KeyCorp's (NYSE:KEY) Earnings Power Remains a Major Concern

KeyCorp (NYSE:KEY) had a solid last quarter, but according to FBR, there are concerns over the earnings power of the bank going forward.

FBR says, "Although this was another decent quarter for KeyCorp, the significant drop in NPAs is not surprising given the company’s propensity to build reserves earlier in the credit cycle than most banks. However, our primary concern with KeyCorp is earnings power given continued de-leveraging and weaker-than-expected NIM. KeyCorp has been shedding problem assets quickly and, given the limited loan demand, the balance sheet is shrinking fairly rapidly.

"We are increasing our FY11 operating EPS to $0.55 from $0.39 given our expectation for KeyCorp to raise capital and pay back TARP in the next few months. We are also introducing our FY12 operating EPS estimate of $0.80."

FBR Capital maintains a "Market Perform" rating on KeyCorp (KEY), which was trading at $8.88, down $0.03, or 0.34 percent, as of 12:50 PM EST. FBR has a price target of $9 on them.