KeyBank CEO sees 'soft landing' for economy

Jul. 20—KeyBank chairman and CEO Chris Gorman is optimistic that the Federal Reserve is settling on the right formula to tame inflation.

"I think there's a decent chance the Fed is going to pull off a soft landing where we get inflation under control without severely damaging the job market," he said Thursday as the Cleveland-based bank released its second-quarter earnings that fell short of analyst forecasts.

Gorman predicts that the Federal Reserve will hike interest rates by a quarter point at next week's meeting, and then pause additional increases, to take stock of the impact.

"I think all these interest rates hikes haven't really had a chance to work their way through the economy, and as they do, they will slow down the economy," Gorman said.

The Federal Reserve has been raising interest rates in a bid to combat inflation, creating concerns about generating a spike in unemployment. Banks are assessing the effect the rate hikes are having — and will have — on customers' appetites for borrowing.

Some other takeaways from Key's second-quarter report:

Key reported deposits of $145.1 billion as of the end of the second quarter, up $1 billion from the previous quarter.

Gorman said Key's deposits picture has been stable, after turmoil at some other banks earlier in the year. Key says 80% of its commercial deposits are from core operating accounts. Those types of accounts tend to keep a customer anchored to a particular bank.

Key's provision for credit losses in the second quarter was $167 million, up from $139 million in the previous quarter. Gorman said Key was being cautious, based on factors such as preparing for a slowing economy and trends in loan growth.

"I think there's a lot of mixed signals out there, and I think it's just prudent," he said. "Having said that, I'm not worried about our loan portfolio, at all."

Key reported second-quarter net income of $250 million, down from $504 million a year ago. The bank reported earnings per share of 27 cents, below analysts' average estimate of 31 cents per share.

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Finance

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Matt Glynn

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Keybank

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Interest Rates

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The Economy

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