KeyCorp Receives $2.8B Investment from Scotiabank

By Bobby Samwell • Monday, August 12 07:59 • Permanent Link

KeyCorp has announced a strategic minority investment from the Bank of Nova Scotia (Scotiabank) of approximately $2.8 billion, representing around 14.9% pro forma common stock ownership at a fixed price of $17.17 per share. This investment is estimated to increase KeyCorp's June 30, 2024, CET1 capital ratio by 195 basis points to 12.4% and boost tangible book value per share by more than 10%.

As part of the transaction, KeyCorp plans to evaluate potential repositioning of the available-for-sale securities portfolio to accelerate expected profitability, liquidity, and capital improvements, estimated to result in a strong net CET1 capital ratio in the range of 11.3% to 11.6%. The estimated CET1 capital ratio, pro forma for the capital raise and balance sheet repositioning, inclusive of AOCI, is expected to be in the range of 9.1% to 9.4%, providing a substantial cushion.

Upon completion, Scotiabank will purchase approximately 163 million shares of KeyCorp’s common stock in two tranches, with the initial investment of $0.8 billion occurring upon expiration of the antitrust waiting period under the Hart-Scott-Rodino (HSR) Act, and the additional investment of $2.0 billion upon approval by the Federal Reserve, expected to occur in the first quarter of 2025.

This strategic minority investment will not only accelerate KeyCorp’s capital and earnings improvement but also strengthen its capacity for growth, enabling additional investments in targeted scale across the franchise and increasing strategic agility in navigating an uncertain environment from a position of strength.

KeyCorp’s Chairman and CEO, Chris Gorman, emphasized the transaction's ability to create greater capacity for growth and drive aggressive growth in areas such as investment banking, payments, and wealth management, leveraging the strengthened financial position.

In conjunction with the transaction, KeyCorp and Scotiabank plan to explore commercial opportunities to partner together in the future to best serve their respective client bases.

KeyCorp's roots trace back nearly 200 years to Albany, New York, and it is one of the nation’s largest bank-based financial services companies, with assets of approximately $187 billion at June 30, 2024, providing a broad range of deposit, lending, cash management, and investment services to individuals and businesses in 15 states. Following these announcements, the company's shares moved 0.5%, and are now trading at a price of $14.61. If you want to know more, read the company's complete 8-K report here.

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