KeyCorp to get $2.5 billion in Treasury money

Posted by Teresa Dixon Murray/Plain Dealer Reporter October 27, 2008 06:55AM

Categories: Banks, Real Time News

Plain Dealer fileKeyCorp, whose tower is one of Cleveland's landmarks, has gotten an infusion of government money.

 

CLEVELAND -- KeyCorp early today said it will get $2.5 billion from the U.S. Treasury by participating in its capital purchase program. Receiving Treasury money is the new stamp of approval the government gives to banks it likes.

 

The money, in exchange for preferred shares of the Key, will allow the Cleveland bank to consider "opportunistic acquisitions," said spokesman William Murschel.

 

http://blog.cleveland.com/business/2008/10/keycorp_gets_treasury_money.html

KeyCorp plans to use bailout money to be a buyer

Posted by Teresa Dixon Murray/Plain Dealer Reporter October 27, 2008 18:15PM

Categories: Banks, Breaking News, National City, Real Time News

Ohio's three remaining large banks boasted Monday that the U.S. government has picked them to survive. One of them, Cleveland's KeyCorp, went so far as to say it plans to buy other banks.

 

Key, Fifth Third Bancorp of Cincinnati and Huntington Bancshares of Columbus all said they're getting billions as part of the U.S. Treasury rescue plan Congress approved this month.

 

This doesn't mean they'll all survive long-term, but they've at least made the cut for now.

 

http://blog.cleveland.com/business/2008/10/keycorp_plans_to_use_bailout_m.html

Surprised a thread hasn't been started yet - thanks.

There were several articles that mentioned Key backed out of buying "a rival bank" back in the spring due to the FAS 157 accounting treatment/punishment that would've taken place.  If I was a betting man, I would guess that bank was Nat City since there were strong rumors of Key buying them during that time. 

From crainscleveland.com:

 

KeyBank to bring about 70 call center jobs to Cleveland

http://www.crainscleveland.com/article/20090114/FREE/901149958

 

By ARIELLE KASS

 

9:40 am, January 14, 2009

 

Washington’s loss is Cleveland’s gain.

 

KeyBank will bring about 70 jobs to the city when it closes a Tacoma, Wash., call center this year.

 

The closing will cost the Puget Sound area about 200 jobs, according to Key, but will bring more employees to Cleveland and Buffalo.

FC take note, Key brought jobs to the region.

 

They are helping their home town.

 

 

_{(now they should ditch buffalo)  >:D}

KeyBank Renovated Office Space in Higbee Building Earns Gold LEED® Certification

Investment in historic building bolsters downtown Cleveland

 

More than 800 employees benefit from sustainable design and green technologies

 

Certification reinforces KeyBank's commitment to sustainable renovation and construction

CLEVELAND, March 15, 2011 /PRNewswire/ -- KeyBank's renovation of three floors in the historic Higbee Building on Public Square has been awarded LEED® Gold certification from the U.S. Green Building Council.  The project's progressive workspace features a number of sustainability features, from automated lighting and ventilation systems to a design that maintains the building's historic charm.

 

"This renovation represents KeyBank's commitment to strengthen our community's core in the most environmentally responsible ways possible," said Henry Meyer, KeyCorp CEO. "It enhances one of the most historic buildings in the heart of downtown, it leverages Tower City Center's existing transportation hub and it allows hundreds of our employees to enjoy the growing sense of excitement connected to the area's ongoing economic development.

 

"We're very proud to have earned this recognition from the U.S. Green Building Council," Meyer said.

 

KeyBank hired local architects from VOCON to incorporate sustainable technologies and construction practices consistent with a LEED certification. The 221,000-square-foot renovation features a high percentage of recycled building materials, enhanced natural lighting, personal lighting control systems, CO2 sensors, outdoor air monitoring systems and more. (For more features, see project Fact Sheet.)

