KeyCorp’s Crossroads: Truist Cuts Price Target Amid Revenue Pressures

The financial sector is rarely static, but recent moves by analysts have thrown KeyCorp (NYSE: KEY) into a spotlight of mixed expectations. Truist Securities’ decision to lower its price target for the regional banking giant to $16 from $18—while maintaining a neutral “Hold” rating—underscores a pivotal debate about the bank’s near-term trajectory. The move, rooted in concerns over declining revenue streams, contrasts with a broader analyst community that still sees upside potential. Here’s why investors should pay close attention.

The Case for Caution: Truist’s Downgrade

Truist’s analysis hinges on two critical revenue pressures: declines in investment banking fees and lower net interest income (NII). The firm anticipates reduced earning assets will weigh on NII, a key profit driver for banks in a low-rate environment. Meanwhile, investment banking revenue—a volatile but lucrative segment—is expected to soften as market conditions for underwriting and advisory work remain uneven.

These headwinds have prompted Truist to trim KeyCorp’s 2025 and 2026 earnings per share (EPS) forecasts by 1% each, settling on estimates of $1.45 and $1.75, respectively. Yet the downgrade isn’t a death knell. Analyst Brian Foran notes two mitigating factors:
1. Reduced credit losses: A stabilizing macroeconomic backdrop and conservative risk management have lowered provisions for bad loans.
2. Share buybacks: KeyCorp’s planned $1 billion repurchase program, set to ramp up in late 2025, could boost shareholder value.

Contextualizing the Cut: Where Does the Stock Stand?

As of April 23, 2025, KeyCorp’s stock closed at $17.47, slightly above Truist’s revised target but below the $18.20 consensus price target from 18 analysts. This average reflects a 27.5% upside from the April 2025 low of $14.27, suggesting broader optimism about KeyCorp’s long-term prospects. Barclays, for instance, retains a $20 price target, citing robust Q1 2025 results in fees and NII growth.

The Bulls’ Case: KeyCorp’s Resilience

KeyCorp’s first-quarter performance offers a counterpoint to Truist’s caution. The bank beat expectations on both earnings and revenue, driven by effective deposit cost management and a loan portfolio that continues to grow steadily. Management also highlighted its $1 billion buyback program, which, if executed, could reduce shares outstanding by roughly 4%—a meaningful tailwind for EPS.

Moreover, KeyCorp’s dividend yield of ~5% remains attractive for income investors, especially in a low-yield environment. The company’s focus on digital innovation—such as its push to simplify home lending processes—and leadership changes, like the appointment of a new Chief Risk Officer, signal a commitment to operational efficiency.

Risks on the Horizon

The Truist report isn’t the only cloud on the horizon. Analysts warn of broader macroeconomic risks, including lingering inflation and potential interest rate volatility. Additionally, KeyCorp’s exposure to certain sectors, such as commercial real estate, could become a liability if recession fears materialize.

The Bottom Line: A Stock Split Between Near-Term Caution and Long-Term Hope

KeyCorp’s story is a microcosm of the banking sector’s current dilemma: balancing short-term headwinds with structural advantages. While Truist’s downgrade highlights legitimate concerns about revenue streams, the consensus still leans bullish, citing projected 60.4% annual earnings growth and a 42% EPS expansion over three years.

Investors should monitor two key catalysts:
1. Q2 2025 earnings: Scheduled for July 22, these results will test whether KeyCorp can sustain NII growth and manage expenses amid a softening economy.
2. Share buybacks: The $1 billion program’s execution will determine whether the stock can climb toward the $18.20 consensus.

Final Analysis

KeyCorp’s shares are caught in a tug-of-war between near-term skepticism and long-term potential. At $17.47, the stock trades just above Truist’s lowered target but well below analyst hopes. For investors, the decision hinges on whether they believe management can navigate the revenue challenges while capitalizing on its buyback and dividend strengths.

The data paints a nuanced picture: while Truist’s caution is justified, the broader optimism reflects KeyCorp’s 14.3% annual revenue growth forecast and its resilient capital position. The stock’s current valuation offers a compelling entry point for those willing to bet on a rebound in NII and a smoother credit environment. But with risks like macroeconomic slowdowns looming, this remains a stock to own only with a long-term horizon—and a watchful eye on the next earnings report.

In the end, KeyCorp’s journey underscores a truth about banking stocks: they’re as much about timing the economy as they are about company performance. For now, the bulls have the data on their side—but the bears have the floor.

Disclosure: This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own research.