KeyCorp (NYSE:KEY) Core Metrics Will Struggle to Improve in Short Term

Most of the positive performance of KeyCorp (NYSE:KEY), as with many banks, is centered around reserve releases, and for KeyCorp, Barclays sees them struggling to improve their core metrics in the short term.

Barclays says, "Bottom-line, KEY's recent strong earnings growth and return to profitability (3rd straight quarter) has been primarily reserve release driven, as credit quality continues to improve. While its reported ROA of 1.53% and ROE of 13.71% appear sound, excluding one-time items and using a 0.60% provision/loan ratio puts its ROA closer to 0.85% and its ROE at 7%. With its exit portfolio/discontinued ops equaling 15% of earning assets (24% of loans) and securities at 29% of earning assets (up from 11% just 6 quarters ago), coupled with an expectation of net interest margin pressure, it could have difficultly improving these core metrics near-term. Still, we view its capital position as sound and its TARP commentary as constructive...We are maintaining our above consensus 2011 EPS forecast of $0.75. Our inaugural 2012 EPS estimate is $1.00."

Barclays reiterates an "Underweight" rating on KeyCorp (KEY), which closed Wednesday at $8.89, dropping $0.02, or 0.22 percent. Barclays has a price target of $9 on KeyCorp.