Good afternoon. I'm Ebrahim Poonawala, I head North American Banks Research for BofA. On behalf of the BofA team, I would like to welcome everyone to Bank of America's 2024 Financial Services Conference. Over the next three days, we'll be hosting approximately 300 institutional investors or 125 corporates to discuss their outlook for the U.S. economy and their own businesses. There's no shortage of things to discuss, given the fast-evolving outlook for interest rates, the heightened focus on CRE, and even some deal-making that we've seen in financials over the last 24 hours.
We're also hosting some must-attend thematic panels around regulation, CRE, a bunch of panels around tech investments, so hopefully you'll can join us for that. One quick programming note: we also have our dates for next year, February 11th and 12th, 2025, so please save the date. For those who are unable to make it, hopefully we'll see you here for an even larger conference. With that, kicking off our discussion on the outlook for the regional banks, I'm delighted to welcome Chris Gorman, Chairman and CEO of KeyCorp. Chris, thank you very much for being here, for kicking it off, and I'll hand it over to you.
Thank you, Ebrahim.
Okay.
We're pleased to kick it off, and thank you for including us. On slide 2 you'll find our statement on forward-looking disclosures. These statements cover our presentation materials and comments, as well as the Q&A segment of our presentation. I'm now on slide 3. We will devote most of our time this afternoon to Q&A, but I want to begin with a few opening comments. 2023 can be characterized as a repositioning year for Key. We made some tough decisions and took actions that had a short-term impact on our financial results, but position Key as a simpler, more profitable, relationship-focused bank as we move forward.
Some examples include: we reduced our risk-weighted assets by $14 billion, including approximately a $7 billion reduction in non-relationship loans. We further right-sized our balance sheet by meaningfully reducing our reliance on wholesale funding and higher-cost broker deposits. Now approximately 85% of our earning assets are core-funded by deposits. Under our new CFO, Clark Khayat, who's with me today, we took meaningful action to position the balance sheet to be more resilient to changes in interest rates up or down while also enhancing our interest rate risk management and capital forecasting processes.
We made significant headway in simplifying and streamlining our businesses. We exited vendor finance. We reorganized and consolidated our commercial banking and payments businesses, and we realigned our real estate business with our institutional bank. Altogether, the actions we took in 2023 enabled us to hold core expenses relatively stable for the third consecutive year. Finally, we meaningfully improved our capital ratios, both including and excluding the impact of AOCI, and we enhanced our liquidity ratios. We are well-positioned relative to our capital priorities and the currently proposed future capital requirements.
In fact, we think we're advantaged relative to other Category 4 banks, given our underwrite-to-distribute model and the asset and capital-light businesses that we enjoy. With the proper foundation in place, I am excited and optimistic about where we are headed. We are now in a position where we can play more offense, and we do so from a position of strength, given the underlying momentum I see across our businesses. Let me give you a few examples of this momentum that I see. In consumer, we grew relationship households by 3% in 2023, and the team has made terrific progress, I should say, enhancing our client value proposition, which is evidenced through improving Net Promoter Scores and J.D. Power results.
In wealth, production reached an all-time high with sales up a little over 20% from last year, and we're seeing momentum in our recently launched Key Private Client, which targets mass affluent clients. That business added 20,000 households in 2023 and over $1 billion of AUM. In small business, which is another area of our focus, 2023 client deposit production was up over two times from the prior year levels, and we acquired 42% more clients.
I'm now turning to commercial. Clients grew 4%, and commercial deposit balances grew 5% as a result of our continued focus on primacy. About 96% of our commercial deposits come from clients that had operating accounts with Key as of December. In our middle-market business, deposits grew 8%, and in enterprise payments, where we have a unique and highly profitable platform, we grew fees by 6% and increased revenue by 5%. At the same time, we made meaningful progress to reduce non-relationship loans in our commercial portfolio. Over the course of 2023, commercial loans declined by about $5 billion. As a result, over 85% of our commercial loans are with clients that do something else with us.
