Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 71

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 71
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. household incomeDiscontinued operationsUnemployment rate(a)Variables include all transformations and interactions with other risk drivers. Additionally, variables may have varying impacts at different points in the economic cycle.In addition to macroeconomic drivers, portfolio attributes such as remaining term, outstanding balance, risk ratings, utilization, FICO, LTV, and delinquency also drive ALLL changes. Our ALLL models were designed to capture the correlation between economic and portfolio changes. As such, evaluating shifts in individual portfolio attributes and macroeconomic variables in isolation may not be indicative of past or future performance. Economic OutlookAs of December 31, 2024, economic uncertainty remains elevated due to geopolitical tensions and the interest rate environment, as well as the U.S. presidential administration change. The unemployment rate remained at a relatively low level, although job growth remains stable. Inflation has continued to come down and commercial real estate pressures have eased. We utilized the Moody’s November 2024 Consensus forecast as the baseline forecast to estimate our expected credit losses as of December 31, 2024. We determined such forecast to be a reasonable view of the outlook for the economy given all available information at year end. 

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The baseline scenario reflects continued economic resiliency, but slowing growth into 2025. U.S. GDP is expected to grow at an annual rate of approximately 2.0% for both 2025 and 2026, compared to 2.7% in 2024. The expected National Unemployment Rate was 4.2% in the fourth quarter of 2024, with the forecast remaining at 4.4% through late-2025. The U.S. Consumer Price Index is forecasted at 2.2% for 2025. The outlook for the National Home Price Index reflects 2% growth in 2025, while the Commercial Real Estate Price Index is forecasted to remain stable.We did not identify material limitations in the third-party economic forecast that required management qualitative adjustments to the ALLL. As a result of the current economic uncertainty, our future loss estimates may vary considerably from our December 31, 2024 assumptions.Commercial Loan Portfolio The commercial ALLL decreased by $23 million, or 2.2%, from December 31, 2023, through December 31, 2024. The overall decrease is driven by changes in portfolio activity and the economic outlook. The change in the reserve levels is reflective of the strategic and ongoing balance sheet optimization efforts, in addition to improving