Working Group uses this information to formulate the credit outlook for each of the securitization trusts. Higher projected defaults, fewer expected recoveries, elevated prepayment speeds and higher discount rates would be expected to result in a lower fair value of the loans and securities in these securitization trusts as well as the portfolio loans at fair value. Default expectations and discount rate changes have the most significant impact on the fair values of the loans and securities. It is important to note that increased cash flow uncertainty, whether through higher defaults and prepayments or fewer recoveries, can result in higher discount rates for use in the fair value process for these loans and securities.

The valuation process for the education loan securitization trust and portfolio loans that are accounted for at fair value is based on a discounted cash flow analysis using a model purchased from a third party that is maintained by Corporate Treasury. The market for student loans, either whole-loan purchases or securitization, is relatively illiquid and has not recovered from the effects of the financial crisis. The valuation process begins with loan-by-loan-level data that is aggregated into pools, based on underlying loan structural characteristics (i.e., current unpaid principal balance, contractual term, interest rate, etc.). Cash flows for these loan pools are developed using a financial model that reflects certain assumptions for defaults, recoveries, status change and prepayments.

A net earnings stream, taking into account cost of funding, is calculated and discounted back to the measurement date using an appropriate discount rate. This resulting amount is used to determine the present value of the loans which represents their fair value to a market participant.

The unobservable inputs set forth in the following table are reviewed and approved by the Working Group on a quarterly basis. The Working Group determines these assumptions based on available data, discussions with appropriate individuals internal and external to Key, as well as the knowledge and experience of the individuals on the Working Group.

A similar discounted cash flow approach to that described above is used on a quarterly basis by Corporate Treasury to fair value the trust securities. In valuing these securities, the discount rates used are provided by a third-party valuation consultant. These discount rates are based primarily on secondary market spread indices for similar student loans and asset-backed securities and are developed by the consultant using market-based data. On a quarterly basis, the Working Group reviews the discount rate inputs used in the valuation process for reasonableness based on the historical and current market knowledge of the Working Group members.

A quarterly variance analysis reconciles valuation changes in the model used to calculate the fair value of the trust loans and securities and the portfolio loans at fair value. This quarterly analysis considers loan and securities runoff, yields, future default and recovery changes, and the timing of cash releases to us from the trusts. Back testing for expected defaults to actual experience is also performed as the impact of future defaults has a significant impact on the fair value of these loans and securities over time. In addition, our internal model risk review group periodically performs a review to ensure the accuracy and validity of the model for determining the fair value of these loans and securities.

At June 30, 2012, the significant unobservable inputs used to measure the fair value of the education loan securitization trust loans and securities and the portfolio loans accounted for at fair value are shown in the following table:

June 30, 2012 dollars in millions	Fair Value of Level 3         Assets and  Liabilities		Valuation    Technique	Significant Unobservable Input	Range (Weighted-Average)
Trust loans and	$	2,653	Discounted cash flow	Prepayment speed		4.00 - 26.00% (10.22%)
portfolio loans				Expected credit losses		2.00 - 80.00% (52.34%)
accounted for at fair				Discount rate		3.00 - 8.10% (5.30%)
value				Expected defaults		8.00 - 20.64% (12.40%)
Trust securities		2,373	Discounted cash flow	Discount rate		2.10 - 6.90% (4.80%)

The following table shows the consolidated trusts’ assets and liabilities at fair value and the portfolio loans at fair value and their related contractual values as of June 30, 2012. At June 30, 2012, loans held by the trusts with unpaid principal balances of $39 million ($37 million on a fair value basis) and portfolio loans at fair value with unpaid principal balances of $2 million ($2 million on a fair value basis) were 90 days or more past due. Loans held by the trusts aggregating $16 million ($15 million on a fair value basis) were in nonaccrual status, while portfolio loans at fair value in nonaccrual status aggregated to less than $1 million on both a contractual amount and fair value basis.

June 30, 2012 in millions	Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	70	$	73
Trust loans		2,712		2,580
Trust other assets		31		31
LIABILITIES
Trust securities	$	2,772	$	2,373
Trust other liabilities		28		28

The following table presents the assets and liabilities of the trusts that were consolidated and are measured at fair value, as well as the portfolio loans that are measured at fair value on a recurring basis.

June 30, 2012 in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	73	$	73
Trust loans		—		—		2,580		2,580
Trust other assets		—		—		31		31
Total assets on a recurring basis at fair value		—		—	$	2,684	$	2,684
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities		—		—	$	2,373	$	2,373
Trust other liabilities		—		—		28		28
Total liabilities on a recurring basis at fair value		—		—	$	2,401	$	2,401

The following table shows the change in the fair values of the Level 3 consolidated education loan securitization trusts for the six-month period ended June 30, 2012.

in millions	Portfolio   Student   Loans		Trust   Student   Loans		Trust   Other   Assets		Trust   Securities		Trust Other Liabilities
Balance at January 1, 2012	$	76	$	2,726	$	34	$	2,522	$	28
Gains (losses) recognized in earnings (a)		(1)		39		—		59		—
Purchases		—		—		—		—		—
Sales		—		—		—		—		—
Issuances		—		—		—		—		—
Settlements		(2)		(185)		(3)		(208)		—
Balance at June 30, 2012	$	73	$	2,580	$	31	$	2,373	$	28

(a) Gains (losses) on the Trust Student Loans and Trust Securities were driven primarily by fair value adjustments.

Austin Capital Management, Ltd. In April 2009, we decided to wind down the operations of Austin, a subsidiary that specialized in managing hedge fund investments for institutional customers. As a result, we have accounted for this business as a discontinued operation.

The results of this discontinued business are included in “income (loss) from discontinued operations, net of taxes” on the income statement. The components of “income (loss) from discontinued operations, net of taxes” for Austin are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Noninterest income		—		—		—	$	1
Noninterest expense	$	1		—	$	9		1
Income (loss) before income taxes		(1)		—		(9)		—
Income taxes		—		—		(3)		—
Income (loss) from discontinued operations, net of taxes	$	(1)		—	$	(6)		—

The discontinued assets and liabilities of Austin included on the balance sheet are as follows:

in millions	June 30,   2012		December 31,   2011		June 30,  2011
Cash and due from banks	$	22	$	31	$	32
Total assets	$	22	$	31	$	32
Accrued expense and other liabilities		—		—	$	1
Total liabilities		—		—	$	1

Combined discontinued operations. The combined results of the discontinued operations are as follows:

	Three months ended June 30,				Six months ended June 30,
in millions	2012		2011		2012		2011
Net interest income	$	30	$	35	$	61	$	71
Provision for loan and lease losses		2		30		6		62
Net interest income (expense) after provision for loan and lease losses		28		5		55		9
Noninterest income		(2)		(11)		(20)		(20)
Noninterest expense		10		9		27		21
Income (loss) before income taxes		16		(15)		8		(32)
Income taxes		6		(6)		3		(12)
Income (loss) from discontinued operations, net of taxes (a)	$	10	$	(9)	$	5	$	(20)

(a) Includes after-tax charges of $12 million and $12 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $26 million and $25 million for the six-month periods ended June 30, 2012 and 2011, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