 

http://www.prnewswire.com/news-releases/keybank-renovated-office-space-in-higbee-building-earns-gold-leed-certification-117999219.html

Beth Mooney is stepping down in May as chairman and CEO. 

https://www.wsj.com/articles/keycorp-ceo-beth-mooney-to-retire-in-may-11568928449

 

She is to be replaced by president of banking Chris Gorman. 

https://www.crainscleveland.com/finance/keycorp-ceo-beth-mooney-will-retire-may-2020-be-succeeded-chris-gorman

https://buffalonews.com/2019/09/20/keybanks-next-ceo-well-versed-about-buffalo/

 

 

5 hours ago, Terdolph said:

I was never very impressed with Beth.

8 hours ago, Terdolph said:

I was never very impressed with Beth.

 

That's too bad, because she really liked you. 

Unusual item:  there are ~1900 Jan,23 $30 call options outstanding for KeyCorp.  Somebody is placing a cheap bet (5 cents a contract?) on a huge price move in the stock which is about $17 today.  At $30, this person's profit would be about $2.5 million. The only thing that would cause that would be a buy-out.

 

EDIT: that should be $5 a contract.

 

From a Cleveland perspective, such a buyout would be disastrous.

Could they also be acquiring another bank?

2 hours ago, bwheats said:

Could they also be acquiring another bank?

That wouldn't boost Key's share price by January 20th; only somebody else acquiring Key could do it.

7 hours ago, Dougal said:

Unusual item:  there are ~1900 Jan,23 $30 call options outstanding for KeyCorp.  Somebody is placing a cheap bet (5 cents a contract?) on a huge price move in the stock which is about $17 today.  At $30, this person's profit would be about $2.5 million. The only thing that would cause that would be a buy-out.

How long ago were those calls placed? Do you know that the approximate price was when those calls were placed?

^I don't know when the calls were written, but KEY has been trading in a $15-19 range for six+ months. There is also another block of 1690 contracts for Jan $25 calls.  The chance of Key getting to $25, let alone $30 in a month in the normal course of events is near zero.

 

The $2.5 million profit I mentioned would be based on owning the stock today. The profit from calls would come from the prospect of the stock trading above $30 by Jan 20.  If KEY were to be acquired, bidding 2.5x book value would not be unusual.  Book value for Key is a bit over $10/share, so a bid of $25 might not be unreasonable and KEY is sufficiently profitable that counter-offers might come.  

 

So, who is betting almost $20K on a Key takeout? Somebody small obviously; but somebody who knows something?

 

Disclosure: I own a few KEY shares.

 

Oh man! I don't even want to think about Key being bought out. 

Who could buy them out?

45 minutes ago, Dougal said:

^I don't know when the calls were written, but KEY has been trading in a $15-19 range for six+ months. There is also another block of 1690 contracts for Jan $25 calls.  The chance of Key getting to $25, let alone $30 in a month in the normal course of events is near zero.

 

The $2.5 million profit I mentioned would be based on owning the stock today. The profit from calls would come from the prospect of the stock trading above $30 by Jan 20.  If KEY were to be acquired, bidding 2.5x book value would not be unusual.  Book value for Key is a bit over $10/share, so a bid of $25 might not be unreasonable and KEY is sufficiently profitable that counter-offers might come.  

 

So, who is betting almost $20K on a Key takeout? Somebody small obviously; but somebody who knows something?

 

Disclosure: I own a few KEY shares.

 

 

Similar disclosure, my father owns a few Key shares and I'm the guardian of his estate so I manage those assets.

 

For newbies, what Dougal is saying: standard option contracts give you the option to buy a block of 100 shares at the strike price on or before the expiration date.  So 1,906 calls (I just checked the actual number myself) would give that group of contract holders the right to buy 190,600 shares of KEY at $30 each on or before January 20, 2023 (that is the standard option expiration date for January).

 

Key reports earning on January 19, 2023, but even if they have a blowout quarter, it would take a lot to move the stock from its current $17.34 to $30.  The options are worthless if KEY (the stock) is not worth at least $30 by January 20.  If Key jumps to $31, then that block of options is basically worth $190,600 (buy the shares for $30, immediately sell them for $31).  You can see how this could get very lucrative if KEY went well above $30, though, and the only feasible scenario for that would be a merger.  Record-breaking earnings alone still probably wouldn't be enough.

