Line of Business Results

6 Months Ended

Jun. 30, 2011

Line of Business Results [Abstract]

Line of Business Results

16. Line of Business Results

The specific lines of business that comprise each of the major business segments (operating segments) are described below.

Key Community Bank

Regional Banking serves a range of clients.

¨ For individuals, Regional Banking offers branch-based deposit and investment products, personal finance services and loans, including residential mortgages, home equity and various types of installment loans.

¨ For small businesses, Regional Banking provides deposit, investment and credit products, and business advisory services.

¨ For high-net-worth clients, Regional Banking offers financial, estate and retirement planning, and asset management services to assist with banking, trust, portfolio management, insurance, charitable giving and related needs.

Commercial Banking provides midsize businesses with products and services that include commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, derivatives and foreign exchange.

Key Corporate Bank

Real Estate Capital and Corporate Banking Services consists of two business units, Real Estate Capital and Corporate Banking Services.

Real Estate Capital is a national business that provides construction and interim lending, permanent debt placements and servicing, equity and investment banking, and other commercial banking products and services to developers, brokers and owner-investors. This unit deals primarily with nonowner-occupied properties (i.e., generally properties in which at least 50% of the debt service is provided by rental income from non-affiliated third parties).

Corporate Banking Services provides cash management, interest rate derivatives, and foreign exchange products and services to clients served by Key Community Bank and Key Corporate Bank. Through its Public Sector and Financial Institutions businesses, Corporate Banking Services also provides a full array of commercial banking products and services to government and not-for-profit entities and to community banks. A variety of cash management services are provided through the Global Treasury Management unit.

Equipment Finance meets the equipment leasing needs of companies worldwide and provides equipment manufacturers, distributors and resellers with financing options for their clients. Lease financing receivables and related revenues are assigned to other lines of business (primarily Institutional and Capital Markets, and Commercial Banking) if those businesses are principally responsible for maintaining the applicable client relationships.

Institutional and Capital Markets through its KeyBanc Capital Markets unit, provides commercial lending, treasury management, investment banking, derivatives, foreign exchange, equity and debt underwriting and trading, and syndicated finance products and services to large corporations and middle-market companies.

Through its Victory Capital Management unit, Institutional and Capital Markets also manages or offers advice regarding investment portfolios for a national client base, including corporations, labor unions, not-for-profit organizations, governments and individuals. These portfolios may be managed in separate accounts, common funds or the Victory family of mutual funds.

Other Segments

Other Segments consist of Corporate Treasury, our Principal Investing unit and various exit portfolios.

Reconciling Items

Total assets included under “Reconciling Items” primarily represent the unallocated portion of nonearning assets of corporate support functions. Charges related to the funding of these assets are part of net interest income and are allocated to the business segments through noninterest expense. Reconciling Items also includes intercompany eliminations and certain items that are not allocated to the business segments because they do not reflect their normal operations.

The table on the following pages shows selected financial data for our two major business segments for the three- and six-month periods ended June 30, 2011 and 2010. This table is accompanied by supplementary information for each of the lines of business that make up these segments. The information was derived from the internal financial reporting system we use to monitor and manage our financial performance. GAAP guides financial accounting, but there is no authoritative guidance for “management accounting” — the way we use our judgment and experience to make reporting decisions. Consequently, the line of business results we report may not be comparable to line of business results presented by other companies.

The selected financial data are based on internal accounting policies designed to compile results on a consistent basis and in a manner that reflects the underlying economics of the businesses. In accordance with our policies:

¨ Net interest income is determined by assigning a standard cost for funds used or a standard credit for funds provided based on their assumed maturity, prepayment and/or repricing characteristics.

¨ Indirect expenses, such as computer servicing costs and corporate overhead, are allocated based on assumptions regarding the extent to which each line of business actually uses the services.

¨ The consolidated provision for loan and lease losses is allocated among the lines of business primarily based on their actual net charge-offs, adjusted periodically for loan growth and changes in risk profile. The amount of the consolidated provision is based on the methodology that we use to estimate our consolidated allowance for loan and lease losses. This methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” on page 102 in our 2010 Annual Report on Form 10-K.

¨ Income taxes are allocated based on the statutory federal income tax rate of 35% (adjusted for tax-exempt interest income, income from corporate-owned life insurance and tax credits associated with investments in low-income housing projects) and a blended state income tax rate (net of the federal income tax benefit) of 2.2%.

¨ Capital is assigned based on our assessment of economic risk factors (primarily credit, operating and market risk) directly attributable to each line of business.

Developing and applying the methodologies that we use to allocate items among our lines of business is a dynamic process. Accordingly, financial results may be revised periodically to reflect accounting enhancements, changes in the risk profile of a particular business or changes in our organizational structure.