The combined assets and liabilities of the discontinued operations are as follows:

in millions	June 30,  2012		December 31,  2011		June 30,  2011
Cash and due from banks	$	22	$	31	$	32
Trust loans at fair value		2,580		2,726		3,100
Portfolio loans at fair value		73		76		—
Loans, net of unearned income of ($2), ($2) and $1		2,830		3,010		3,161
Less: Allowance for loan and lease losses		79		104		109
Net loans		5,404		5,708		6,152
Trust accrued income and other assets at fair value		31		34		34
Accrued income and other assets		76		87		110
Total assets	$	5,533	$	5,860	$	6,328
Trust accrued expense and other liabilities at fair value	$	28	$	28	$	31
Trust securities at fair value		2,373		2,522		2,919
Total liabilities	$	2,401	$	2,550	$	2,950

XML

Line of Business Results

6 Months Ended

Jun. 30, 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- and six- month periods ended June 30, 2012 and June 30, 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 June 30,	Key Community Bank						Key Corporate Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	348		$	374		$	182		$	176
Noninterest income		189			185			210			215
Total revenue (TE) (a)		537			559			392			391
Provision (credit) for loan and lease losses		11			79			4			(76)
Depreciation and amortization expense		9			10			13			19
Other noninterest expense		467			437			205			188
Income (loss) from continuing operations before income taxes (TE)		50			33			170			260
Allocated income taxes and TE adjustments		9			(1)			62			95
Income (loss) from continuing operations		41			34			108			165
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		41			34			108			165
Less: Net income (loss) attributable to noncontrolling interests		—			—			3			1
Net income (loss) attributable to Key	$	41		$	34		$	105		$	164
AVERAGE BALANCES (b)
Loans and leases	$	27,043		$	26,242		$	18,532		$	17,168
Total assets (a)		30,638			29,687			22,715			21,468
Deposits		48,253			47,719			12,409			10,195
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	50		$	79		$	9		$	29
Return on average allocated equity (b)		5.73	%		4.22	%		23.61	%		28.26 %
Return on average allocated equity		5.73			4.22			23.61			28.26
Average full-time equivalent employees (c)		8,757			8,504			2,257			2,191
Six months ended June 30,	Key Community Bank						Key Corporate Bank
dollars in millions	2012			2011			2012			2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$	701		$	752		$	369		$	362
Noninterest income		365			371			424			434
Total revenue (TE) (a)		1,066			1,123			793			796
Provision (credit) for loan and lease losses		13			90			17			(97)
Depreciation and amortization expense		19			19			26			39
Other noninterest expense		914			874			423			396
Income (loss) from continuing operations before income taxes (TE)		120			140			327			458
Allocated income taxes and TE adjustments		21			25			119			168
Income (loss) from continuing operations		99			115			208			290
Income (loss) from discontinued operations, net of taxes		—			—			—			—
Net income (loss)		99			115			208			290
Less: Net income (loss) attributable to noncontrolling interests		—			—			3			—
Net income (loss) attributable to Key	$	99			115		$	205			290
AVERAGE BALANCES (b)
Loans and leases	$	26,830			26,277		$	18,558			17,421
Total assets (a)		30,416			29,713			22,789			21,607
Deposits		48,011			47,912			11,982			10,736
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	99		$	155		$	34		$	104
Return on average allocated equity (b)		6.82	%		7.11	%		22.30	%		23.78 %
Return on average allocated equity		6.82			7.11			22.30			23.78
Average full-time equivalent employees (c)		8,738			8,441			2,256			2,173

(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
$	12		$	13		$	542		$	563		$	2		$	7		$	544		$	570
	87			55			486			455			(1	)		(1)			485			454
	99			68			1,028			1,018			1			6			1,029			1,024
	6			(10)			21			(7)			—			(1)			21			(8)
	2			5			24			34			35			35			59			69
	19			20			691			645			(36	)		(34)			655			611
	72			53			292			346			2			6			294			352
	16			9			87			103			(24	)		(3)			63			100
	56			44			205			243			26			9			231			252
	—			—			—			—			10			(9)			10			(9)
	56			44			205			243			36			—			241			243
	2			2			5			3			—			—			5			3
$	54		$	42		$	200		$	240		$	36		$	—		$	236		$	240
$	3,804		$	4,985		$	49,379		$	48,395		$	67		$	59		$	49,446		$	48,454
	26,862			28,965			80,215			80,120			705			1,266			80,920			81,386
	510			801			61,172			58,715			(109	)		(174)			61,063			58,541
$	18		$	26		$	77		$	134			—			—		$	77		$	134
	31.57	%		20.82	%		15.02	%		15.12	%		2.20	%		1.13	%		9.00	%		10.45	%
	31.57			20.82			15.02			15.12			3.05			—			9.40			10.07
	6			23			11,020			10,718			4,435			4,631			15,455			15,349
Other Segments						Total Segments						Reconciling Items						Key
2012			2011			2012			2011			2012			2011			2012			2011
$	27		$	46		$	1,097		$	1,160		$	6		$	14		$	1,103		$	1,174
	176			115			965			920			(8	)		(9)			957			911
	203			161			2,062			2,080			(2	)		5			2,060			2,085
	33			(35)			63			(42)			—			(6)			63			(48)
	5			10			50			68			69			75			119			143
	40			44			1,377			1,314			(79	)		(76)			1,298			1,238
	125			142			572			740			8			12			580			752
	24			32			164			225			(20	)		(7)			144			218
	101			110			408			515			28			19			436			534
	—			—			—			—			5			(20)			5			(20)
	101			110			408			515			33			(1)			441			514
	2			11			5			11			—			—			5			11
$	99		$	99		$	403		$	504		$	33		$	(1)		$	436		$	503
$	3,997		$	5,139		$	49,385		$	48,837		$	53		$	44		$	49,438		$	48,881
	26,723			30,157			79,928			81,477			765			1,355			80,693			82,832
	498			786			60,491			59,434			(144	)		(148)			60,347			59,286
$	45		$	69		$	178		$	328			—		$	(1)		$	178		$	327
	28.73	%		24.29	%		14.83	%		15.54	%		1.23	%		1.00	%		8.63	%		10.16	%
	28.73			24.29			14.83			15.54			1.45			(.05)			8.73			9.77
	5			43			10,999			10,657			4,431			4,669			15,430			15,326

Supplementary information (Key Corporate Bank lines of business)

		Real Estate Capital and																Institutional and
Three months ended June 30,		Corporate Banking Services								Equipment Finance								Capital Markets
dollars in millions		2012				2011				2012				2011				2012				2011
Total revenue (TE)	$		176		$		156		$		57		$		63		$		159		$		172
Provision (credit) for loan and lease losses			5				(49)				6				(30)				(7)				3
Noninterest expense			63				50				37				45				118				112
Net income (loss) attributable to Key			65				97				9				30				31				37
Average loans and leases			7,343				7,713				4,886				4,545				6,303				4,910
Average loans held for sale			337				229				23				—				154				73
Average deposits			9,190				7,371				7				12				3,212				2,812
Net loan charge-offs			7				26				4				2				(2)				1
Net loan charge-offs to average loans			.38	%			1.35	%			.33	%			.18	%			(.13)	%			.08	%
Nonperforming assets at period end	$		186		$		245		$		33		$		39		$		29		$		55
Return on average allocated equity			30.90	%			31.13	%			14.48	%			35.81	%			17.99	%			20.00	%
Average full-time equivalent employees			950				902				464				511				843				778
		Real Estate Capital and																Institutional and
Six months ended June 30,		Corporate Banking Services								Equipment Finance								Capital Markets
dollars in millions		2012				2011				2012				2011				2012				2011
Total revenue (TE)	$		337		$		324		$		122		$		126		$		334		$		346
Provision (credit) for loan and lease losses			4				(39)				4				(56)				9				(2)
Noninterest expense			122				118				75				98				252				219
Net income (loss) attributable to Key			129				154				27				53				49				83
Average loans and leases			7,521				8,146				4,833				4,583				6,204				4,692
Average loans held for sale			314				185				23				2				174				102
Average deposits			8,705				7,987				7				9				3,270				2,740
Net loan charge-offs			23				91				9				12				2				1
Net loan charge-offs to average loans			.61	%			2.25	%			.37	%			.53	%			.06	%			.04
Nonperforming assets at period end	$		186		$		245		$		33		$		39		$		29		$		55
Return on average allocated equity			29.15	%			22.72	%			20.88	%			31.34	%			14.10	%			22.29	%
Average full-time equivalent employees			951				892				466				516				839				765