So while the whole time we're growing clients, we're also shrinking our balance sheet last year. While we weren't as active with our own balance sheet as we've been in the past, we continue to raise significant capital for the benefit of our clients. Over $80 billion in 2023 leveraging our unique distribution capabilities. This proven and mature underwrite-to-distribute model is a key differentiator for us. Turning to investment banking. The business felt the impact of the significant decline in M&A and syndication activity last year, but pipelines remain strong, and I'm pleased to report that we're off to a good start in 2024.
Finally, I want to comment on credit quality, which I believe is the single most important determinant of return on tangible common equity and, in so doing, to shareholder value over time. Credit quality remains a clear strength of Key. Our credit measures reflect the de-risking we have done over the past decade and our distinctive underwrite-to-distribute model. Net charge-offs remain well below our through-the-cycle target, and our NPAs, which we firmly believe have very low loss content, also remain well below our historical averages. Over half of our C&I loans are rated as investment-grade or the equivalent, and our consumers have a weighted average FICO score of approximately 768 at origination.
As a reminder, we have very limited exposure to leveraged lending, to office loans, and to credit cards. I want to spend a minute on commercial real estate, given the attention it's been getting in the market recently. At Key, we are underweight commercial real estate relative to our peers. Just like we did in KeyBanc Capital Markets a decade ago, we have built a strong underwrite-to-distribute capability. We've been much more selective in the borrowers we do business with, and we have honed our focus on the types of asset classes and geographies we lend into.
This includes a disciplined focus on affordability trends and metrics, which essentially led us to pull out of gateway cities three years ago, and I'm sure many of you remember us talking about that. At year-end, our non-owner-occupied real estate portfolio represented just 13% of total loans. Exposure to office is less than 1% of total loans, meaningfully less than many others. Within multifamily, we have only about 5% of our loans in properties in New York City, Chicago, Los Angeles, and San Francisco.
Now, one important point of differentiation for Key is that our multifamily business not only includes traditional market-rate multifamily, but we also have one of the largest affordable housing origination businesses in the country. Our traditional market-rate multifamily portfolio comprises about 5% of total loans and is healthy and highly diversified by geography. Generally, loans are with experienced owners and operators rather than developers, and this is important, and underwritten based on long-term permanent rates on actual non-trended rents, which obviously reduces the risk of refinance or interest rate risk. Key has no exposure to rent-controlled properties in New York City.
Affordable housing, where we are a top 5 originator nationwide, makes up about 3% of our total loans and continues to be a significant and unmet need in this country. Credit performance of this book industry-wide has been exceptional, with just 0.5% cumulative defaults dating back to the year 2000, so for the last quarter of a century. Overall, we are well-reserved with 3.1% held against our non-owner-occupied real estate loans, including a little over 2% against multifamily and, as you can imagine, 6% against office buildings. In summary, 2023 was a repositioning year for Key, but we have now reached an inflection point where we will now start to play offense.
Our balance sheet is appropriately sized for our anticipated future environment. Our demonstrated ability to manage and grow our deposits provides us with a strong foundation. We have a well-defined net interest income opportunity as we move through 2024 and into 2025. We are well-positioned to benefit as realization rates on our strong investment banking pipelines eventually revert to historical norms. More broadly, I am excited about the opportunity set, and I like our strategic position as we enter a new regulatory framework. With that, Ebrahim, I would be happy to take your questions. Thank you.
Well, thank you. Thanks for that. It means you essentially answered everything I had there, so we can just go back on our home.
Okay. Well, it was nice to be, no, yeah.
I know. No, I appreciate the summary and just...
Yeah.
I think maybe just to double-click on some of the things you mentioned. I think the one area where you've been focused on is RWA optimization. Just talk to us when we're talking about we're going to play offense, what that actually means. I n our seat, as we think about what that means for loan growth over the course of the next few quarters of the next year, and are we done with the optimization piece of it, or is there more to go?
Sure. So as I mentioned, we accomplished a lot last year. We reduced RWAs by $14 billion. We reduced loans by about $7 billion. And we've always been very, very disciplined about making sure we have relationships. And the reason, Ebrahim, we've always been so disciplined, and you've heard me say this many times, on a risk-adjusted basis, standalone credit doesn't return its cost of capital. And so when we decided we wanted to take the balance sheet down, it was easy for us to put together the hit list: here's where we want to be, here's where we don't want to be, etc. As a consequence of that, we still have some of that as we go into 2024.
