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