XML

Acquisition and Discontinued Operations (Details 7) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012		Dec. 31, 2011		Jun. 30, 2011		Dec. 31, 2010
Components of Assets and Liabilities of Subsidiary
Cash and due from banks	$ 717		$ 694		$ 853		$ 278
Total assets	5,533	[1]	5,860	[1]	6,328	[1]
Total liabilities	2,401	[1]	2,550	[1]	2,950	[1]
Segment, Discontinued Operations [Member]
Components of Assets and Liabilities of Subsidiary
Cash and due from banks	22		31		32
Total liabilities	2,401		2,550		2,950
Segment, Discontinued Operations [Member] | Austin Capital Management [Member]
Components of Assets and Liabilities of Subsidiary
Cash and due from banks	22		31		32
Total assets	22		31		32
Accrued expense and other liabilities					1
Total liabilities					$ 1

[1] The assets of the VIEs can only be used by the particular VIE and there is no recourse to Key with respect to the liabilities of the consolidated LIHTC or education loan securitization trust VIEs.

XML

Asset Quality (Details 1) (USD $) In Millions, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	$ 223	$ 322	$ 218
With no related allowance recorded, Unpaid Principal Balance	546	650	548
With no related allowance recorded, Average Recorded Investment	231	356	304
With related allowance recorded, Recorded Investment	188	166	170
With related allowance recorded, Unpaid Principal Balance	241	318	203
With related allowance recorded, Specific Allowance	48	46	51
With related allowance recorded, Average Recorded Investment	156	199	201
Recorded Investment	411	488	388
Unpaid Principal Balance	787	968	751
Average Recorded Investment	387	555	505
Commercial, financial and agricultural [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	59	116	88
With no related allowance recorded, Unpaid Principal Balance	142	217	195
With no related allowance recorded, Average Recorded Investment	68	89	75
With related allowance recorded, Recorded Investment	43	43	62
With related allowance recorded, Unpaid Principal Balance	53	71	70
With related allowance recorded, Specific Allowance	12	14	26
With related allowance recorded, Average Recorded Investment	46	66	75
Commercial real estate: Commercial Mortgage [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	112	123	100
With no related allowance recorded, Unpaid Principal Balance	199	207	240
With no related allowance recorded, Average Recorded Investment	113	143	131
With related allowance recorded, Recorded Investment	56	89	96
With related allowance recorded, Unpaid Principal Balance	98	174	115
With related allowance recorded, Specific Allowance	15	21	21
With related allowance recorded, Average Recorded Investment	63	88	91
Commercial real estate: Construction [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	51	83	30
With no related allowance recorded, Unpaid Principal Balance	204	226	113
With no related allowance recorded, Average Recorded Investment	49	124	98
With related allowance recorded, Recorded Investment	4	34	12
With related allowance recorded, Unpaid Principal Balance	4	73	18
With related allowance recorded, Specific Allowance	3	11	4
With related allowance recorded, Average Recorded Investment	4	39	29
Commercial Real Estate Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	163	206	130
With no related allowance recorded, Unpaid Principal Balance	403	433	353
With no related allowance recorded, Average Recorded Investment	162	267	229
With related allowance recorded, Recorded Investment	60	123	108
With related allowance recorded, Unpaid Principal Balance	102	247	133
With related allowance recorded, Specific Allowance	18	32	25
With related allowance recorded, Average Recorded Investment	67	127	120
Commercial Lease Financing [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment		0
With related allowance recorded, Unpaid Principal Balance		0
With related allowance recorded, Specific Allowance		0
With related allowance recorded, Average Recorded Investment		6
Commercial Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	222
With no related allowance recorded, Unpaid Principal Balance	545
With no related allowance recorded, Average Recorded Investment	230
With related allowance recorded, Recorded Investment	103
With related allowance recorded, Unpaid Principal Balance	155
With related allowance recorded, Specific Allowance	30
With related allowance recorded, Average Recorded Investment	113
Real estate - residential mortgage [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	1
With no related allowance recorded, Unpaid Principal Balance	1
With no related allowance recorded, Average Recorded Investment	1
With related allowance recorded, Recorded Investment	16
With related allowance recorded, Unpaid Principal Balance	17
With related allowance recorded, Specific Allowance	2
With related allowance recorded, Average Recorded Investment	8
Home Equity Key Community Bank [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	11
With related allowance recorded, Unpaid Principal Balance	11
With related allowance recorded, Specific Allowance	3
With related allowance recorded, Average Recorded Investment	6
Home Equity Other [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	6
With related allowance recorded, Unpaid Principal Balance	6
With related allowance recorded, Specific Allowance	1
With related allowance recorded, Average Recorded Investment	3
Home Equity Loans [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	17
With related allowance recorded, Unpaid Principal Balance	17
With related allowance recorded, Specific Allowance	4
With related allowance recorded, Average Recorded Investment	9
Consumer other - Key Community Bank [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	2
With related allowance recorded, Unpaid Principal Balance	2
With related allowance recorded, Specific Allowance	1
With related allowance recorded, Average Recorded Investment	1
Consumer Marine [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	50
With related allowance recorded, Unpaid Principal Balance	50
With related allowance recorded, Specific Allowance	11
With related allowance recorded, Average Recorded Investment	25
Other Consumer [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment
With related allowance recorded, Unpaid Principal Balance
With related allowance recorded, Specific Allowance
With related allowance recorded, Average Recorded Investment
Consumer Other [Member]
Financing Receivable, Impaired [Line Items]
With related allowance recorded, Recorded Investment	50
With related allowance recorded, Unpaid Principal Balance	50
With related allowance recorded, Specific Allowance	11
With related allowance recorded, Average Recorded Investment	25
Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	(1)
With no related allowance recorded, Unpaid Principal Balance	(1)
With no related allowance recorded, Average Recorded Investment	(1)
With related allowance recorded, Recorded Investment	85
With related allowance recorded, Unpaid Principal Balance	86
With related allowance recorded, Specific Allowance	18
With related allowance recorded, Average Recorded Investment	$ 43

XML

Employee Benefits (Details Textual)	6 Months Ended
	Jun. 30, 2012 Y
Employee Benefits (Textual) [Abstract]
Age of employees under condition one	55
Age of employees under condition two	50
Period of service under condition one	5 years
Period of service under condition two	15 years
Minimum period of service at the time of termination hired before 2001	15 years	[1]
Condition under Retiree healthcare plan	We sponsor a retiree healthcare plan in which all employees age 55 with five years of service (or employees age 50 with 15 years of service who are terminated under conditions that entitle them to a severance benefit) are eligible to participate.
Death benefit plan	Death benefit plan that provides a death benefit for a very limited number of (i) former Key employees who retired from their employment with Key prior to 1994, (ii) former Key employees who elect a grandfathered pension benefit under the KeyCorp Cash Balance Pension Plan, and (iii) Key employees who otherwise were provided a historical death benefit at the time of their termination.