Three months ended June 30,	Key Community Bank								Key Corporate Bank
dollars in millions	2011				2010				2011				2010
SUMMARY OF OPERATIONS
Net interest income (TE)	$	374			$	408			$	174			$	198
Noninterest income		185				194				215				208
Total revenue (TE) (a)		559				602				389				406
Provision (credit) for loan and lease losses		79				121				(76	)			99
Depreciation and amortization expense		10				9				19				24
Other noninterest expense		438				443				187				225
Income (loss) from continuing operations before income taxes (TE)		32				29				259				58
Allocated income taxes and TE adjustments		(2	)			(2	)			95				20
Income (loss) from continuing operations		34				31				164				38
Income (loss) from discontinued operations, net of taxes		—				—				—				—
Net income (loss)		34				31				164				38
Less: Net income (loss) attributable to noncontrolling interests		—				—				1				—
Net income (loss) attributable to Key	$	34			$	31			$	163			$	38
AVERAGE BALANCES (b)
Loans and leases	$	26,242			$	27,217			$	17,168			$	20,949
Total assets (a)		29,688				30,303				21,468				24,789
Deposits		47,719				50,406				10,195				12,391
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	79			$	148			$	29			$	173
Return on average allocated equity (b)		4.26		%		3.49		%		28.11		%		4.58	%
Return on average allocated equity		4.26				3.49				28.11				4.58
Average full-time equivalent employees (c)		8,504				8,241				2,191				2,175

Six months ended June 30,	Key Community Bank							Key Corporate Bank
dollars in millions	2011			2010				2011				2010
SUMMARY OF OPERATIONS
Net interest income (TE)	$	752		$	820			$	358			$	394
Noninterest income		371			376				434				385
Total revenue (TE) (a)		1,123			1,196				792				779
Provision (credit) for loan and lease losses		90			263				(97	)			260
Depreciation and amortization expense		19			18				39				49
Other noninterest expense		873			886				395				472
Income (loss) from continuing operations before income taxes (TE)		141			29				455				(2	)
Allocated income taxes and TE adjustments		26			(14	)			167				(4	)
Income (loss) from continuing operations		115			43				288				2
Income (loss) from discontinued operations, net of taxes		—			—				—				—
Net income (loss)		115			43				288				2
Less: Net income (loss) attributable to noncontrolling interests		—			—				—				—
Net income (loss) attributable to Key	$	115		$	43			$	288			$	2
AVERAGE BALANCES (b)
Loans and leases	$	26,277		$	27,491			$	17,421			$	21,691
Total assets (a)		29,713			30,593				21,607				25,525
Deposits		47,912			50,922				10,736				12,306
OTHER FINANCIAL DATA
Net loan charge-offs (b)	$	155		$	264			$	104			$	424
Return on average allocated equity (b)		7.16	%		2.43		%		23.69		%		.12		%
Return on average allocated equity		7.16			2.43				23.69				.12
Average full-time equivalent employees (c)		8,441			8,212				2,173				2,194

(a)	Substantially all revenue generated by our major business segments is derived from clients that reside in the United States. Substantially all long-lived assets, including premises and equipment, capitalized software and goodwill held by our major business segments, are located in the United States.
(b)	From continuing operations.
(c)	The number of average full-time equivalent employees has not been adjusted for discontinued operations.

Other Segments								Total Segments							Reconciling Items								Key
2011				2010			2011				2010			2011				2010				2011				2010
$	16			$	9		$	564			$	615		$	6			$	8			$	570			$	623
	54				85			454				487			—				5				454				492
	70				94			1,018				1,102			6				13				1,024				1,115
	(10	)			7			(7	)			227			(1	)			1				(8	)			228
	5				12			34				45			35				40				69				85
	20				41			645				709			(34	)			(25	)			611				684
	55				34			346				121			6				(3	)			352				118
	10				2			103				20			(3	)			(3	)			100				17
	45				32			243				101			9				—				252				101
	—				—			—				—			(9	)			(27	)			(9	)			(27	)
	45				32			243				101			—				(27	)			243				74
	2				4			3				4			—				—				3				4
$	43			$	28		$	240			$	97			—			$	(27	)		$	240			$	70
$	4,980			$	6,738		$	48,390			$	54,904		$	64			$	49			$	48,454			$	54,953
	28,959				30,597			80,115				85,689			1,271				2,187				81,386				87,876
	777				1,672			58,691				64,469			(150	)			(60	)			58,541				64,409
$	26			$	115		$	134			$	436			—			$	(1	)		$	134			$	435
	22.46		%		10.22	%		15.28		%		4.87	%		1.11		%		—				10.45		%		3.65		%
	22.46				10.22			15.28				4.87			—				(4.07	)	%		10.07				2.64
	23				191			10,718				10,607			4,631				5,058				15,349				15,665