 

That said, I don't read anything too likely into this.  I'd note that people swing for the fences in the other direction, too: There are also 2627 open put positions in KEY for January at a strike of $12, meaning that the contract holder has the right to force a counterparty to buy KEY at $12/share, which only has value if the share price drops below $12, and only start to have big jackpot value if the price drops well below $12.  Its 52-week low is $15.26.  The odds of KEY dropping below $12 by January 20 are probably greater than the odds of it hitting $30, but honestly probably not that different than the odds of it hitting $25 (which, as Dougal noted, is another threshold where there's been a lot of options activity).

 

Also, Dougal, I think you're doing the math wrong on the profit.  The profit wouldn't be $2.5M unless KEY went far above $30 by January 20.  Exercising the options (whether the option holder actually doing so or selling it to someone who would do so) would only generate profit of 100($KEY-$30).  For 190,600 shares of KEY to generate $2.5M in profit from those options, it would have to go $13.11 over $30, so $43.11.  The big options bonanza would be to whoever owned options to buy KEY at its current price (or lower) in the event of a merger.  Of course those would be more expensive up front.

1 minute ago, guardianpayroll said:

Who could buy them out?

 

Key's market cap is only $16B, not huge for a large bank.  JP Morgan Chase is $386B, Bank of America is $263B, Wells Fargo is $162B, Citi is $87B.  For comparison, Fifth Third is $22B and Huntington is $21B.

4 minutes ago, Gramarye said:

 

Key's market cap is only $16B, not huge for a large bank.  JP Morgan Chase is $386B, Bank of America is $263B, Wells Fargo is $162B, Citi is $87B.  For comparison, Fifth Third is $22B and Huntington is $21B.

Thanks for the info, I guess where my thought process is, who is trying to get into the Cleveland market?

38 minutes ago, Gramarye said:

 

You explained it so much better than I did.  🙂

31 minutes ago, guardianpayroll said:

Thanks for the info, I guess where my thought process is, who is trying to get into the Cleveland market?

 

Bank of America has been slowly creeping in... but who knows.

1 hour ago, Gramarye said:

 

Key's market cap is only $16B, not huge for a large bank.  JP Morgan Chase is $386B, Bank of America is $263B, Wells Fargo is $162B, Citi is $87B.  For comparison, Fifth Third is $22B and Huntington is $21B.

I dont see Key being bought out either. I tend to agree with you that $30/share is less likely than a put at $12/share, and I doubt there really is a serious takeover account. What does make me curious is the price that a call at $30 would trade for when it was purchased. If someone was placing a stupid bet but it was a pennies on the dollar bet, then chances are you have a speculator just pulling the lever and hoping something comes up big once in a while (I would suspect this is what is going on).  I am curious as to how big your portfolio would need to be to place a bet like this knowing you are probably just pissing the money away

19 minutes ago, Brutus_buckeye said:

I dont see Key being bought out either. I tend to agree with you that $30/share is less likely than a put at $12/share, and I doubt there really is a serious takeover account. What does make me curious is the price that a call at $30 would trade for when it was purchased. If someone was placing a stupid bet but it was a pennies on the dollar bet, then chances are you have a speculator just pulling the lever and hoping something comes up big once in a while (I would suspect this is what is going on).  I am curious as to how big your portfolio would need to be to place a bet like this knowing you are probably just pissing the money away

 

Depends on when it was purchased.  The longer the lead time, the higher the price.  If those options were purchased 11 months ago (i.e., 1 year from January 2022 to January 2023), they would have been far more expensive, not just because of the extra lead time but because KEY was trading above $27 at times in January 2022 (ah, those halcyon days gone by), so $30 would not have seemed farfetched.

 

If you wanted to buy 1900 options contracts now, the current asking price is $0.05 per contract, so you could pony up $95 and make $190,000 if KEY actually hits $31 by January.

 

I don't particularly recommend it.  It's Christmas season.  If you really want to donate $95, you can at least do some good and save on your taxes by donating to a worthy nonprofit by year-end.

