Why KeyCorp’s new bond issue matters for stock investors

KeyCorp (KEY) has launched a new fixed income offering of senior, subordinated notes due 2031. This move comes shortly after fresh shelf registrations for debt, preferred stock, common shares, and other securities earlier in June.

Recent capital markets activity appears to sit alongside building momentum in KeyCorp’s stock, with a 90 day share price return of 18.15% and a 1 year total shareholder return of 44.47%, while the share price last closed at $22.33.

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With a value score of 4, an indicated intrinsic discount of about 40%, and the stock trading roughly 12% below the average analyst price target, the key question is whether KeyCorp is still undervalued or if the market is already pricing in future growth.

Most Popular Narrative: 10.8% Undervalued

KeyCorp’s most followed narrative pegs fair value around $25 per share, compared with the latest close at $22.33, so the bond issue drops into an already value focused story.

The anticipated shift from net interest income (NII) headwinds to tailwinds due to a pivot in fixed asset repricing and the structure of swap and treasury maturities, expected to significantly enhance NII in the forthcoming quarters, impacting revenue growth positively. Read the complete narrative.

Curious what sits behind that repricing story? The narrative leans on specific revenue, margin and earnings paths that must line up to justify that $25 fair value. Want to see which assumptions really carry the weight here?

Result: Fair Value of $25.03 (UNDERVALUED)

However, the picture is not one way, with rising nonperforming loans and tighter regulatory capital expectations both capable of capping how much repricing investors ultimately see.

Another view: earnings multiple sends a mixed signal

While the narrative and intrinsic value work imply upside, the current P/E of 13.4x sits above the US Banks industry at 11.8x, yet below a peer average of 15.2x and close to a fair ratio of 13.6x. Is the real risk that expectations are already tight?

To stress test that view against hard numbers, take a closer look at how the current P/E compares with our fair ratio and comparable banks in the valuation breakdown, then decide which side of the gap you think the stock belongs on. See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Given the mix of optimism and caution running through this story, it makes sense to check the numbers yourself and move quickly to firm up your own view. To see what is driving that positive sentiment in more detail, take a closer look at the 4 key rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.