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KeyCorp Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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KeyCorp (KEY) filed Quarterly Report for the period ended 2010-06-30.

Keycorp has a market cap of $7.44 billion; its shares were traded at around $8.46 with and P/S ratio of 1.2. The dividend yield of Keycorp stocks is 0.4%.KEY is in the portfolios of Third Avenue Management, Martin Whitman of Third Avenue Value Fund, RS Investment Management, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Pioneer Investments, Brian Rogers of T Rowe Price Equity Income Fund, Charles Brandes of Brandes Investment, Bruce Kovner of Caxton Associates, Irving Kahn of Kahn Brothers & Company Inc., Richard Pzena of Pzena Investment Management LLC, Manning & Napier Advisors, Inc, David Dreman of Dreman Value Management, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

During the second quarter of 2010, concerns emerged that the pace of the U.S. economic recovery was slowing. A reluctance by employers to add employees to payrolls, slowing of growth in housing and consumer spending, and the European sovereign debt crisis each cast doubt on the sustainability of economic growth and the recovery. U.S. payrolls increased by 524,000 during the second quarter of 2010 compared to a 261,000 increase in the first quarter of 2010; however, a large part of this improvement was due to temporary government census hiring. Private payrolls did increase by 323,000 compared to a 236,000 increase the prior quarter. Prior to 2010, over 8 million Americans had lost their jobs during the recession that began in December 2007. The average unemployment rate for the second quarter of 2010 remained at the first quarter average of 9.7%. This compares to a 9.3% average rate for all of 2009 and a 10 year average rate of 5.8%.

U.S. household spending slowed during the second quarter of 2010. The average monthly rate of consumer spending was unchanged for the second quarter of 2010 compared to an average monthly increase of 0.4% in the first quarter of 2010 and an average monthly increase of 0.3% for all of 2009. Measures of inflation continued to remain under control as prices for consumer goods and services increased a modest 1.1% in June 2010 from June 2009, compared to an annual increase of 2.3% in March 2010 and a 2.7% increase for all of 2009.

The homebuyer tax credit, offered as part of The Worker, Homeownership and Business Assistance Act of 2009, contributed to an improvement in the housing market to begin the second quarter of 2010. Home buying activity increased early in the quarter as home buyers rushed to beat the April 2010 tax credit expiration, but activity weakened following the expiration. In June 2010, new home sales decreased by 14% from March 2010. As a result, new home prices fell and building activity plummeted towards the end of the quarter. In June 2010, median prices for new homes fell 5% from March 2010 and residential housing starts decreased by 13% over the same period. Existing home sales rose by 0.2% in June 2010 from March 2010 while median prices for existing homes rose 8% over the same period. Existing home prices may have been supported by slowing foreclosures which fell 14% in June 2010 from March 2010.

The uncertainties surrounding a stalling economic recovery and sovereign debt instabilities renewed fears in the financial markets. A reemergence of a flight to quality causing increased demand for government securities sent the benchmark two-year Treasury yield down to the lowest levels seen during this recession, falling 0.41% from 1.02% at March 31, 2010 to 0.61% at June 30, 2010. The ten-year Treasury yield, which began the quarter at 3.83%, declined 0.90% to close the quarter at 2.93%. While there were sharp declines in Treasury yields during the quarter, the concern over the creditworthiness of financial institutions resulted in an increase in short-term interbank lending rates by as much as 0.25%. As credit concerns once again heightened, credit spreads for banks and financial firms debt obligations widened. Acknowledging the fragility of the economy and financial markets, the Federal Reserve held the federal funds target rate near zero during the first half of 2010 and maintained its stance that rates would stay at exceptionally low levels for an extended period. The Federal Reserve also reestablished the Central Bank Liquidity Swap Program to improve liquidity conditions in U.S. dollar funding markets abroad.

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