Today’s Stock of the Week is a well-diversified bank that should greatly benefit in a rising interest rate environment.
Holding the Key
KeyCorp (KEY) has been in the banking business since 1849 and is well-positioned to benefit from a rising interest rate environment, which will enable it to raise rates on loans faster than it will need to increase rates on deposits.
Based in Cleveland, it has significantly expanded in the Northeast and northern Midwest through its recent acquisition of First Niagara. This largely industrial region is poised to benefit from the economic improvement expected with an increase in US manufacturing. Companies’ retooling and other needs should lead to higher bank lending.
KeyCorp is also well-diversified, offering a broad array of banking products plus some securities and trading services that produce fee income. Costs associated with the First Niagara merger brought earnings down in 2016, but the acquisition should prove favorable over the longer term. Revenue of $2.6 billion in 2015 should be reported to have grown to $3.3 billion in 2016 and should reach $4 billion this year. The dividend of $0.34/share/yr. recently yielded 1.83% and appears secure.
Fiscal year.: Dec. Earnings per share: 2017 est./$1.10… 2016 est./$0.80… 2015/$1.06.
This Week’s Expert
Michael Cuggino is president of Permanent Portfolio Family of Funds, San Francisco, and portfolio manager of the $2.7 billion Permanent Portfolio Fund (PRPFX) and the $28 million Permanent Portfolio Aggressive Growth Fund (PAGRX). PermanentPortfolio.com