Company: KEY-PI
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0000091576-25-000110
Chunk: 48

Company: KEYCORP /NEW/
Filing Date: 2025-08-05
Form: 10-Q
Item: Item 2
Chunk 48
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 composition of our on- and off-balance sheet positions, accounting for recent and anticipated trends in customer activity. The analysis also incorporates assumptions for the current and projected interest rate environments and balance sheet growth projections based on a most likely macroeconomic outlook. The modeling incorporates investment portfolio and swap portfolio balances consistent with management's desired interest rate risk positioning. The simulation model estimates the amount of net interest income at risk by simulating the change in net interest income that would occur if rates were to gradually diverge from market expectations over the next 12 months (subject to a floor on market interest rates at zero).

Figure 22 presents the results of the simulation analysis at June 30, 2025, and June 30, 2024. At June 30, 2025, our simulated exposure to changes in interest rates was neutral. The exposure to declining rates has changed from (1.79)% as of June 30, 2024 to (0.48)% as of June 30, 2025, while the exposure to rising rates has changed from (0.15)% as of June 30, 2024 to 0.78% as of June 30, 2025. The modest shift toward asset sensitivity was caused principally by the adoption  of a new pricing model for indeterminate maturity interest-bearing deposits in the first quarter. The new deposit beta model incorporates more historical data and features that we believe more accurately reflect the behavior of our clients in rising and declining interest rate cycles. In addition, since the beginning of the second quarter, Key now measures simulated change in net interest income relative to implied forwards in a baseline scenario. Previously, metrics were calculated against a flat-rate assumption in the baseline scenario. 

We are actively managing the balance sheet to maintain desired IRR positioning in the current environment. Tolerance levels for risk management require the development of remediation plans to maintain residual risk within tolerance if simulation modeling demonstrates that a gradual, parallel 200 basis point increase or 200 basis point decrease in interest rates over the next 12 months would adversely affect net interest income over the same period by more than 5.0%, revised from 5.5% to reflect tighter risk management. Current modeled exposure is within Board-approved tolerances.

Figure 22. Simulated Change in Net Interest Income 

June 30, 2025June 30, 2024Basis point change assumption-200 +200-200 +200Tolerance level(5.00)%(5.00