KeyBank 2008 Annual Report Download - page 18

16
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS KEYCORP AND SUBSIDIARIES
INTRODUCTION
This section generally reviews the financial condition and results of
operations of KeyCorp and its subsidiaries for each of the past three
years. Some tables may include additional periods to comply with
disclosure requirements or to illustrate trends in greater depth. When you
read this discussion, you should also refer to the consolidated financial
statements and related notes that appear on pages 73 through 124.
Terminology
This report contains some shortened names and industry-specific terms.
We want to explain some of these terms at the outset so you can better
understand the discussion that follows.
•KeyCorp refers solely to the parent holding company.
•KeyBank refers to KeyCorp’s subsidiary bank, KeyBank National
Association.
•Key refers to the consolidated entity consisting of KeyCorp and its
subsidiaries.
• In November 2006, Key sold the subprime mortgage loan portfolio
held by the Champion Mortgage finance business and announced a
separate agreement to sell Champion’s origination platform. As a result
of these actions, Key has accounted for this business as a discontinued
operation.We use the phrase continuing operations in this document
to mean all of Key’s business other than Champion. Key completed
the sale of Champion’s origination platform in February 2007.
• Key engages in capital markets activities primarily through business
conducted by the National Banking group. These activities encompass
avariety of products and services. Among other things, Key trades
securities as a dealer, enters into derivative contracts (both to
accommodate clients’ financing needs and for proprietary trading
purposes), and conducts transactions in foreign currencies (both to
accommodate clients’ needs and to benefit from fluctuations in
exchange rates).
• For regulatory purposes, capital is divided into two classes. Federal
regulations prescribe that at least one-half of a bank or bank holding
company’s total risk-based capital must qualify as Tier 1.Both total
and Tier 1 capital serve as bases for several measures of capital
adequacy, which is an important indicator of financial stability and
condition. You will find a more detailed explanation of total and Tier
1capital and how they arecalculated in the section entitled “Capital,”
which begins on page 48.
Description of business
KeyCorp was organized in Ohio in 1958 and is headquartered in
Cleveland, Ohio. As of December 31, 2008, KeyCorp was one of the
nation’s largest bank-based financial services companies, with
consolidated total assets of $104.531 billion. Through KeyBank and
certain other subsidiaries, KeyCorp provides a wide range of retail
and commercial banking, commercial leasing, investment management,
consumer finance, and investment banking products and services to
individual, corporate and institutional clients. As of December 31,
2008, these services were provided across the country through
subsidiaries operating 986 full service retail banking branches in
fourteen states, additional offices, a telephone banking call center
services group and a network of 1,478 automated teller machines in
sixteen states. Key had 18,095 average full-time-equivalent employees
during 2008. Additional information pertaining to KeyCorp’s two
major business groups, Community Banking and National Banking,
appears in the “Line of Business Results” section, which begins on
page 28, and in Note 4 (“Line of Business Results”), which begins on
page 88.
In addition to the customary banking services of accepting deposits and
making loans, KeyCorp’s bank and trust company subsidiaries offer
personal and corporate trust services, personal financial services, access
to mutual funds, cash management services, investment banking and
capital markets products, and international banking services. Through
its subsidiary bank, trust company and registered investment adviser
subsidiaries, KeyCorp provides investment management services to
clients that include large corporate and public retirement plans,
foundations and endowments, high-net-worth individuals and multi-
employer trust funds established to provide pension, vacation or other
benefits to employees.
KeyCorp provides other financial services — both within and outside of
its primary banking markets — through nonbank subsidiaries. These
services include accident, health and credit-life insurance on loans
made by KeyBank, principal investing, community development
financing, securities underwriting and brokerage, and merchant services.
KeyCorp also is an equity participant in a joint venture that provides
merchant services to businesses.
Forward-looking statements
This report and other reports filed by Key under the Securities Exchange
Act of 1934, as amended, or registration statements filed by Key under
the Securities Act of 1933, as amended, contain statements that are
considered “forward looking statements” within the meaning of the
Private Securities Litigation ReformAct of 1995, including statements
about Key’slong-term goals, financial condition, results of operations,
earnings, levels of net loan charge-offs and nonperforming assets,
interest rate exposureand profitability.These statements usually can be
identified by the use of forward-looking language such as “our goal,”
“our objective,” “our plan,” “will likely result,” “expects,” “plans,”
“anticipates,” “intends,” “projects,” “believes,” “estimates” or other
similar words, expressions or conditional verbs such as “will,” “would,”
“could” and “should.”
Forward-looking statements express management’s current expectations,
forecasts of future events or long-term goals and, by their nature, are
subject to assumptions, risks and uncertainties. Although management
believes that the expectations, forecasts and goals reflected in these
forward-looking statements are reasonable, actual results could differ
materially for a variety of reasons, including the following factors:
• Unprecedented volatility in the stock markets, public debt markets and
other capital markets, including continued disruption in the fixed
income markets, has affected and could continue to affect Key’s
ability to raise capital or other funding for liquidity and business
purposes, as well as revenue from client-based underwriting,
investment banking and other capital markets-driven businesses.