KeyCorp (NYSE:KEY) — This regional bank with branches concentrated in the Midwest is one of the largest bank-based financial services companies in the United States. It has $94 billion in assets.
With the Federal Reserve likely to begin hiking interest rates sometime this year, a steeper yield curve should benefit KeyCorp and other banks due to rising net interest margins. S&P Capital IQ projects that KeyCorp will increase net interest income by 6% next year, with a 2% increase in noninterest income and 4% growth in net revenues.
Its analysts estimate earnings will increase 7% to $1.11 per share this year and another 9% in 2016 to $1.21. They applaud the bank’s efforts to increase operating leverage, manage risk and build its capital base.
Credit Suisse Equity Research ranks KEY stock “outperform,” noting the bank is moderately sensitive to interest rate increases. Its analysts project earnings of $1.16 for 2015, $1.29 for 2016 and $1.50 for 2017. However, analysts tend to be conservative in estimating targets for industries undergoing a turnaround like the banking sector. Credit Suisse’s price target is a modest $16.
Technically KEY stock has broken through a quadruple-top at $14.60. The breakout is supported by a classic “V” formation, high volume and a strong buy signal from the MACD indicator.
The consolidation in the “V” was preceded by a slow but steady advance, which began in mid-2012 from under $7, and has taken more than 12 months to form.
KEY stock is in a favorable sector and is a quality holding suitable for investors and traders alike. The trading target is $18, which is 17% above current prices. Investors can hold with a long-term objective of $25.