Other Segments									Total Segments								Reconciling Items								Key
2011				2010				2011				2010				2011				2010				2011				2010
$	50			$	27			$	1,160			$	1,241			$	14			$	14			$	1,174			$	1,255
	115				171				920				932				(9	)			10				911				942
	165				198				2,080				2,173				5				24				2,085				2,197
	(35	)			128				(42	)			651				(6	)			(10	)			(48	)			641
	10				23				68				90				75				83				143				173
	43				82				1,311				1,440				(73	)			(59	)			1,238				1,381
	147				(35	)			743				(8	)			9				10				752				2
	34				(34	)			227				(52	)			(9	)			(6	)			218				(58	)
	113				(1	)			516				44				18				16				534				60
	—				—				—				—				(20	)			(25	)			(20	)			(25	)
	113				(1	)			516				44				(2	)			(9	)			514				35
	11				20				11				20				—				—				11				20
$	102			$	(21	)		$	505			$	24			$	(2	)		$	(9	)		$	503			$	15
$	5,133			$	7,047			$	48,831			$	56,229			$	50			$	53			$	48,881			$	56,282
	30,151				29,978				81,471				86,096				1,361				2,187				82,832				88,283
	783				1,763				59,431				64,991				(145	)			(109	)			59,286				64,882
$	69			$	269			$	328			$	957			$	(1	)			—			$	327			$	957
	26.30		%		(3.74	)	%		15.73		%		.60		%		.93		%		1.22		%		10.16		%		.75		%
	26.30				(3.74	)			15.73				.60				(.10	)			(.69	)			9.77				.28
	43				195				10,657				10,601				4,669				5,117				15,326				15,718

Supplementary information (Key Community Bank lines of business)

Three months ended June 30,		Regional Banking						Commercial Banking
dollars in millions	2011			2010			2011			2010
Total revenue (TE)	$	450		$	489		$	109		$	113
Provision for loan and lease losses		63			57			16			64
Noninterest expense		400			409			48			43
Net income (loss) attributable to Key		6			27			28			4
Average loans and leases		17,495			18,404			8,747			8,813
Average loans held for sale		42			69			21			1
Average deposits		41,710			45,219			6,009			5,187
Net loan charge-offs		65			82			14			66
Net loan charge-offs to average loans		1.49	%		1.79	%		.64	%		3.00	%
Nonperforming assets at period end	$	302		$	339		$	153		$	222
Return on average allocated equity		1.08	%		4.65	%		11.59	%		1.30	%
Average full-time equivalent employees		8,138			7,886			366			355

Six months ended June 30,		Regional Banking						Commercial Banking
dollars in millions	2011			2010			2011			2010
Total revenue (TE)	$	897		$	974		$	226		$	222
Provision for loan and lease losses		80			172			10			91
Noninterest expense		799			816			93			88
Net income (loss) attributable to Key		38			16			77			27
Average loans and leases		17,546			18,577			8,731			8,914
Average loans held for sale		56			75			26			1
Average deposits		41,948			45,698			5,964			5,224
Net loan charge-offs		127			179			28			85
Net loan charge-offs to average loans		1.46	%		1.94	%		.65	%		1.92	%
Nonperforming assets at period end	$	302		$	339		$	153		$	222
Return on average allocated equity		3.41	%		1.39	%		15.59	%		4.38	%
Average full-time equivalent employees		8,074			7,859			367			353

Supplementary information (Key Corporate Bank lines of business)

		Real Estate Capital and												Institutional and
Three months ended June 30,		Corporate Banking Services						Equipment Finance						Capital Markets
dollars in millions	2011			2010			2011			2010			2011			2010
Total revenue (TE)	$	154		$	173		$	63		$	61		$	172		$	172
Provision for loan and lease losses		(49	)		77			(30	)		10			3			12
Noninterest expense		50			97			45			49			111			103
Net income (loss) attributable to Key		95			—			30			1			38			37
Average loans and leases		7,713			11,466			4,545			4,478			4,910			5,005
Average loans held for sale		229			194			—			16			73			171
Average deposits		7,371			9,728			12			5			2,812			2,658
Net loan charge-offs		26			142			2			18			1			13
Net loan charge-offs to average loans		1.35	%		4.97	%		.18	%		1.61	%		.08	%		1.04	%
Nonperforming assets at period end	$	245		$	867		$	39		$	106		$	55		$	116
Return on average allocated equity		30.66	%		—			37.02	%		1.15	%		20.11	%		15.46	%
Average full-time equivalent employees		902			901			511			549			778			725

		Real Estate Capital and												Institutional and
Six months ended June 30,		Corporate Banking Services						Equipment Finance						Capital Markets
dollars in millions	2011			2010			2011			2010			2011			2010
Total revenue (TE)	$	319		$	314		$	127		$	122		$	346		$	343
Provision for loan and lease losses		(39	)		222			(56	)		14			(2	)		24
Noninterest expense		117			217			97			94			220			210
Net income (loss) attributable to Key		152			(78	)		54			9			82			71
Average loans and leases		8,146			11,901			4,583			4,525			4,692			5,265
Average loans held for sale		185			154			2			9			102			148
Average deposits		7,987			9,683			9			5			2,740			2,618
Net loan charge-offs		91			349			12			36			1			39
Net loan charge-offs to average loans		2.25	%		5.91	%		.53	%		1.60	%		.04	%		1.49	%
Nonperforming assets at period end	$	245		$	867		$	39		$	106		$	55		$	116
Return on average allocated equity		22.42	%		(7.77	)%		34.24	%		5.08	%		21.56	%		14.70	%
Average full-time equivalent employees		892			911			516			556			765			727