[1] For the three months ended June 30, 2012 and 2011, we did not have any impairment losses related to securities.

XML

Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012 Account
Basis of Presentation (Textual) [Abstract]
Economic interest in unconsolidated investments in voting rights entities, minimum	20.00%
Economic interest in unconsolidated investments in voting rights entities, maximum	50.00%
Economic interest in unconsolidated investments in voting rights entities, Ownership less than	20.00%
Number of consumer and business accounts acquired		400,000
Value of consumer and business accounts acquired		$ 725

XML

Line of Business Results (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
SUMMARY OF OPERATIONS
Net interest income (TE)	$ 538	$ 564	$ 1,091	$ 1,161
Noninterest income	485	454	957	911
Provision (credit) for loan and lease losses	21	(8)	63	(48)
Other noninterest expense	48	41	81	58
Income (loss) from continuing operations before income taxes (TE)	288	346	568	739
Allocated income taxes and TE adjustments	57	94	132	205
Income (loss) from continuing operations	231	252	436	534
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
NET INCOME (LOSS)	241	243	441	514
Less: Net income (loss) attributable to noncontrolling interests	5	3	5	11
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	236	240	436	503
Key [Member]
SUMMARY OF OPERATIONS
Net interest income (TE)	544	570	1,103	1,174
Noninterest income	485	454	957	911
Total revenue (TE)	1,029	1,024	2,060	2,085
Provision (credit) for loan and lease losses	21	(8)	63	(48)
Depreciation and amortization expense	59	69	119	143
Other noninterest expense	655	611	1,298	1,238
Income (loss) from continuing operations before income taxes (TE)	294	352	580	752
Allocated income taxes and TE adjustments	63	100	144	218
Income (loss) from continuing operations	231	252	436	534
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
NET INCOME (LOSS)	241	243	441	514
Less: Net income (loss) attributable to noncontrolling interests	5	3	5	11
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	236	240	436	503
AVERAGE BALANCES
Loans and leases	49,446	48,454	49,438	48,881
Total assets	80,920	81,386	80,693	82,832
Deposits	61,063	58,541	60,347	59,286
OTHER FINANCIAL DATA
Net loan charge-offs	77	134	178	327
Return on average allocated equity	9.00%	10.45%	8.63%	10.16%
Return on average allocated equity, Total	9.40%	10.07%	8.73%	9.77%
Average full-time equivalent employees	15,455	15,349	15,430	15,326
Community Bank [Member]
SUMMARY OF OPERATIONS
Net interest income (TE)	348	374	701	752
Noninterest income	189	185	365	371
Total revenue (TE)	537	559	1,066	1,123
Provision (credit) for loan and lease losses	11	79	13	90
Depreciation and amortization expense	9	10	19	19
Other noninterest expense	467	437	914	874
Income (loss) from continuing operations before income taxes (TE)	50	33	120	140
Allocated income taxes and TE adjustments	9	(1)	21	25
Income (loss) from continuing operations	41	34	99	115
Income (loss) from discontinued operations, net of taxes
NET INCOME (LOSS)	41	34	99	115
Less: Net income (loss) attributable to noncontrolling interests
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	41	34	99	115
AVERAGE BALANCES
Loans and leases	27,043	26,242	26,830	26,277
Total assets	30,638	29,687	30,416	29,713
Deposits	48,253	47,719	48,011	47,912
OTHER FINANCIAL DATA
Net loan charge-offs	50	79	99	155
Return on average allocated equity	5.73%	4.22%	6.82%	7.11%
Return on average allocated equity, Total	5.73%	4.22%	6.82%	7.11%
Average full-time equivalent employees	8,757	8,504	8,738	8,441
Key Corporate Bank [Member]
SUMMARY OF OPERATIONS
Net interest income (TE)	182	176	369	362
Noninterest income	210	215	424	434
Total revenue (TE)	392	391	793	796
Provision (credit) for loan and lease losses	4	(76)	17	(97)
Depreciation and amortization expense	13	19	26	39
Other noninterest expense	205	188	423	396
Income (loss) from continuing operations before income taxes (TE)	170	260	327	458
Allocated income taxes and TE adjustments	62	95	119	168
Income (loss) from continuing operations	108	165	208	290
Income (loss) from discontinued operations, net of taxes
NET INCOME (LOSS)	108	165	208	290
Less: Net income (loss) attributable to noncontrolling interests	3	1	3
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	105	164	205	290
AVERAGE BALANCES
Loans and leases	18,532	17,168	18,558	17,421
Total assets	22,715	21,468	22,789	21,607
Deposits	12,409	10,195	11,982	10,736
OTHER FINANCIAL DATA
Net loan charge-offs	9	29	34	104
Return on average allocated equity	23.61%	28.26%	22.30%	23.78%
Return on average allocated equity, Total	23.61%	28.26%	22.30%	23.78%
Average full-time equivalent employees	2,257	2,191	2,256	2,173
Other Segments [Member]
SUMMARY OF OPERATIONS
Net interest income (TE)	12	13	27	46
Noninterest income	87	55	176	115
Total revenue (TE)	99	68	203	161
Provision (credit) for loan and lease losses	6	(10)	33	(35)
Depreciation and amortization expense	2	5	5	10
Other noninterest expense	19	20	40	44
Income (loss) from continuing operations before income taxes (TE)	72	53	125	142
Allocated income taxes and TE adjustments	16	9	24	32
Income (loss) from continuing operations	56	44	101	110
Income (loss) from discontinued operations, net of taxes
NET INCOME (LOSS)	56	44	101	110
Less: Net income (loss) attributable to noncontrolling interests	2	2	2	11
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	54	42	99	99
AVERAGE BALANCES
Loans and leases	3,804	4,985	3,997	5,139
Total assets	26,862	28,965	26,723	30,157
Deposits	510	801	498	786
OTHER FINANCIAL DATA
Net loan charge-offs	18	26	45	69
Return on average allocated equity	31.57%	20.82%	28.73%	24.29%
Return on average allocated equity, Total	31.57%	20.82%	28.73%	24.29%
Average full-time equivalent employees	6	23	5	43
Total Segments [Member]
SUMMARY OF OPERATIONS
Net interest income (TE)	542	563	1,097	1,160
Noninterest income	486	455	965	920
Total revenue (TE)	1,028	1,018	2,062	2,080
Provision (credit) for loan and lease losses	21	(7)	63	(42)
Depreciation and amortization expense	24	34	50	68
Other noninterest expense	691	645	1,377	1,314
Income (loss) from continuing operations before income taxes (TE)	292	346	572	740
Allocated income taxes and TE adjustments	87	103	164	225
Income (loss) from continuing operations	205	243	408	515
Income (loss) from discontinued operations, net of taxes
NET INCOME (LOSS)	205	243	408	515
Less: Net income (loss) attributable to noncontrolling interests	5	3	5	11
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	200	240	403	504
AVERAGE BALANCES
Loans and leases	49,379	48,395	49,385	48,837
Total assets	80,215	80,120	79,928	81,477
Deposits	61,172	58,715	60,491	59,434
OTHER FINANCIAL DATA
Net loan charge-offs	77	134	178	328
Return on average allocated equity	15.02%	15.12%	14.83%	15.54%
Return on average allocated equity, Total	15.02%	15.12%	14.83%	15.54%
Average full-time equivalent employees	11,020	10,718	10,999	10,657
Reconciling Items [Member]
SUMMARY OF OPERATIONS
Net interest income (TE)	2	7	6	14
Noninterest income	(1)	(1)	(8)	(9)
Total revenue (TE)	1	6	(2)	5
Provision (credit) for loan and lease losses		(1)		(6)
Depreciation and amortization expense	35	35	69	75
Other noninterest expense	(36)	(34)	(79)	(76)
Income (loss) from continuing operations before income taxes (TE)	2	6	8	12
Allocated income taxes and TE adjustments	(24)	(3)	(20)	(7)
Income (loss) from continuing operations	26	9	28	19
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
NET INCOME (LOSS)	36		33	(1)
Less: Net income (loss) attributable to noncontrolling interests
NET INCOME (LOSS) ATTRIBUTABLE TO KEY	36		33	(1)
AVERAGE BALANCES
Loans and leases	67	59	53	44
Total assets	705	1,266	765	1,355
Deposits	(109)	(174)	(144)	(148)
OTHER FINANCIAL DATA
Net loan charge-offs				$ (1)
Return on average allocated equity	2.20%	1.13%	1.23%	1.00%
Return on average allocated equity, Total	3.05%		1.45%	(0.05%)
Average full-time equivalent employees	4,435	4,631	4,431	4,669

