Company: KEY-PI
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0000091576-25-000110
Chunk: 159

Company: KEYCORP /NEW/
Filing Date: 2025-08-05
Form: 10-Q
Item: Item 1
Chunk 159
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 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 June 30, 2025, there is continued economic resiliency, but also elevated uncertainty as a result of the recent changes to trade and other policies, which add stress to the existing economic pressures.We utilized the Moody’s May 2025 Consensus forecast as the baseline forecast to estimate our expected credit losses as of June 30, 2025. This baseline scenario reflects slowing growth over the next two years. U.S. GDP is expected to grow at an annual rate of 1.2% for 2025 and 1.5% for 2026. The expected National Unemployment Rate is forecasted to peak at 4.6% in mid-2026. The U.S. Consumer Price Index is forecasted at 3.2% for 2025. The geopolitical environment remains both uncertain and complex. The U.S. administration’s policy changes pose potential downside-risks to the economic outlook over the next two years, although to what extent remains highly uncertain. These economic considerations continue to be addressed through a qualitative reserve adjustment, which leverages downside economic assumptions.As a result of the current economic uncertainty, our future loss estimates may vary considerably from our June 30, 2025 assumptions.Commercial Loan Portfolio The ALLL from continuing operations for the commercial segment increased by $29 million, or 2.7%, from March 31, 2025. The change in the reserve levels is reflective of a reserve build due to the worsening economic outlook, paired with loan growth and changes in the portfolio mix.  Consumer Loan Portfolio The ALLL from continuing operations for the consumer segment decreased by $12 million, or 3.2%,from March 31, 2025. The overall decrease in the consumer allowance was driven by the impact of loan runoff across all portfolio segments, which was partly offset by reserve increases due to the worsening economic outlook. 

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Credit Risk ProfileThe prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to