So we shrunk the balance sheet in 2023. You'll see some continued shrinking at the beginning of 2024. We will end 2024 about where we exited 2023. So that will be the trajectory. I think there'll be plenty of opportunities for us to lend. One of the things I don't worry about, our ability to generate assets, is typically we've only put about 18%-20% of the assets that we generate on our books. So I feel like, to the extent there's opportunities there, you know, we'll be able to grow our balance sheet, and we'll be able to do it with, you know, high-quality loans.
Got it. I guess maybe just taking a step back, the U.S. economy, if you look at the GDP print, seemed to be doing extremely well. Just give us a sense of there's a lot of, like, macro-cross-currents out there. What's the sentiment among clients? Like, are corporates out there waiting to invest, or are they waiting for an all-clear on the Fed policy? We have elections coming up. What's the sentiment like?
So let me start with the consumer, because the consumer's been an incredible story, and so then I'll get to our commercial clients, where I spend a lot of my time out talking to them. Our- our consumer clients today have 33% more balances than they did pre-pandemic. So people talk about the burndown of all the stimulus. We have yet to really see that. So is it coming? Absolutely. Are they spending a lot on services? Yes. All of you walked through airports as you were coming here. The airports are packed. People are spending money like crazy. So the consumer is very, very strong, and we see that in all of our credit metrics.
As it relates to commercial clients, commercial clients are sitting on a lot of cash. The economy is clearly slowing down. Now, what's interesting is when the economy slows down, these businesses throw off cash, right? So as they convert sales to receivables or inventory to receivables to cash, they actually throw off a lot of cash. Our clients have a lot of cash. We are having great discussions with our clients. I do think there's still a fair amount of uncertainty that people are not investing in sort of long-term CapEx, but I think, I mean, they're in good shape financially.
Got it. I guess coming back to Key, and I'm going to go off-script here, so don't mind. But I two things. I think one, as we think about the role of regional banks, just remind us the competitive strengths of Key as you compete across businesses, commercial consumer relative to the other regional, the large banks. And maybe tied to that, just talk about scale, right? I think there's a lot of focus around. Do banks need to be X amount in size to really be able to be successful? So yeah.
Yeah. Well, I mean, one of the things that's interesting about scale is there is from a regulatory perspective, there's actually negative scale. It's sort of scale turned upside down. If you're under $10 billion- under Durbin- you're benefited. If you're under $100 billion, you're benefited. If you're then under $700 billion, you're benefited. So, to some degree, there's negative leverage and negative scale leverage, with respect to the regulatory environment. Our strategy at Key has always been targeted scale. And my view on that is, you know, we have 959 branches.
I'll use B of A because you're our fine host today. I mean, for us to try to pretend to play the same game that B of A is playing, I think for us is not a winning strategy. What a winning strategy is for us to identify where we can be relevant and to know where we win, how we win, why we win. And if you look, for example, at the integrated corporate and investment bank that we built many years ago, and you look at focus not only on industry verticals but even sub-verticals and how effective we are in going after that business.
So for someone to compete with us there, they have to have a balance sheet. They have to be able to provide strategic advice. They have to be able to raise capital everywhere. And all of a sudden, the competitive set goes from 4,600 to, I don't know, 3, 4. The 3, the 4 we compete with are good. So I just think for us, this notion of targeted scale is really, really important. If you think about out west, Ebrahim, where we've really focused on younger clients in terms of acquisition, great market for us, a lot of in-migration.
If you think about Laurel Road, we now do business in 50 states, with doctors and dentists, which obviously expands our 15-state footprint. The last thing we've done on Laurel Road since I'm on that point is we bought this business, GradFin. GradFin is the market leader in providing strategic advice around the Public Service Loan Forgiveness or income-based debt repayment. And so with all the discussion from elected officials those programs, by the way, have been around forever.
