Company: KEY-PI
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000091576-25-000058
Chunk: 139

Company: KEYCORP /NEW/
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 1
Chunk 139
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 2025, there is continued economic resiliency, but also unprecedented geopolitical uncertainty as a result of the recent changes to trade and other policies, which could add stress to the existing economic pressures.We utilized the Moody’s February 2025 Consensus forecast as the baseline forecast to estimate our expected credit losses as of March 31, 2025. This baseline scenario reflects slowing growth over the next two years. U.S. GDP is expected to grow at an annual rate of approximately 2% for 2025 and 2026. The expected National Unemployment Rate is forecasted to remain close to 4% over the next two years. The U.S. Consumer Price Index is forecasted at 2.6% for 2025. Current market conditions may not be fully captured in the baseline forecast as of the quarter-end. The geopolitical environment remains both uncertain and complex as a result of policy changes that could substantially impact global economies, including product and country specific tariffs, funding freezes and cuts to different government programs, federal layoffs, increased deportations and changes to immigration policy. These actions pose potential downside-risks to the economic outlook, although to what extent remains highly uncertain. These economic uncertainties were addressed through a qualitative reserve increase, which leveraged downside economic assumptions.As a result of the current economic uncertainty, our future loss estimates may vary considerably from our March 31, 2025 assumptions.Commercial Loan Portfolio The ALLL from continuing operations for the commercial segment increased by $20 million, or 1.9%, from December 31, 2024. The change in the reserve levels is reflective of a reserve build due to economic uncertainty as a result of the ongoing U.S. policy changes, which impact all portfolio segments. These reserve increases are partly offset by ongoing favorable portfolio credit migration, largely concentrated in the commercial real estate portfolio. Consumer Loan Portfolio The ALLL from continuing operations for the consumer segment was unchanged from December 31, 2024. The overall stable levels in the consumer allowance are driven by reserve increases due to economic uncertainty, which are offset by reserve decreases due to continued loan runoff.

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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 meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the refreshed FICO score assigned for the consumer loan portfolios. The internal risk grades assigned to loans follow our definitions of Pass and Crit