XML

Consolidated Statements of Income (Unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Income [Abstract]
Net tax effect on loss from discontinued operations	$ 6	$ (6)	$ 3	$ (12)

XML

Acquisition and Discontinued Operations (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income (Loss) From Discontinued Operations, Net Of Taxes
Net interest income	$ 538	$ 564	$ 1,091	$ 1,161
Provision for loan and lease losses			62	(47)
Net interest income (expense) after provision for loan and lease losses	517	572	1,028	1,209
Noninterest income	485	454	957	911
Noninterest expense	714	680	1,417	1,381
Income taxes	57	94	132	205
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
Segment, Discontinued Operations [Member]
Income (Loss) From Discontinued Operations, Net Of Taxes
Net interest income	30	35	61	71
Provision for loan and lease losses	2	30	6	62
Net interest income (expense) after provision for loan and lease losses	28	5	55	9
Noninterest income	2	11	20	20
Noninterest expense	10	9	27	21
Income (loss) before income taxes	16	(15)	8	(32)
Income taxes	6	(6)	3	(12)
Income (loss) from discontinued operations, net of taxes	10	(9)	5	(20)
Education Lending [Member]
Income (Loss) From Discontinued Operations, Net Of Taxes
Income (loss) before income taxes	17	(15)	17	(32)
Income taxes	6	(6)	6	(12)
Income (loss) from discontinued operations, net of taxes	11	(9)	11	(20)
Education Lending [Member] | Segment, Discontinued Operations [Member]
Income (Loss) From Discontinued Operations, Net Of Taxes
Net interest income	30	35	61	71
Provision for loan and lease losses	2	30	6	62
Net interest income (expense) after provision for loan and lease losses	28	5	55	9
Noninterest income	(2)	(11)	(20)	(21)
Noninterest expense	$ 9	$ 9	$ 18	$ 20

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES
Net income (loss)	$ 441	$ 514
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision (credit) for loan and lease losses	63	(48)
Depreciation and amortization expense	119	143
FDIC (payments) net of FDIC expense	13	35
Deferred income taxes (benefit)	38	157
Net losses (gains) and writedown on OREO	12	5
Provision (credit) for customer derivative losses	1	(12)
Net losses (gains) from loan sales	(54)	(30)
Net losses (gains) from principal investing	(59)	(52)
Provision (credit) for losses on lending-related commitments	6	(16)
(Gains) losses on leased equipment	(63)	(9)
Net securities losses (gains)		(1)	[1]
Net decrease (increase) in loans held for sale excluding loan transfers from continuing operations	(5)	140
Net decrease (increase) in trading account assets	(57)	216
Other operating activities, net	(220)	412
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	235	1,454
INVESTING ACTIVITIES
Net decrease (increase) in short-term investments	1,303	(3,219)
Purchases of securities available for sale	(10)	(619)
Proceeds from sales of securities available for sale		1,587
Proceeds from prepayments and maturities of securities available for sale	2,733	2,448
Proceeds from prepayments and maturities of held-to-maturity securities	238
Purchases of held-to-maturity securities	(2,481)	(2)
Purchases of other investments	(39)	(104)
Proceeds from sales of other investments	3	43
Proceeds from prepayments and maturities of other investments	72	41
Net decrease (increase) in loans, excluding acquisitions, sales and transfers	(217)	1,775
Proceeds from loan sales	135	94
Purchases of premises and equipment	(53)	(74)
Proceeds from sales of premises and equipment	1
Proceeds from sales of other real estate owned	45	94
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	1,730	2,064
FINANCING ACTIVITIES
Net increase (decrease) in deposits	211	(200)
Net increase (decrease) in short-term borrowings	30	(1,017)
Net proceeds from issuance of long-term debt	4	1,020
Payments on long-term debt	(2,019)	(684)
Repurchase of Treasury Shares	(82)
Net proceeds from issuance of common shares		604
Net proceeds from reissuance of common shares	1
Series B Preferred Stock - TARP redemption		(2,500)
Repurchase of common stock warrant		(70)
Cash dividends paid	(87)	(96)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(1,942)	(2,943)
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS	23	575
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD	694	278
CASH AND DUE FROM BANKS AT END OF PERIOD	717	853
Additional disclosures relative to cash flows:
Interest paid	249	317
Income taxes paid (refunded)	26	(319)
Noncash items:
Loans transferred to portfolio from held for sale	93
Loans transferred to held for sale from portfolio	16	54
Loans transferred to other real estate owned	$ 21	$ 23

[1] For the three months ended June 30, 2012 and 2011, we did not have any impairment losses related to securities.