 

If you really think KEY is going to get bought out at some point, rather than swing for the fences that the merger is going to be announced between now and January 20 (and that the price is above $30--you could probably buy a heck of a lot of the total float now on the open market without pushing the price that high), I would just buy the stock and hold it.  It pays a 4.75% dividend at the current price and you don't need to worry about any magic dates on which your interest will expire worthless if lightning hasn't struck.

 

As I mentioned, I hold the stock in my dad's portfolio.  As a court-appointed guardian, there are rules that require me to be more risk-averse with his money than I could or would be with my own.  I bought KEY because my expert scientific opinion is that KeyCorp is among the most boring financial institutions in the entire United States.  KEY is the stock market's equivalent of a solid blue polo shirt.

6 minutes ago, Gramarye said:

 

Depends on when it was purchased.  The longer the lead time, the higher the price.  If those options were purchased 11 months ago (i.e., 1 year from January 2022 to January 2023), they would have been far more expensive, not just because of the extra lead time but because KEY was trading above $27 at times in January 2022 (ah, those halcyon days gone by), so $30 would not have seemed farfetched.

 

If you wanted to buy 1900 options contracts now, the current asking price is $0.05 per contract, so you could pony up $95 and make $190,000 if KEY actually hits $31 by January.

 

I don't particularly recommend it.  It's Christmas season.  If you really want to donate $95, you can at least do some good and save on your taxes by donating to a worthy nonprofit by year-end.

 

If you really think KEY is going to get bought out at some point, rather than swing for the fences that the merger is going to be announced between now and January 20 (and that the price is above $30--you could probably buy a heck of a lot of the total float now on the open market without pushing the price that high), I would just buy the stock and hold it.  It pays a 4.75% dividend at the current price and you don't need to worry about any magic dates on which your interest will expire worthless if lightning hasn't struck.

 

As I mentioned, I hold the stock in my dad's portfolio.  As a court-appointed guardian, there are rules that require me to be more risk-averse with his money than I could or would be with my own.  I bought KEY because my expert scientific opinion is that KeyCorp is among the most boring financial institutions in the entire United States.  KEY is the stock market's equivalent of a solid blue polo shirt.

 

This is pure speculation here, my guess is that these call options were purchased in mid/late January 2022 (1 year term) which would make sense given the maturity coming up. At that time the stock price was trading around $27.15/share.  In that range $30/share seems like a reasonable bet given the ordinary course of business and expecting to continue 2022 at the same pace as 2021.  

 

As we can see now, that January 2022 bed as turned out to be a poor one. 

 

https://www.macrotrends.net/stocks/charts/KEY/keycorp/stock-price-history#:~:text=The all-time high KeyCorp,above the current share price.

1 hour ago, Gramarye said:

If you wanted to buy 1900 options contracts now, the current asking price is $0.05 per contract, so you could pony up $95 and make $190,000 if KEY actually hits $31 by January.

 

Options prices are shown per share, but the contract is for 100 shares; thus, the contract price would be $5. Still a nice profit.

 

Mooney and Gorman have made Key into a safe and quite profitable but low-growth bank. I could see somebody like Citi making an offer and then others jumping it.  A $30 offer would be just a little under three times book value.

 

I sure hope this doesn't happen, however.

 

 

8 hours ago, Gramarye said:

 

Key's market cap is only $16B, not huge for a large bank.  JP Morgan Chase is $386B, Bank of America is $263B, Wells Fargo is $162B, Citi is $87B.  For comparison, Fifth Third is $22B and Huntington is $21B.

 

Maybe I spent too much time in the 1980s watching little fish (especially in Cleveland and other mid-sized Midwest cities) get gobbled up by big fish (especially from outside of Cleveland and other mid-sized). But those numbers suggest Key is vulnerable to a takeover.

1 hour ago, KJP said:

 

Maybe I spent too much time in the 1980s watching little fish (especially in Cleveland and other mid-sized Midwest cities) get gobbled up by big fish (especially from outside of Cleveland and other mid-sized). But those numbers suggest Key is vulnerable to a takeover.

