Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 169

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1A
Chunk 169
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 City, Chicago, Los Angeles, and San Francisco; we also have no exposure to rent controlled properties in New York City). 

The most severely impacted commercial real estate segments have been in office. Key’s non-owner occupied office exposures are 5% of our total commercial real estate exposure. Substantial deterioration in property market fundamentals could negatively impact our portfolio, with a large portion of our clients active in real estate but in the comparatively better performing multifamily space over the cycle. A correction in the real estate markets could impact the ability of borrowers to make debt service payments on loans or to refinance the loans at maturity. 

A relatively small portion of our commercial real estate loans are construction loans. New construction and value-add or rehabilitation construction projects may not be fully leased at loan origination. These properties typically require additional leasing through the life of the loan to provide adequate cash flow to support debt service payments. If property market fundamentals deteriorate sharply, performance under existing leases could deteriorate and the execution of new leases could slow, compromising the borrower’s ability to cover debt service payments.

We are subject to the risk of defaults by our loan clients and counterparties.

Many of our routine transactions expose us to credit risk, including the risk of default of our counterparties, which include other financial institutions, or clients. Our credit risk may be exacerbated when the collateral held cannot be realized or is liquidated at prices insufficient to recover the full amount of the loan or derivative exposure due to us. In deciding whether to extend credit or enter into other transactions, we rely on information furnished by or on behalf of counterparties and clients, including financial statements, credit reports and other information. We also rely on representations of those counterparties, clients, or other third parties as to the accuracy and completeness of that information. The inaccuracy of that information or those representations affects our ability to accurately evaluate the default risk of a counterparty or client. In addition, given the Dodd-Frank legislative mandate to centrally clear eligible derivative contracts, we rely on central clearing counterparties to remain open and operationally viable at all times. A financial institution or other counterparty failure or a cybersecurity breach that causes the failure of or disruption to a counterparty or client, may materially and adversely affect our business, financial condition, or results of operations. Further, market volatility or difficulty accessing liquidity in the capital markets can result in a weaker counterparty profile and eventual failure of the counterparty to meet its contractual obligations.

Declining asset prices could adversely affect us.

During periods of economic stress, the volatility