XML

Asset Quality (Details 10) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Jun. 30, 2011
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	$ 48	$ 46
Collectively Evaluated for Impairment Allowance	840	1,184
Loans Outstanding	49,605	47,840
Individually Evaluated for Impairment corresponding allowance	411	488
Collectively Evaluated for Impairment, Outstanding	49,194	47,352
Collectively Evaluated for Impairment Allowance, Discontinued Operations	79	109
Loans Outstanding, Discontinued Operations	5,483	6,261
Collectively Evaluated for Impairment Outstanding, Discontinued Operations	5,483	6,261
Individually Evaluated for Impairment Allowance, Total ALLL - Including Discontinued Operations	48	46
Collectively Evaluated for Impairment Allowance, Total ALLL - Including Discontinued Operations	919	1,293
Loans Outstanding Total ALLL - Including Discontinued Operations	55,088	54,101
Individually Evaluated for Impairment Outstanding Total ALLL - Including Discontinued Operations	411	488
Collectively Evaluated for Impairment Outstanding Total ALLL - Including Discontinued Operations	54,677	53,613
Commercial, financial and agricultural [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	12	14
Collectively Evaluated for Impairment Allowance	292	381
Loans Outstanding	20,386	16,883
Individually Evaluated for Impairment corresponding allowance	102	159
Collectively Evaluated for Impairment, Outstanding	20,284	16,724
Commercial real estate: Commercial Mortgage [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	15	21
Collectively Evaluated for Impairment Allowance	235	322
Loans Outstanding	7,409	8,069
Individually Evaluated for Impairment corresponding allowance	168	213
Collectively Evaluated for Impairment, Outstanding	7,241	7,856
Commercial real estate: Construction [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	3	11
Collectively Evaluated for Impairment Allowance	52	95
Loans Outstanding	1,172	1,631
Individually Evaluated for Impairment corresponding allowance	55	116
Collectively Evaluated for Impairment, Outstanding	1,117	1,515
Commercial Real Estate Loans [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	18	32
Collectively Evaluated for Impairment Allowance	287	417
Loans Outstanding	8,581	9,700
Individually Evaluated for Impairment corresponding allowance	223	329
Collectively Evaluated for Impairment, Outstanding	8,358	9,371
Commercial Lease Financing [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Collectively Evaluated for Impairment Allowance	68	107
Loans Outstanding	5,636	6,105
Collectively Evaluated for Impairment, Outstanding	5,636	6,105
Commercial [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	30	46
Collectively Evaluated for Impairment Allowance	647	905
Loans Outstanding	34,603	32,688
Individually Evaluated for Impairment corresponding allowance	325	488
Collectively Evaluated for Impairment, Outstanding	34,278	32,200
Real estate - residential mortgage [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	2
Collectively Evaluated for Impairment Allowance	24	41
Loans Outstanding	2,016	1,838
Individually Evaluated for Impairment corresponding allowance	17
Collectively Evaluated for Impairment, Outstanding	1,999	1,838
Home Equity Key Community Bank [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	3
Collectively Evaluated for Impairment Allowance	77	99
Loans Outstanding	9,601	9,431
Individually Evaluated for Impairment corresponding allowance	11
Collectively Evaluated for Impairment, Outstanding	9,590	9,431
Home Equity Other [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	1
Collectively Evaluated for Impairment Allowance	23	37
Loans Outstanding	479	595
Individually Evaluated for Impairment corresponding allowance	6
Collectively Evaluated for Impairment, Outstanding	473	595
Home Equity [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	4
Collectively Evaluated for Impairment Allowance	100	136
Loans Outstanding	10,080	10,026
Individually Evaluated for Impairment corresponding allowance	17
Collectively Evaluated for Impairment, Outstanding	10,063	10,026
Consumer other - Key Community Bank [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	1
Collectively Evaluated for Impairment Allowance	33	47
Loans Outstanding	1,263	1,157
Individually Evaluated for Impairment corresponding allowance	2
Collectively Evaluated for Impairment, Outstanding	1,261	1,157
Consumer Marine [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	11
Collectively Evaluated for Impairment Allowance	33	52
Loans Outstanding	1,542	1,989
Individually Evaluated for Impairment corresponding allowance	50
Collectively Evaluated for Impairment, Outstanding	1,492	1,989
Consumer Others [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Collectively Evaluated for Impairment Allowance	3	3
Loans Outstanding	101	142
Collectively Evaluated for Impairment, Outstanding	101	142
Consumer Other - Key Corporate Bank [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	11
Collectively Evaluated for Impairment Allowance	36	55
Loans Outstanding	1,643	2,131
Individually Evaluated for Impairment corresponding allowance	50
Collectively Evaluated for Impairment, Outstanding	1,593	2,131
Consumer Loans [Member]
Financing Receivable, Allowance for Credit Loss, Additional Information
Individually Evaluated for Impairment Allowance	18
Collectively Evaluated for Impairment Allowance	193	279
Loans Outstanding	15,002	15,152
Individually Evaluated for Impairment corresponding allowance	86
Collectively Evaluated for Impairment, Outstanding	$ 14,916	$ 15,152

XML

Derivatives and Hedging Activities (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Derivatives and Hedging Activities (Textual) [Abstract]
Net liability position total	$ 217,000,000	$ 250,000,000	$ 250,000,000
Cash and securities collateral posted	70,000,000	64,000,000	33,000,000
Derivatives and Hedging Activities (Additional Textual) [Abstract]
Derivative assets after effects of bilateral collateral and master netting agreements	183,000,000
Derivative liabilities after effects of bilateral collateral and master netting agreements	61,000,000
Derivative assets not designated as hedging instruments after effects of bilateral collateral and master netting agreements, and a reserve for potential future losses	635,000,000
Derivative liabilities not designated as hedging instruments after effects of bilateral collateral and master netting agreements, and a reserve for potential future losses	824,000,000
Amount of debt being hedged under foreign currency exchange risk	0
Reclassification of net losses on derivative instruments from AOCI	5,000,000
Length of time hedged in cash flow hedge	12 months
Reclassification of net gains related to terminated cash flow hedges from AOCI to income	11,000,000
Maximum length of time over which forecasted transactions are hedged, years	17 years
Other comprehensive income unrealized loss on derivatives arising during period net of tax	6,000,000
Cash collateral netted against derivative assets	513,000,000	486,000,000	354,000,000
Cash collateral netted against derivative liabilities	11,000,000	11,000,000	19,000,000
Gross exposure on derivatives, after taking into account the effects of bilateral collateral and master netting agreements	1,000,000,000
Net exposure on derivatives, after taking into account, the effects of bilateral collateral and master netting agreements	244,000,000
Additional collateral held in the form of securities	231,000,000
Net exposure on derivatives to broker-dealers and banks, after the application of master netting agreements and collateral	13,000,000
Default reserve associated with the uncollateralized contracts	24,000,000	22,000,000
Gross exposure on derivatives, after taking into account the effects of master netting agreements	625,000,000
Net exposure on derivatives with clients, after the application of master netting agreements, collateral and the related reserve	574,000,000
Key Bank [Member]
Derivatives and Hedging Activities (Textual) [Abstract]
Net liability position total	589,000,000
Derivative assets included in net liability position	542,000,000
Derivative liabilities included in net liability position	1,100,000,000
Cash and securities collateral posted	537,000,000
Payments to terminate contracts	18,000,000
Key Corp [Member]
Derivatives and Hedging Activities (Textual) [Abstract]
Net liability position total	29,000,000
Derivative assets included in net liability position	0
Derivative liabilities included in net liability position	29,000,000
Cash and securities collateral posted	29,000,000
Payments to terminate contracts	3,000,000
Additional collateral amount	$ 3,000,000

XML

Shareholders' Equity (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended		3 Months Ended	6 Months Ended
	Apr. 30, 2011	Nov. 30, 2008	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2008 Series B Preferred Stock [Member]	Jun. 30, 2011 Series B Preferred Stock [Member]	Jun. 30, 2012 Common Stock [Member]	Jun. 30, 2012 Common Stock [Member] Maximum [Member]
Shareholders' Equity (Textual) [Abstract]
Common Stock general repurchase program					$ 312						$ 230
Treasury Stock, Value										2,500		344
Common Stock repurchase program											259
Common Stock employee compensation and benefit program					32						29
Issuance of preferred stock to the U.S. Treasury									2,500
Shareholders' Equity (Additional Textual) [Abstract]
Amortization of discount on preferred stock including deemed dividend				49
Warrants repurchased	70					70
Repurchases from shares on the open market					82
Repurchases from employees in connection with employee elections under compensation and benefit programs					3
Elimination of dividends			31
Discount amortization			4					140
Amount paid to US treasury during the investment period							2,867
Return to US treasury above initial investment		$ 367