Back when National City Bank was still in business, I recall reading a banking report of the strength of various banks.  It stated that of the area banks at risk of being taken over, Key was a higher risk of being taken over than National City Bank.  Unfortunately it appears that risk still exists.

Made these back in 2005-2006; didn’t think I’d be dusting them off, but here we are 🤷🏻‍♂️

On 12/8/2022 at 1:32 AM, Dougal said:

Unusual item:  there are ~1900 Jan,23 $30 call options outstanding for KeyCorp.  Somebody is placing a cheap bet (5 cents a contract?) on a huge price move in the stock which is about $17 today.  At $30, this person's profit would be about $2.5 million. The only thing that would cause that would be a buy-out.

 

EDIT: that should be $5 a contract.

 

From a Cleveland perspective, such a buyout would be disastrous.

As others have said above, these contracts were probably created a year ago when Key was trading at $27. The only person who would buy Key at $30 right now is Elon Musk. (To be clear, that's a joke, not a prediction.) A Jan 23 $30 Call which is worth next to nothing now is worth exactly nothing if Key gets bought out for $30 or less per share.

 

There are also bigger option buys at Jan 23 $17 Put, $15 Put, and even $12 Put.

 

It's probably not insider trading. Probably just some schmuck from WallStreetBets who put $2000 in his Robinhood account and only has $200 in it now.

 

In any event, I suppose it's possible Key would get bought out, but the option chain has nothing to do with that possibility.

15 minutes ago, LlamaLawyer said:

In any event, I suppose it's possible Key would get bought out, but the option chain has nothing to do with that possibility.

You also have to look at who would be realistic suitors to buy Key. Citi would likely not be a logical candidate for numerous reasons, regulatory being the most significant. 

 

Also, per a number of bank execs at some regional banks I have spoken with who underwrite some acquisitions (on a much smaller scale), banks are trading at a premium and it really would not make sense to go after a traditional brick and mortar bank like Key at this time, given the premium you would need to pay for them. It is not a bank in distress, but it is also not a superstar in the sector either. More or less, it is an average bank, and to acquire such an asset you would have to way overpay for the value that you would actually get from it.  Many banks right now are focused on acquiring Fintech assets and you are starting to see their acquisitions and investments play out in those arenas.

My guess is the next big bank merger that creates a splash will be a bank that has a large fintech presence in their portfolio. 

 

 

12 minutes ago, Brutus_buckeye said:

  Many banks right now are focused on acquiring Fintech assets and you are starting to see their acquisitions and investments play out in those arenas.

My guess is the next big bank merger that creates a splash will be a bank that has a large fintech presence in their portfolio. 

 

On a positive note, Key has been making some nice small fintech tuck-in acquisitions aimed at broadening their services.

The market recently took a dim view of Key's earnings report; and the stock was down a major fraction.  The market called the earnings a miss, but a closer look says the entire decline in earnings was accounted for by a provision for loan losses, which losses may or may not occur.  Revenues were up.  The stock has bounced back today.  Personally, I thought it was a good report, given weakness in revenues in some prior years.

 

 

I guess we can now say that whomever purchased those options for Jan 23 officially took a bath on them

28 minutes ago, Brutus_buckeye said:

I guess we can now say that whomever purchased those options for Jan 23 officially took a bath on them

Well, if it hadn't been for the loan loss provisions (which seem to be bigger than other banks are taking), earnings would have grown.  Not enough to push the stock to $30, however.  What makes options fun (bloody?) is that options are a zero sum game; somebody did take a loss.

How concerned should we be about KeyCorp here? From their most recent balance sheets it looks like they don't have a lot of hold-to-maturity unrealized losses, and they've got a lot of investment in hedging vehicles like interest-rate swaps. But they're very leveraged.

The majority of banks their size are going to be very leveraged. At least unlike SVB they were not flush with huge deposits that were capable of running on them in a short term (as they are much more diversified on the deposit end). I dont know how involved they were in the long term treasury bond market but if they started hedging that like most responsible banks in 2022, they should be fine. 

Sickening drop in KEY stock this AM - down 10% at the moment.  Are the shorts piling on?

