KeyBank increases the number of loans with the help of the digital lending platform

KeyBank continues to reap dividends from its 2019 acquisition of online lending company Laurel Road, citing the transaction, along with residential mortgages, as a key driver of its recent consumer loan growth.

Photographer: Ty Wright/Bloomberg Mercury

“With respect to consumer lending, this relatively stable outlook for total lending would assume that total consumer lending grows by approximately $2 billion from 2020 to 2021. And that growth comes from both residential mortgages and Laurel Road,” said Chief Financial Officer Don Kimble. during Thursday’s fourth-quarter earnings call.

The $186.3 billion bank in the fourth quarter earned $590 million in originations and last year issued more than $2.3 million in Laurel Road loans, according to the earnings call.

The online lending business provides solutions to targeted customer segments, such as lawyers and graduate students. This year, Cleveland-based KeyBank launched Laurel Road for Doctors, a digital banking platform tailored for doctors and dentists.

“Keep in mind that we are only in the early stages of rolling out this platform across our branch network, where we are seeing strong growth,” Kimble said. “And of that $2.5 billion in the fourth quarter and the $8.3 billion for the full year, about half was for purchase rather than refinancing. And so we think that there will still be opportunities to continue to show growth there.

The bank reported net revenue of $1.9 billion in the fourth quarter, a 5.5% year-over-year increase. It reported fourth-quarter revenue of $601 million, up from $549 million year-over-year but down slightly from $616 million sequentially.

While many banks are increasing their technology spending, KeyBank reported that its “IT processing” spending was $73 million, down 11% year-on-year and 6% sequentially.

Total noninterest expense for the quarter was $1.1 billion, compared to $980 million in the fourth quarter of 2020 and $1 billion in the prior quarter, according to the earnings report. The high expenses were due to “higher production-related incentives, severance pay, and funding from our philanthropic foundation,” chairman and CEO Chris Gorman said on the call.

In addition to developing Laurel Road, the bank noted new investments in its enhanced digital and analytical capabilities, but did not note the price tags of those investments. The bank’s “robust analytics” helped KeyBank close branches, which it accelerated in 2021, Gorman said. The bank plans to consolidate 70 additional branches, or 7% of its network, during the first half.

“Our decisions are driven by customer behavior as more and more business continues to shift to our digital channels,” Gorman said. “It is also informed by our strong analytics. We expect limited customer attrition as a high percentage of affected branches are located within 2 miles of another key facility.

Key Corp shares. [NYSE: KEY] were trading at $24.79 at market close, down 1.35% from market open.

[Editor’s Note: Tech spend may be incorporated into other non-interest expenses listed at KeyBank, such as equipment, professional services and the catchall “other expenses,” which were $171 million.]

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