KeyCorp Confident in $1 Billion Fee Target Despite M&A Slowdown

Key Points

• KeyCorp remains confident in reaching its $1 billion investment banking and direct placement fee target despite middle-market M&A announcements falling 11% in 2026. Its M&A fees were up 15% year to date, and executives say the target does not depend on a major deal-market rebound.
• Acquisitions are expanding Key’s advisory capabilities: Atlantic-Pacific Capital adds private-capital expertise, while Clearwater is on track to contribute an estimated $20 million to $25 million in 2026 fees.
• Key is exploring AI applications across its Institutional Bank, onboarding and underwriting, but has not yet seen a major productivity lift. The bank also said direct exposure to data centers is less than 1% of its loans.

KeyCorp NYSE: KEY executives said the bank remains confident it can reach its target of $1 billion in investment banking and direct placement fees, even as middle-market merger activity remains subdued.

Randy Paine, president of Key Institutional Bank, said announced middle-market mergers and acquisitions were down 11% in 2026 after declining in the prior two years. Despite that backdrop, Key’s M&A fees were up 15% year to date, he said.

“I have no worries that we won’t achieve it, even in the kind of environment that we’re in right now,” Paine said of the fee target. A pickup in M&A or public equity activity would provide upside, he added.

Chief Financial Officer Clark Khayat said the bank was not counting on a major increase in deal activity to reach its targets. He said a return to more normal activity levels could provide an additional boost.

Acquisitions Expand Advisory Capabilities

The comments came after Key announced an agreement to acquire Atlantic-Pacific Capital, a private capital adviser with about 35 employees. Paine said the acquisition would give the bank capabilities in areas including continuation vehicles, which private equity firms can use when exiting holdings.

About 40% of Key’s investment banking fees come from private equity-owned companies, Paine said. He also sees opportunities to use Atlantic-Pacific’s capabilities with clients in private credit and institutional real estate.

Paine said integration of Clearwater, a U.K. firm Key acquired at the beginning of August, was on track. Key had projected that Clearwater would add $20 million to $25 million in investment banking fees in 2026, and it contributed about $10 million during the two months Key owned it in the third quarter, he said.

Executives said Key would continue evaluating smaller acquisitions, but stressed that deals must add capabilities for its targeted clients and fit culturally. Khayat said the bank reviews many opportunities, but most do not meet its criteria.

Banker Productivity and AI

Paine said newly hired bankers generally take 12 to 18 months to reach full productivity. Productivity has risen slightly as Key has added bankers across its commercial franchise, he said, and he expects more recent hires to contribute further as they mature.

Khayat said average productivity has been flat to up even with new bankers included. Key tracks groups of hires against expectations and prior years, he said, adding that the bank increases investment in areas showing success and pulls back where results are weaker.

On artificial intelligence, Paine said the Institutional Bank has 35 use cases being explored or put through its technology team, but has not yet seen a major productivity uplift. He expects some benefit, though he said he could not quantify it.

Khayat said Key is also examining broader uses of the technology in client onboarding, servicing and underwriting. Streamlining those processes could free bankers from manual work and help the bank onboard clients and realize revenue faster, he said.

Real Estate and Private Credit

Paine said Key expects slightly less commercial mortgage banking fee revenue in the fourth quarter, with some loans likely to remain on its balance sheet longer. He characterized the effect as not meaningful in the context of the overall environment.

Key has about $750 billion in commercial mortgage servicing assets, including roughly $270 billion in special servicing, Paine said. Active special servicing stood at about $10 billion and had been stable. Urban central business district offices remain a trouble spot, while some overbuilt multifamily markets face manageable pressures, he said.

In private credit, Paine said Key both competes with lenders and provides them financing. He said the bank had seen a pullback in private credit that benefits its own balance-sheet and syndicated lending businesses. Based on reporting Key receives on loans backing its warehouse facilities, Paine said he had not seen significant credit issues and described the industry’s challenges as a redemption issue.

Asked about the potential effects of slower artificial intelligence infrastructure spending, Paine said Key’s direct data center exposure was less than 1% of its loans. He noted that clients, including those in its power business, have indirect exposure to the build-out.

About KeyCorp (NYSE:KEY)

KeyCorp is a financial services company headquartered in Cleveland, Ohio, and the parent company of KeyBank National Association. Through KeyBank, it provides retail and commercial banking services to individuals, businesses, institutional clients and government entities.

KeyBank's offerings include checking and savings accounts, consumer lending, mortgages, home equity financing, credit cards, business loans, treasury management and payment services. The company also provides investment banking and capital markets services through KeyBanc Capital Markets, as well as wealth management, investment management and personal financial planning services.

KeyCorp traces its history to 1825, when the institution that became KeyBank was established in Albany, New York.

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