XML

Securities (Details 1) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Available for Sale Securities (Unrealized Loss Position)
Fair value, less than 12 months	$ 213	$ 4	$ 126
Fair value, 12 months or longer
Fair Value	213	4	126
Gross unrealized losses, less than 12 months	1
Gross unrealized losses, 12 months or longer
Gross unrealized losses, Total	1
Collateralized Mortgage Backed Securities [Member]
Available for Sale Securities (Unrealized Loss Position)
Fair value, less than 12 months	1	1	126
Fair value, 12 months or longer
Fair Value	1	1	126
Held-to-maturity Securities, Collateralized mortgage obligations Fair Value less than 12 months	200
Held-to-maturity Securities, Gross unrealized losses, less than 12 months
Held-to-maturity Securities, Collateralized mortgage obligations Fair Value 12 months or longer
Held-to-maturity Securities, Gross unrealized losses, 12 months or longer
Held-to-maturity Securities, Collateralized mortgage obligations Fair Value	200
Held-to-maturity Securities, Gross unrealized losses
Gross unrealized losses, less than 12 months
Gross unrealized losses, 12 months or longer
Gross unrealized losses, Total
Other securities [Member]
Available for Sale Securities (Unrealized Loss Position)
Fair value, less than 12 months	12	3
Fair value, 12 months or longer
Fair Value	12	3
Gross unrealized losses, less than 12 months	1
Gross unrealized losses, 12 months or longer
Gross unrealized losses, Total	$ 1

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2012

Basis of Presentation and Variable Interest Entities [Abstract]

Offsetting Derivative Positions

In accordance with the applicable accounting guidance, we take into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related collateral when recognizing derivative assets and liabilities. Additional information regarding derivative offsetting is provided in Note 7 (“Derivatives and Hedging Activities”).

Fair value measurement

Fair value measurement. In May 2011, the FASB issued accounting guidance that changed the wording used to describe many of the current accounting requirements for measuring fair value and disclosing information about fair value measurements. This accounting guidance clarified the FASB’s intent about the application of existing fair value measurement requirements. It was effective for the interim and annual periods beginning on or after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations. As required by this accounting guidance, additional information regarding the classification is provided in Note 5 (“Fair Value Measurements”).

Presentation of comprehensive income

Presentation of comprehensive income. In June 2011, the FASB issued new accounting guidance that required all nonowner changes in shareholders’ equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new accounting guidance did not change any of the components currently recognized in net income or comprehensive income. It was effective for public entities for interim and annual periods beginning after December 15, 2011 (effective January 1, 2012, for us) as well as interim and annual periods thereafter. As required by this accounting guidance, Consolidated Statements of Comprehensive Income (Unaudited) are now included as part of our financial statements.

Testing goodwill for impairment

Testing goodwill for impairment. In September 2011, the FASB issued new accounting guidance that simplified how an entity tests goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether additional goodwill impairment testing is required. This accounting guidance was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations.

Repurchase agreements

Repurchase agreements. In April 2011, the FASB issued accounting guidance that changed the accounting for repurchase agreements and other similar arrangements by eliminating the collateral maintenance requirement when assessing effective control in these transactions. This change could result in more of these transactions being accounted for as secured borrowings instead of sales. This accounting guidance was effective for new transactions and transactions modified on or after the first interim or annual period beginning after December 15, 2011 (effective January 1, 2012, for us). The adoption of this accounting guidance did not have a material effect on our financial condition or results of operations since we do not account for these types of arrangements as sales.

Testing indefinite-lived intangible assets for impairment

Testing indefinite-lived intangible assets for impairment. In July 2012, the FASB issued new accounting guidance that simplifies how an entity tests indefinite-lived intangible assets other than goodwill for impairment. It permits an entity to first assess qualitative factors to determine whether further testing for impairment of indefinite-lived intangible assets other than goodwill is required. This accounting guidance will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (January 1, 2013, for us). Early adoption is permitted. The adoption of this accounting guidance is not expected to have a material effect on our financial condition or results of operations.

Offsetting disclosures

Offsetting disclosures. In December 2011, the FASB issued new accounting guidance that requires an entity to disclose information about offsetting and related arrangements to enable financial statement users to understand the effect of those arrangements on the entity’s financial position. This new accounting guidance will be effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (effective January 1, 2013, for us).

XML

Derivatives and Hedging Activities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	$ 84,457	$ 74,544	$ 68,119
Derivative Assets, Gross	818	945	900
Derivative Asset, Netting adjustments	(1,382)	(1,452)	(1,219)
Total Derivative Asset	818	945	900
Derivative Liability, Netting adjustments	(880)	(978)	(847)
Total Derivative Liability	763	1,026	991
Designated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	16,334	15,621	10,901
Derivative Assets, Gross	588	589	459
Derivative Liabilities, Gross	40	174	151
Nondesignated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	68,123	58,923	57,218
Derivative Assets, Gross	1,612	1,808	1,660
Derivative Liabilities, Gross	1,603	1,830	1,687
Interest rate [Member] | Designated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	15,903	15,067	9,713
Derivative Assets, Gross	586	589	459
Derivative Liabilities, Gross	32	27	1
Interest rate [Member] | Nondesignated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	58,222	48,537	46,355
Derivative Assets, Gross	1,273	1,364	1,149
Derivative Liabilities, Gross	1,278	1,371	1,180
Foreign exchange [Member] | Designated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	431	554	1,188
Derivative Assets, Gross	2
Derivative Asset, Netting adjustments	8
Derivative Liabilities, Gross		147	150
Foreign exchange [Member] | Nondesignated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	5,579	5,549	6,001
Derivative Assets, Gross	105	151	178
Derivative Liabilities, Gross	97	141	169
Energy and commodity [Member] | Nondesignated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	1,691	1,610	1,896
Derivative Assets, Gross	209	253	295
Derivative Liabilities, Gross	204	253	303
Credit [Member] | Nondesignated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	2,613	3,210	2,934
Derivative Assets, Gross	25	37	34
Derivative Liabilities, Gross	24	62	31
Equity [Member] | Nondesignated [Member]
Fair values, Volume of activity and gain/loss information related to derivative instruments
Notional Amount	18	17	32
Derivative Assets, Gross		3	4
Derivative Liabilities, Gross		$ 3	$ 4

XML

Trust Preferred Securities Issued by Unconsolidated Subsidiaries (Table)

6 Months Ended

Jun. 30, 2012

Trust Preferred Securities Issued by Unconsolidated Subsidiaries [Abstract]

Disclosure of Capital Securities Issued by Unconsolidated Subsidiaries

dollars in millions	Trust Preferred Securities, Net of Discount		(a)	Common Stock		Principal Amount of Debentures, Net of Discount		(b)	Interest Rate         of Trust Preferred Securities and Debentures			(c)	Maturity         of Trust Preferred Securities and Debentures
June 30, 2012
KeyCorp Capital I	$	156		$	6	$	162			1.208	%			2028
KeyCorp Capital II		116			4		120			6.875				2029
KeyCorp Capital III		151			4		155			7.750				2029
KeyCorp Capital VII(e)		189			5		194			5.700				2035
KeyCorp Capital X (d), (e)		589			—		589			8.000				2068
Total	$	1,201		$	19	$	1,220			6.616	%			—
December 31, 2011	$	1,206		$	19	$	1,225			6.610	%			—
June 30, 2011	$	1,912		$	26	$	1,935			6.570	%			—

(a) The trust preferred securities must be redeemed when the related debentures mature, or earlier if provided in the governing indenture. Each issue of trust preferred securities carries an interest rate identical to that of the related debenture. Certain trust preferred securities include basis adjustments related to fair value hedges totaling $155 million at June 30, 2012, $160 million at December 31, 2011, and $121 million at June 30, 2011. See Note 7 (“Derivatives and Hedging Activities”) for an explanation of fair value hedges.