20 minutes ago, Dougal said:

Sickening drop in KEY stock this AM - down 10% at the moment.  Are the shorts piling on?

 

Basically all regional bank stocks are way down. I actually think Key is going to be okay. They had deposit growth last quarter, and their balance sheet is less risky than the banks that are really tanking like $ZION, $PACW, $WAL, etc.

15 minutes ago, LlamaLawyer said:

 

Basically all regional bank stocks are way down. I actually think Key is going to be okay. They had deposit growth last quarter, and their balance sheet is less risky than the banks that are really tanking like $ZION, $PACW, $WAL, etc.

 

KEY's drop was significantly greater than most peer regionals; that's my concern - that KEY has been targeted by short sellers (deservedly or not). Confidence in banks is so easily undermined.

KEY started the day up about 50 cents but that got swept away by the Powell commentary.  I guess they're paying for their Pacific Northwest exposure. 5/3 and Huntington are doing better.

My belief stated about ten days ago is unchanged. Key's balance sheet is not super risky (relatively). They have diverse depositors, relatively low HTM losses, and fairly low exposure to CRE - Office. I give them a better than 90% chance of making it through the turmoil. If Key does fall apart, I would be confident about ten to twenty other regional banks do too.

 

The headwinds are just bad though. This yield curve inversion is so deep, and that's toxic to banks.

City of New York threatens to pull $10 million of deposits out of Key.  The city ordered the banks to report by a date certian how they're doing in certain ESG matters. Key, along with Capital One, PNC, Wells Fargo, et al, responded with the legal equivalent of "get stuffed."

 

Ironically, Key had just received kudos as one of the 50 most civic-minded banks in the US.

 

"New York City Banking Commission Votes to Limit Deposits at Capital One Financial, KeyBank

6:06 AM ET, 05/26/2023 - MT Newswires

06:06 AM EDT, 05/26/2023 (MT Newswires) -- The New York City Banking Commission has voted to limit the city's deposits at Capital One Financial (COF) and KeyCorp (KEY) unit KeyBank after the banks "failed to submit required plans demonstrating their efforts to root out discrimination," the NYC Comptroller's office said Thursday.

In February, the Commission asked banks to show a "meaningful commitment to combat discrimination in employment, services, and lending,", the office said. Five banks failed to comply with the designation process and the NYC Comptroller, Brad Lander, voted against allowing them to obtain additional deposits this cycle.

The office said that 26 banks were certified to obtain deposits from New York City Agencies for the next two years.

Capital One and KeyBank "outright refused to submit required policies," the Comptroller's office said. Capital One held $7.2 million in City deposits and KeyBank held $10 million at the end of April. The two banks will be able to service existing contracts for one year, the office said.

Capital One and KeyBank did not immediately respond to requests for comment by MT Newswires."

21 minutes ago, Dougal said:

City of New York threatens to pull $10 million of deposits out of Key.  The city ordered the banks to report by a date certian how they're doing in certain ESG matters. Key, along with Capital One, PNC, Wells Fargo, et al, responded with the legal equivalent of "get stuffed."

 

Ironically, Key had just received kudos as one of the 50 most civic-minded banks in the US.

 

"New York City Banking Commission Votes to Limit Deposits at Capital One Financial, KeyBank

6:06 AM ET, 05/26/2023 - MT Newswires

06:06 AM EDT, 05/26/2023 (MT Newswires) -- The New York City Banking Commission has voted to limit the city's deposits at Capital One Financial (COF) and KeyCorp (KEY) unit KeyBank after the banks "failed to submit required plans demonstrating their efforts to root out discrimination," the NYC Comptroller's office said Thursday.

In February, the Commission asked banks to show a "meaningful commitment to combat discrimination in employment, services, and lending,", the office said. Five banks failed to comply with the designation process and the NYC Comptroller, Brad Lander, voted against allowing them to obtain additional deposits this cycle.

The office said that 26 banks were certified to obtain deposits from New York City Agencies for the next two years.

