KeyBank 2014 Annual Report Download - page 98

Liquidity for KeyCorp
The primary source of liquidity for KeyCorp is from subsidiary dividends, primarily from KeyBank. KeyCorp
has sufficient liquidity when it can service its debt; support customary corporate operations and activities
(including acquisitions); support occasional guarantees of subsidiaries’ obligations in transactions with third
parties at a reasonable cost, in a timely manner, and without adverse consequences; and pay dividends to
shareholders.
We use a parent cash coverage months metric as the primary measure to assess parent company liquidity. The
parent cash coverage months metric measures the months into the future where projected obligations can be met
with the current amount of liquidity to meet all projected obligations. We generally issue term debt to supplement
dividends from KeyBank to manage our liquidity position at or above our targeted levels. The parent company
generally maintains cash and short-term investments in an amount sufficient to meet projected debt maturities
over at least the next 24 months. At December 31, 2014, KeyCorp held $2.2 billion in short-term investments,
which we projected to be sufficient to meet our projected obligations, including the repayment of our maturing
debt obligations for the periods prescribed by our risk tolerance.
Typically, KeyCorp meets its liquidity requirements through regular dividends from KeyBank, supplemented
with term debt. Federal banking law limits the amount of capital distributions that a bank can make to its holding
company without prior regulatory approval. A national bank’s dividend-paying capacity is affected by several
factors, including net profits (as defined by statute) for the two previous calendar years and for the current year,
up to the date of dividend declaration. During 2014, KeyBank paid KeyCorp $300 million in dividends; nonbank
subsidiaries did not pay any cash dividends or noncash dividends to KeyCorp. KeyCorp did not make any capital
infusions to KeyBank during 2014. As of December 31, 2014, KeyBank had $935 million of capacity to pay
dividends to KeyCorp.
Our liquidity position and recent activity
Over the past 12 months our liquid asset portfolio, which includes overnight and short-term investments, as well
as unencumbered, high quality liquid securities held as protection against a range of potential liquidity stress
scenarios, has increased as a result of net customer loan and deposit flows and an increase in unpledged
securities. The liquid asset portfolio continues to exceed the amount that we estimate would be necessary to
manage through an adverse liquidity event by providing sufficient time to develop and execute a longer-term
solution.
From time to time, KeyCorp or KeyBank may seek to retire, repurchase or exchange outstanding debt, capital
securities, preferred shares or common shares through cash purchase, privately negotiated transactions or other
means. Additional information on repurchases of common shares by KeyCorp is included in Part II, Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities of this report. Such transactions depend on prevailing market conditions, our liquidity and capital
requirements, contractual restrictions, regulatory requirements and other factors. The amounts involved may be
material, individually or collectively.
We generate cash flows from operations and from investing and financing activities. We have approximately
$195 million of cash and cash equivalents and short-term investments in international tax jurisdictions as of
December 31, 2014. As we consider alternative long-term strategic and liquidity plans, opportunities to repatriate
these amounts would result in approximately $7 million in taxes to be paid. If we were to cease operations in all
international tax jurisdictions, the total amount of taxes to be paid would increase to approximately $11 million.
Accordingly, we have included the total amount as a deferred tax liability at December 31, 2014.
The Consolidated Statements of Cash Flows summarize our sources and uses of cash by type of activity for the
years ended December 31, 2014, and December 31, 2013.
85