But think about us in the fourth quarter having 16,000 discussions with people that aren't current customers of ours, and in exchange for that, in exchange for giving them advice, obviously, they become customers. So the whole notion of targeted scale, I think, for us is really important. You know, obviously, scale at some level makes sense, but when the market leaders are 20 times as big as you are, I would ask the rhetorical question, how would one define scale?
That's fine. That's helpful. I guess maybe just narrowing down a bit around the outlook for banks right now centered around what happens with interest rates. What happens to NII? There's a fair amount of debate, even since the start of the year, where the forward curve was pricing in six cuts. Now 3 cuts. Some folks think there might be a hike instead of a cut. Help us in terms of what's the best NII outlook for Key, and what's the least good outcome in terms of the path of interest rates?
Well, this is a great question to ask me because every day I have Clark give me a bunch of other runs on how this looks. Let me just start with this basic premise. We have done a great job over the last year of repositioning our balance sheet. We now are, you know, approaching this notion of neutrality. I have been a believer for a long time, and this group has heard me say it, higher for longer, and it looks like it's playing out that way. Anywhere from zero cuts to six cuts, anywhere starting in May or starting at any time in the year, we are within our guidance that we've provided.
Interestingly enough, our maximum NII for 2024. And obviously, it's really interesting. You have to define what period you're talking about because all you're doing is moving dollars from one area, one period to another. But maximum for 2024 is zero cuts. And the reason I say that is because you basically have the benefit of, you know, what happens is deposit pricing drifts up, but the rest of your balance sheet reprices day one. And so for us, the way we're currently positioned, that's what's the maximum return for us.
So zero cuts is the best-case outcome, I see.
Yeah.
Because your backbook is still repricing.
Yeah. That's right.
You have got it. Got it. Well, that's helpful and very clear. I guess the other side of KeyCorp has been around capital markets, investment banking. And one, give us a sense of I think there is a fair amount of optimism, the dealmaking, and just IB activities picking up. And I think we've seen some of the data points around there.
So one, like, are you seeing it trend better than what you expected at the start of the year? And maybe, Chris, if you can address you have right-sized the franchise just over the last year. The one question I get from investors is, did they give up some of the muscle around IB, and does that kind of hit the revenue potential of the business? So maybe, yeah.
Sure. Well, so let me answer the first part first. As I mentioned in my prepared remarks, we're off to a good start. And so what I think, you know, what's not good for the deal business is to have the 10-year go from 3 to 5 to 4. People start really wondering. If, say, the 10-year stays at 4, 4.5, I don't really care, and all of a sudden, the inversion goes away, and you get that pivot, that is a fine environment to get a lot of things done. And so that's an environment that business people can rely on, and I think that will unlock, kind of what's going on, and unlock some of the portfolio.
To your question, about sort of carving away muscle, the answer is no. And I'll give you an interesting story. It was literally in mid-2022, we were going after a group of bankers, and I thought we made sort of a knockout offer, and they were bid away from us. We were competing. They were leaving their existing employer. They weren't leaving us. And I literally got everyone together, and I said, "We're out of the market." I said, "There's certain times when you just have to be out of the market.".
I said, "This is crazy. Like, if this works beautifully, you know, this firm will get paid back in six years or something," as it turned out, "it probably is going to be a little longer than that." But so we just completely got out of the market. One of the things that we've been really fortunate is we have great longevity of our bankers, meaning that the same people have been covering the same accounts. As we look at all the variables, and we look at them all, the biggest determinant of how successful you are is how long you've had that relationship with that client. We're very fortunate in that we don't get attrition.
People like working on our platform because it's a little bit unique. So no, we haven't been hiring, but we haven't had really attrition going out the back door either. We certainly, as we look to right-size our business, are not pushing people out that are our producers, so haven't cut into the muscle at all. Contrary to that, I think there's going to be a really great opportunity. You know, this is now the conclusion of bonus season all across North America. I think there's going to be a great opportunity for us to, to wade into the market. Our hit rate's pretty good when we identify people.
Got it. And within the capital markets business, just remind us, if the business get a lot more to ECM, DCM, M&A, and in terms of verticals, any particular areas that you think is going to be the driver of growth as things rebound?