Capital One and KeyBank "outright refused to submit required policies," the Comptroller's office said. Capital One held $7.2 million in City deposits and KeyBank held $10 million at the end of April. The two banks will be able to service existing contracts for one year, the office said.

Capital One and KeyBank did not immediately respond to requests for comment by MT Newswires."

These RFP's and such put out by certain cities and other municipalities are complicated. In some cases, Key can't really respond in the affirmative even if they are implementing all of the standards requested due to their privacy policies and such set by their various boards. In some cases, it may not be good business sense to respond as requested as it gives away too much info that could be used against the bank in future lawsuits and discovery.  While probably not illegal for Key to offer up such information, there are many good reasons not to do so. especially, going on record could open up significant liability down the road for the bank in unforeseen areas. If NYC does not like the response, they can always bank somewhere else and may choose to do so. If enough banks do not comply with their request, then the city needs to rethink their approach. 

45 minutes ago, Dougal said:

City of New York threatens to pull $10 million of deposits out of Key.  The city ordered the banks to report by a date certian how they're doing in certain ESG matters. Key, along with Capital One, PNC, Wells Fargo, et al, responded with the legal equivalent of "get stuffed."

 

Ironically, Key had just received kudos as one of the 50 most civic-minded banks in the US.

 

"New York City Banking Commission Votes to Limit Deposits at Capital One Financial, KeyBank

6:06 AM ET, 05/26/2023 - MT Newswires

06:06 AM EDT, 05/26/2023 (MT Newswires) -- The New York City Banking Commission has voted to limit the city's deposits at Capital One Financial (COF) and KeyCorp (KEY) unit KeyBank after the banks "failed to submit required plans demonstrating their efforts to root out discrimination," the NYC Comptroller's office said Thursday.

In February, the Commission asked banks to show a "meaningful commitment to combat discrimination in employment, services, and lending,", the office said. Five banks failed to comply with the designation process and the NYC Comptroller, Brad Lander, voted against allowing them to obtain additional deposits this cycle.

The office said that 26 banks were certified to obtain deposits from New York City Agencies for the next two years.

Capital One and KeyBank "outright refused to submit required policies," the Comptroller's office said. Capital One held $7.2 million in City deposits and KeyBank held $10 million at the end of April. The two banks will be able to service existing contracts for one year, the office said.

Capital One and KeyBank did not immediately respond to requests for comment by MT Newswires."

I also wonder how much of this is public posturing by the committee. In some cases, certain banks are one of the few in a market or the country that can offer certain services which limits the city's ability to switch to other competitors. For example, there are certain services that a Citi will offer and there are really only 1 or 2 other options for that type of business line, same with PNC and even Key. Depending on the type of business the city has with Key, if Key tells them to "F'off" there is very little the city can do about it in the short term and they may not be able to move those deposits because they may be tied to other contractual covenants.

2 hours ago, Brutus_buckeye said:

I also wonder how much of this is public posturing by the committee. In some cases, certain banks are one of the few in a market or the country that can offer certain services which limits the city's ability to switch to other competitors. For example, there are certain services that a Citi will offer and there are really only 1 or 2 other options for that type of business line, same with PNC and even Key. Depending on the type of business the city has with Key, if Key tells them to "F'off" there is very little the city can do about it in the short term and they may not be able to move those deposits because they may be tied to other contractual covenants.

 

Semi-private posturing I guess. The NYT didn't cover it.

Over the last week Key stock has climbed from a little over $10 to a little over $11 in anticipation of earnings.  The earnings announcement is due on Thursday, with street estimates of about 27 cents per share. The stock action says Key may beat it.  🤞

^  Key beat the estimates by 2 cents a share, which is good news mostly by virtue of not being bad news.

I wonder if Key will have the guts to go after NY Community Bank (Ohio Savings), which probably will get bought by somebody.  The FDIC has hinted some other mid-sized banks should probably be merger candidates. If Key doesn't want to risk NYCB, they really need to go after one of the others.

Didn't NYCB buy Signature? Seems to me like if Bank B buys Bank C (which is failing) and then Bank B starts failing a year later, Maybe Bank A shouldn't buy Bank B.