(b) We have the right to redeem these debentures: (i) in whole or in part, on or after July 1, 2008 (for debentures owned by KeyCorp Capital I); March 18, 1999 (for debentures owned by KeyCorp Capital II); and July 16, 1999 (for debentures owned by KeyCorp Capital III). If the debentures purchased by KeyCorp Capital I are redeemed before they mature, the redemption price will be the principal amount, plus any accrued but unpaid interest. If the debentures purchased by KeyCorp Capital II or KeyCorp Capital III are redeemed before they mature, the redemption price will be the greater of: (a) the principal amount, plus any accrued but unpaid interest or (b) the sum of the present values of principal and interest payments discounted at the Treasury Rate (as defined in the applicable indenture), plus 20 basis points (25 basis points or 50 basis points in the case of redemption upon either a tax event or a capital treatment event for KeyCorp Capital III), plus any accrued but unpaid interest. When debentures are redeemed in response to tax or capital treatment events, the redemption price for KeyCorp Capital II and KeyCorp Capital III generally is slightly more favorable to us. The principal amount of debentures shown above includes adjustments related to hedging with financial instruments totaling $155 million at June 30, 2012, $160 million at December 31, 2011, and $118 million at June 30, 2011.

(c) The interest rates for the trust preferred securities issued by KeyCorp Capital II, KeyCorp Capital III, KeyCorp Capital VII, and KeyCorp Capital X are fixed. KeyCorp Capital I has a floating interest rate equal to three-month LIBOR plus 74 basis points that reprices quarterly. The total interest rates are weighted-average rates.

(d) In connection with the issuances of these trust preferred securities, KeyCorp entered into a replacement capital covenant. On April 16, 2012, KeyCorp commenced a consent solicitation from the holders of record as of April 10, 2012, of the outstanding 5.70% trust preferred securities of KeyCorp Capital VII to terminate the Replacement Capital Covenant, dated as of February 27, 2008, as amended (the “RCC”) by KeyCorp in favor of and for the benefit of each Covered Debt holder (as defined in such RCC). On April 27, 2012, KeyCorp announced that, effective as of April 26, 2012, a majority of the holders of record of the trust preferred securities in liquidation amount of KeyCorp Capital VII consented to terminate the RCC. Pursuant to the terms of the consent solicitation, the termination of the RCC became effective on April 26, 2012.

(e) On June 12, 2012, KeyCorp announced the redemption, in full, of 5.70% trust preferred securities of KeyCorp Capital VII and 8.000% enhanced trust preferred securities of KeyCorp Capital X. On July 12, 2012, KeyCorp completed such redemptions.

XML

Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

10.  Income Taxes

Income Tax Provision

In accordance with the applicable accounting guidance, the principal method established for computing the provision for income taxes in interim periods requires us to make our best estimate of the effective tax rate expected to be applicable for the full year. This estimated effective tax rate is then applied to interim consolidated pre-tax operating income to determine the interim provision for income taxes. Additionally, the accounting guidance allows for an alternative method to computing the effective tax rate and, thus the interim provision for income taxes, when a taxpayer is unable to calculate a reliable estimate of the effective tax rate for the entire year. For the second quarter of 2012, we applied an estimated annual effective rate to the interim period’s consolidated pre-tax operating income. For the interim periods during 2011, we applied the alternative method allowed under the accounting guidance. The provision for the quarters during 2011 was calculated by applying the statutory federal income tax rate to the quarter’s consolidated operating income before taxes after modifications. These items included modifications for nontaxable items recognized in the quarter, which were comprised of income from corporate-owned life insurance, tax credits related to investments in low-income housing projects, and state taxes. During those periods, we concluded that the uncertainty of the economic environment made the alternative method more reliable in determining the tax provision for those periods.

The effective tax rate, which is the provision for income taxes as a percentage of income from continuing operations before income taxes, was 19.8% for the second quarter of 2012, 27.0% for the first quarter of 2012, and 27.1% for the second quarter of 2011. The effective tax rates are below our combined federal and state statutory tax rate of 37.2%, due primarily to income from investments in tax-advantaged assets such as corporate-owned life insurance and credits associated with investments in low-income housing projects. In addition, during the second quarter and the first six months of 2012, our effective tax rate was lower due to the early termination of certain leveraged leases that resulted in nontaxable gains pursuant to a prior settlement with the IRS.

Deferred Tax Asset

At June 30, 2012, from continuing operations, we had a federal deferred tax asset of $119 million and a state deferred tax liability of $22 million compared to a federal deferred tax asset of $111 million and a state deferred tax liability of $19 million at December 31, 2011, and a combined federal and state deferred tax asset of $208 million at June 30, 2011, included in “accrued income and other assets” on the balance sheet. To determine the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded, we conduct a quarterly assessment of all available evidence. This evidence includes, but is not limited to, taxable income in prior periods, projected future taxable income, and projected future reversals of deferred tax items. Based on these criteria, and in particular our expectations for future taxable income, we currently believe that it is more-likely-than-not that we will realize the net deferred tax asset in future periods.

Unrecognized Tax Benefits

As permitted under the applicable accounting guidance for income taxes, it is our policy to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

XML

Trust Preferred Securities Issued by Unconsolidated Subsidiaries (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Capital Securities Issued by Unconsolidated Subsidiaries Information
Common Stock	$ 1,017	$ 1,017	$ 1,017
Business Trusts [Member]
Capital Securities Issued by Unconsolidated Subsidiaries Information
Trust Preferred Securities, Net of Discount	1,201	1,206	1,912
Common Stock	19	19	26
Principal Amount of Debentures, Net of Discount	1,220	1,225	1,935
Interest Rate of Trust preferred Securities and Debentures	6.616%	6.61%	6.57%
KeyCorp Capital I [Member]
Capital Securities Issued by Unconsolidated Subsidiaries Information
Trust Preferred Securities, Net of Discount	156
Common Stock	6
Principal Amount of Debentures, Net of Discount	162
Interest Rate of Trust preferred Securities and Debentures	1.208%
Maturity of Trust Preferred Securities and Debentures	2028
KeyCorp Capital II [Member]
Capital Securities Issued by Unconsolidated Subsidiaries Information
Trust Preferred Securities, Net of Discount	116
Common Stock	4
Principal Amount of Debentures, Net of Discount	120
Interest Rate of Trust preferred Securities and Debentures	6.875%
Maturity of Trust Preferred Securities and Debentures	2029
KeyCorp Capital III [Member]
Capital Securities Issued by Unconsolidated Subsidiaries Information
Trust Preferred Securities, Net of Discount	151
Common Stock	4
Principal Amount of Debentures, Net of Discount	155
Interest Rate of Trust preferred Securities and Debentures	7.75%
Maturity of Trust Preferred Securities and Debentures	2029
KeyCorp Capital VII [Member]
Capital Securities Issued by Unconsolidated Subsidiaries Information
Trust Preferred Securities, Net of Discount	189
Common Stock	5
Principal Amount of Debentures, Net of Discount	194
Interest Rate of Trust preferred Securities and Debentures	5.70%
Maturity of Trust Preferred Securities and Debentures	2035
KeyCorp Capital X [Member]
Capital Securities Issued by Unconsolidated Subsidiaries Information
Trust Preferred Securities, Net of Discount	589
Principal Amount of Debentures, Net of Discount	$ 589
Interest Rate of Trust preferred Securities and Debentures	8.00%
Maturity of Trust Preferred Securities and Debentures	2068