Yeah. I think, you know, look, let's face it. The biggest driver of growth, and we happen to have good positions in both of them, is healthcare and technology. So broadly defined, those are the biggest drivers of growth. If you think about some of the large announced deals we've had this year, we had a big $750 million IPO that we announced. That was in healthcare.
We had another deal that was in one of our traditional power alleys, happened to be building products, which is a sub-vertical of industrial. So, but I think over time, you know, healthcare and technology will continue to drive it. But we have some really strong verticals. We are a market leader in advisory around renewables, and that whole game is consolidating as we speak. So, I think we're in a lot of the right places to really capture the growth.
Understood. I guess, switching gears maybe on the, there's been so much focus on just flat expenses across the banking space. But remind us in terms of investment priorities, where you're putting in investment dollars, as you reinvest, I guess, some of the savings that you're getting elsewhere.
Sure. So, we took out $400 million of expenses last year. And the areas where we're investing broadly are technology and people. I mean, in the banking business, that's where you invest. What we've said is that we think we can keep expenses relatively flat. So that means we have $400 million to expense, or I'm sorry, to invest. And that's, you know, that's what we're going to go about the business of doing. And, you know, as it relates to technology, it will be a mix of front-end things. It will be a mix of some things refreshing the core, something we always invest in, you know, cyber/regulatory. That's obviously part of being in the banking business.
Got it. I guess maybe switching, you mentioned earlier, like, half the revenue comes from the consumer business. And as we think about, like, if we are in a structurally higher-rate environment over the next decade, and you think about how banks go about growing deposits, it used to be in the '90s pre-GFC through regional bank M&A or depo or branch additions. As you think about Key, like, what's the strategy to acquire new clients on the consumer side, grow deposits?
Well, I mean, it goes back first and foremost to targeted scale. I mean, if you think about all the people that, you know, there's 4.4 million nurses. There's 1.1 million doctors. You know, this affinity model around that group, that drives deposits. Another area where we've invested heavily, and I mentioned it earlier, is out in the West. The West has in-migration. Our consumers are younger there, so we invest there.
Another area, other areas where we're going to invest, one, we're going to invest heavily in small business. And I say small business. You were asking about consumer, but in small business, where the individual starts and his or her business ends is indiscernible. These are all Subchapter S's. It's the same group of accounts. So we're going to really lean in on small business. We have, as everybody knows, a really strong middle-market business, and then we think we have a great opportunity.
And then lastly, where we'll garner a lot of deposits. I mentioned the 20,000 new customers that we got, in our, in our wealth business focusing on mass affluent. Mass affluent for a bank like Key is really a great area to focus on. You know, there's, there's a whole bunch of people focusing on affluent, but mass affluent is really where the opportunity is. The pyramid gets pretty broad, and, we think that's a great opportunity.
And all of by definition, anyone that's a mass affluent prospect or client, by definition, they have, they have deposits. And they probably have deposits away from us. One of the things that we've done a really good job of since last March is really knowing which of our clients we have great relationships. We have primacy with our relationships. And we know which of our clients have dollars away from Key. Now, you might have to pay for those, right? Because they're away from you. But the notion is, with our 3.5 million customers, there's a real opportunity for us to grow deposits from them.
Got it. I guess maybe just moving back to investment spend. Clearly, there's a lot of debate across the economy around inflation, whether it's the Fed's going to hit their target. When you see investments you're making, as you mentioned, technology, personnel, etc., are you seeing inflation cool off? Like, do you think do you feel okay making the call that inflation is going to move closer to what the Fed's targeting, the 2%, or could we get some bumps?
I think we'll get some bumps along the way. I, for one, am not convinced that inflation's under control. I've said this before. I think it's really hard to have inflation under control when you have a job market that doesn't look like it's cracking, doesn't look like it's weakening. Are people switching jobs less often? Absolutely. Is the economy slowing down? Yes. But has the labor market really been damaged? The answer is no. So I remain worried about inflation as we go forward.
