S&P Global Ratings on Thursday revised its outlook for KeyCorp to positive from stable and left the bank's long-term issuer credit rating unchanged at 'BBB'. The ratings body made the same outlook shift for KeyBank N.A., affirming that unit's 'BBB+' rating.
The agency noted that KeyCorp has achieved material business and financial progress in recent years. S&P highlighted improved profitability metrics, the adoption of more conservative risk management policies and a material increase in capital ratios as the primary factors supporting the more constructive view.
On margins, S&P pointed to a rise in KeyCorp's net interest margin to 2.87% in the first quarter of 2026, compared with 2.58% in the first quarter of 2025. The ratings firm attributed the lift to a large securities repositioning, repricing of fixed-rate assets and lower deposit costs.
Capital strength was a central part of S&P's assessment. KeyCorp's common equity Tier 1 ratio stood at 11.4% as of March 31, 2026, an increase from 9.1% at year-end 2022. S&P said that earnings retention and a $2.8 billion investment by Bank of Nova Scotia in 2024, which purchased a 14.9% stake in the company, supported that rise. On an adjusted basis, the CET1 ratio was 10.0% as of March 31, 2026, which S&P said compared favorably with many large regional bank peers.
S&P also recorded modest improvements in credit metrics. Nonperforming assets and net charge-offs declined over the past year. Net charge-offs to average loans were 38 basis points in the first quarter of 2026, versus 39 basis points in the fourth quarter and 43 basis points a year earlier. The share of criticized loans decreased to 4.9% of total loans as of March 31, 2026, down from 6.0% a year earlier.
The positive outlook signals that S&P could raise KeyCorp's ratings within the next two years if the bank sustains further improvements in overall financial performance and if its results align with those of higher-rated peers. The agency specifically cited the need for better earnings stability amid potential interest rate volatility. At the same time, S&P expects KeyCorp's capital ratios to decline modestly toward peer medians as the bank deploys capital.
Implications for the bank and its stakeholders include greater recognition of strengthened capital and risk controls, while S&P's conditional language underscores that continued performance is required for a higher rating. The outlook change may be seen as an endorsement of recent management actions but does not itself change the current ratings.