Balanced Risk-Reward Keeps KeyCorp Rated Hold Despite Improving Fundamentals and Capital Returns

KeyCorp, the Financial sector company, was revisited by a Wall Street analyst yesterday. Analyst Keith Horowitz from Citi maintained a Hold rating on the stock and has a $22.00 price target.

Keith Horowitz has given his Hold rating due to a combination of factors that balance improving fundamentals with a largely reflected valuation. He highlights that KeyCorp’s net interest income trajectory remains solid, driven by ongoing repricing of fixed-rate assets and diminishing swap-related pressure on margins, which should support modest net interest margin expansion into 2026. His forecasts call for healthy revenue and fee growth, alongside tighter expense control and a benign credit environment, with net charge-offs expected to remain within a manageable range through 2026. At the same time, he notes that these positives are broadly appreciated by the market, limiting upside, even as management’s clearer stance on capital deployment and larger planned share repurchases support the profitability outlook and justify a modestly higher price target.

Horowitz also points out that his revenue expectations are broadly aligned with consensus, with only modest upside stemming from stronger capital markets fees and better cost discipline. The bank’s loan and deposit growth trends, as well as its deposit pricing strategy, are viewed as constructive but not sufficiently differentiated to drive a more aggressive recommendation. He acknowledges that improved capital return plans, including a projected $1 billion in share buybacks in 2026, help support a higher normalized return on tangible common equity assumption of around 15%. However, with the expected share price return of roughly mid‑single digits from current levels, he concludes that the risk‑reward profile is balanced, leading him to reiterate a Hold rather than move to a more bullish stance.

In another report released on December 22, Truist Financial also maintained a Hold rating on the stock with a $22.00 price target.

KEY’s price has also changed moderately for the past six months – from $17.420 to $20.730, which is a 19.00% increase.