Got it. I guess maybe in the time we have, maybe switching gears to credit quality. So as you mentioned, I think to me, ever since the Fed started hiking, I think the question has been, how much damage will they do to the job market and the economy before we get to rate cuts? As you think about just across your loan portfolio, CRE, C&I, where are you seeing the soft spots? Where are you most concerned about in terms of credit risk?
Well, obviously, the place that we immediately focus, and again, we don't have a lot of leveraged loans, less than 2% of, and so leveraged loans is the first place that I always look. I actually have a lot of background in that. And, you know, what you want is you want to have cap; you want your borrowers to have other sources of capital besides just you. I feel good about where our leveraged book is. Again, it's less than 2% of loans. And by the way, it was the same level when we were about half the size that we are now.
So a lot of velocity focused in our seven industry verticals. The other area, obviously, that we are constantly stress-testing is our real estate portfolio because that is where, you know, that is leverage. One of the things that people, people talk about real estate, like, it's a wholly separate thing. And the one thing in, in assessing, like, all asset classes are the same. What you really have to look at is, what is the capital structure of these loans? And let me give you a couple examples. So in multifamily, for example, the way we do it is maximum loan to value is 60%.
As I mentioned, we pull out of markets when we think they're overpriced. We don't allow any capital to be below us, and we don't model in rent increases. There are some funds out there that are providing capital to the same the same asset group, the same in the same geographies, 80% loan to value, capital underneath it. And to make that work, you have to basically make some assumptions that rents are going to go up every year, i.e., price to perfection.
So when you think about when we're constantly stress-testing our portfolio, it's not just, "Gee, this is a multifamily building, and the building happens to be in Miami." We're looking at, what's the cap structure? What are our assumptions? So those are the places that we look. But when rates go up, we stress-test our leveraged portfolio, and we stress-test all of our real estate. That's where; I mean, that's where you focus.
You mentioned there are funds who provide easier terms. Are there a lot of banks that provide the same terms, or are you seeing it more from the non-bank sector?
Look, I think that it's a whole gradation, right? I mean, if we're at one end of the spectrum, I think you probably have a variety of market participants that are at all ends of the spectrum.
Got it. You're obviously one of the largest CMBS servicing platforms out there. So you have a unique insight into what's happening in the CMBS and CRE markets. Just give us the latest. I remember a year ago, we did this conference discussion. You talked about just the increase in the office special servicing. Like, what are you seeing there?
So it's good. We're named special servicer on more than $200 billion worth of loans. So that basically, when you're named special servicer, you're basically the workout agent, and you're named ahead of time. And these are all off-us loans, by the way. We're also named primary servicer on well over $400 billion loans. So we have a really good window into kind of what's going on, who's not paying the rent, what are the cash flows. And, you're right. A year ago, huge ramp-up in office. 2023 was a record year for our special servicing business. We've actually seen a little bit of a ramp down in office, interestingly enough. And we've seen a little bit of a ramp up in some of the multifamily. So that's what we've seen.
Just from your perspective and this is not about Key's loan book, but when you think about multifamily, do you see the issues as the same as what we are seeing in office, or it's a different, it's more of a restructuring issue for banks as opposed to massive losses?
I think they're completely different. And the reason I think the two asset classes are completely different is there is a shortage of front doors in the United States. There is no shortage of cubicles in the United States. I used to, before the pandemic, when I would be walking around, all of our sites and, you know, we take a lot of pride in how we run our business, I can't tell you how many empty cubicles I would see as I go to all of our sites and was out talking to people.
Now, since the pandemic, we said first, we said we were going to take and we're probably not dissimilar to others. First, we said we were going to take out 25% of our non-branch, non-ops square footage. We did that. Then we said we were going to take out 33% in total. So it's not 25 plus 33. It's 25 became 33. We did that. And now we're looking at other places. So I think the starting point is completely different. And, you know, people have stopped going into offices. You know, people have not stopped living in apartments. So, I think the markets are totally different.
Yeah. Well, they've not stopped going into BofA offices, I can attest to that. But, I know we have a few minutes. I just wanted to open the room and see if anyone had questions in the audience. Anyone, raise your hands if you have a question? But if no questions, I had the last couple of questions to go through. I think the one thing we didn't talk about, Chris, was just capital- capital priorities, right?
Yeah. I think it seems like all banks, including your peers and the capital build mode, we saw a transaction being announced by one of your other regional peers this morning, which was capital accretive. Talk to us in terms of where capital ratios are, where you want them to be, and how we should be thinking about eventually capital return and deployment over time.
Sure. So in terms of ultimately where we and others want capital ratios to be, I think that's to be determined. We're all building capital for many good reasons. But with the uncertainties around where and when the Basel III Endgame actually lands, it's hard to say that you want to be at this number by a certain date. You know, we're at 10% CET1. We organically built capital last year from 9.1% to 10%. So there are a bunch of dials that you can pull.
We've also said publicly that, you know, our priorities are as follows. First, to support our customers. Secondly, to pay a dividend. And thirdly, what we've said is, we are not going to engage in share repurchases until we know how the Basel III Endgame plays out. So I think there's a bunch of levers that all of us can pull. And I think we'll all continue to build capital knowing that eventually, in the construct of the Basel III Endgame, we'll need to be carrying more capital.
Got it. And I think one question just around in terms of fiscal policy. You hear a lot about the CHIPS Act and the fiscal stimulus that's being put back to the point about maybe pushing inflation higher. Are you seeing that in your markets when you think about, like, Intel's Ohio chip plant? I'm not sure what the latest there is. But are you seeing those investment dollars making it to your clients and driving investments, or not quite?
So that's, that's one of the reasons why it's a great question. It's one of the reasons I think that inflation is going to be a little a little stickier and a little more pernicious than maybe others think, is it takes forever for this capital these dollars to be pushed out. And so, I happen to be chairman of the Ohio Business Roundtable, and there's all these we have an initiative around going after these federal grants. It's shocking how many grants worth multiple billions of dollars still haven't been let.
So if you think about the Inflation Reduction Act, if you think about the CHIPS Act, if you think about the $2 trillion invested in green energy, a lot of that is still in the pipeline. So no, it hasn't really made its way out yet. And so I think that's going to be a catalyst, I think, for additional stimulus as we go forward. There was just an announcement about a chip plant in New York, New York State, I think, as early as today.
Understood. I guess one last question. So I get asked this question all the time around the investment thesis on regional banks. Why should you buy a regional bank? Since I have you on the spot here, like, talk to us in terms of the investment thesis on Key. What would your three bullet points be in terms of why this is an attractive investment?
Yeah. Well, it's an appropriate question to ask me today because just last week, I had some options expiring that I exercised and held. And the reason I did that is because I think we're undervalued. I think if you look at our strategy, this whole notion of targeted scale, if you think about us dramatically shrinking the balance sheet and growing the clients, both on the consumer side and the commercial side, while concurrently shrinking the balance sheet, if you think about our credit positioning, which I think in banking I always tell everyone that works for us, you make money in banking by not losing it.
I think it's really, really important. We have been very disciplined in terms of how we've lent money because it's not a great business, as a standalone. And then, the other thing is just our business model. As you think about the questions you were just asking around capital, one of the things that I think is really going to drive value going forward is the whole notion of being able to distribute paper. I think, obviously, non-bank players are going to play a bigger and bigger role.
And I think the ability to underwrite and distribute capital and serve your clients that way is going to really is going to really pay great dividends as you think about the banking construct going forward. I'll give you one statistic as we wrap up here. We used to think that our loan to deposit ratio would be somewhere between 90%-95%. Last quarter, we were at 78%.
I think, ultimately, a lot of banks that are category four banks will probably have about a 75% loan to deposit ratio, which means you have to be able to really serve your customers, but you have to be able to distribute the paper. And so those are some of the reasons why, I'm very bullish. And then lastly, I'd be remiss with my team here. One of the things that makes me really bullish about Key is I just think I modestly think we have a really great team with a unique strategy.
Right. All right. So I guess go buy yourself some KeyCorp. And with that, Chris, thank you so much for your time.
Thank you, Ebrahim.
Okay.