Okay, good morning again, everyone. I'm Ken Usdin, the Large-Cap Banks Analyst here at Autonomous. Really happy to be a part of this Bernstein Strategic Decisions Conference, and I'm happy to be here with Chris Gorman, who is the Chairman and CEO of KeyCorp. C hris has been the CEO and Chairman since May of 2020, and this past year has been a really important one for KeyCorp, with the sale of a 14.9% stake to Scotiabank, creating a lot of new optionality with the big capital base, the ability to improve earnings. We're going to talk about that and a lot of other things that are on the table for KeyCorp today. Before we go, just a really quick reminder: you can put in questions through the Pigeonhole app. Chris, thanks so much for joining us today. Looking forward to the conversation.
Ken, thanks for being here. I always like coming to this conference. I think it's a little bit unique, and it's great to be with you here on your new platform.
Excellent. Great. Thank you very much for that. Chris, look, I think we're going to start with big picture and talk macro. So much noise, news since the beginning of the year. As we sit here today, what's your assessment of specifically the U.S. economy and the local economies that you guys serve, both in footprint for KeyCorp, but also given that you have a lot of national businesses, you have that interesting perspective as well?
Sure. I guess broadly what I'd start with is all of our clients entered this period of uncertainty in a really strong position. If you think about, I'll talk a little bit about our consumers. Our consumers are very, very healthy. They have an average FICO score of 790 at booking. They, frankly, have a lot of wealth. We have $61 billion of AUM in our wealth business. They have 20, this is an interesting statistic, this to show you the long tail of COVID. The non-interest-bearing accounts for our retail customers are 26% above today where they were pre-COVID, and they're spending in line with how they've been spending. In spite of all the uncertainty, our consumers, which are sort of super prime consumers, continue to just move along just fine. On the commercial side, Ken, there, too, I think our customers are in pretty good shape.
These middle-market companies have been growing by double digits for the last four years or so, so 10% growth. These businesses are growing well. They're mostly—and I'm sure there'll be questions about trade and tariffs—they're mostly dependent on the U.S. economy, and we'll get to that in a second. They're doing well. 90% of the deposits that we have in our commercial bank are tied to these operating accounts of these people we have relationships with. Our commercial customers are doing well. Obviously, the liberation day was obviously a bit of a setback for everyone. Having said that, we had a record—as it relates to us specifically—we had a record first quarter in our investment bank. For the first half of the year, we'll be up probably 10% year-over-year . We have strong backlogs. We're finally starting to see some loan growth.
This is kind of interesting. I thought that we would see loan growth a lot earlier. I thought people would pre-buy the tariffs. I mean, the president had been talking about tariffs for two years while he was running for president. People were not forward-buying the tariffs. Now we are actually seeing a fair amount of loan growth. Our utilization, Ken, is up from 31% to 33%. Having said that, it is not back to 35% or 36% where we would expect it to be, but people are starting to invest in inventory. In terms of C&I loans, we were up about $1.5 billion in the first quarter, and I think already quarter to date, we are probably up a similar amount. Look, there's a lot of uncertainty, no question about it, but I think what's going on on the ground is, frankly, a lot more favorable than what you read about every day.
Yeah, and that's a great segue to deepen on the tariffs and trade points. The anecdotes have been mixed about those that are extending their businesses and borrowing versus those that are sitting back and waiting amidst this incremental caution. How are customers reacting to the specific issues of tariffs and trade, and how are you hearing that in the conversation across the lending book?
Look, there's a lot of uncertainty. When I think about uncertainty and what we're modeling out, it's not just what's going on with the tariffs, which, by the way, if you had a spreadsheet out, sort of change from Friday to Sunday, I mean, there's a few things going on. We're constantly looking at kind of a whole range of things, and it's immigration, it's trade, which is tariffs, it's dereg, which, by the way, I think deregulation for American business is more important, I believe, than tax. Obviously, tax is part of it, and immigration is part of it, and immigration affects things like construction, etc. What the initial shot of the tariffs did, because everyone was surprised by the approach on liberation day, is it did cause people to pause. I see that pause kind of dissipating now. I really do.
I think as people realize this is a long-term negotiation thing, as people realize that the U.S. consumer really, at least from our business, drives the train, really, in my mind, what really matters is we have to have some kind of an agreement with the EU and with China. Not to dismiss everybody else, but let's face it, if we have an agreement there, everything else kind of falls in place. I think our customers are taking a similar perspective. Now, as it relates to us and how we think the tariffs impact us, we've done a lot of work, and we started early. This was long before liberation day.
We're running a bunch of different scenarios with all the variables I just talked about, and we basically looked at what industry codes and sub-industry codes, and we said, "Okay, who's going to be impacted?" Everyone in this room would know it would be people like manufacturing, retail, and others. At that first pass, kind of top-down, we said, "Gee, we think 20%-25%." What we've done subsequently is really go out with a detailed questionnaire to 850 of our largest customers, and we really—what are your supply chains? What are you dependent on? Obviously, as we run our spreadsheets, that changes as things change, but it's not a huge number.
We have—I'll give you an order of magnitude—we have about $74 billion in C&I loans, and we think about $1.5 billion are impacted to a significant degree, or could be, depending on how it plays out, impacted to a significant degree by tariffs. I am not dismissing it as not as unimportant, but I do not think it is as important, at least to our business, as you might think.
Yeah. If you try to take a crystal ball view to the next 6 to 12 months and think about all the things you just mentioned, what are the couple few swing factors that you're watching for as the most important for how this all trends?
Sure. I think I always start with geopolitical. I mean, the one wild card that none of us have any control over, and it would have a significant impact on all of our businesses, including all of our customers' businesses, is some geopolitical event. Let's face it, you've got wars going on in three places in the world, basically, and any of those on any given day. That is something that I think all of us have to pay attention to. The next is the macro, and where is the economy really going to go? My base case on the economy, and I've said this before, is we're not going to go into a recession. I don't see that happening. I think there's actually a chance that the economy is starting to accelerate. I think inflation is something we have to keep our eye on.
I think watching the macro is really important for our business. The next thing that I think is really important is deregulation. I was talking broadly about deregulation a moment ago, but specifically as it relates to financial services, it will take a while, but I think it's an important—I think we're at an important inflection point. Since the GFC, there had been just regulation on top of regulation on top of regulation. There was never—no capital was too much, etc. I think now, Ken, what you're going to see is I think the agencies will come to a point where they're much more coordinated. One of the things that people underestimate is when these agencies aren't coordinated, the time cost that it takes senior people is pretty phenomenal.
For example, if you were having a cyber exam by several agencies consecutively asking the same stuff, I mean, obviously, that's just not a great use of time. I think we're going to get—and look, I am for safety and soundness. It's very important, but I think this notion of overlapping regulations, process, procedure, documentation, I think that will be positive. The other things that drive, I think will drive things, at least for us, as we look forward, is these deposit betas. Deposit betas and the down betas are going to be really, really interesting. Our up beta was about 55%. We're already around 50%, 50 in the interest cutting cycle. That's better than we would have modeled. I think that's something to keep an eye on. Now, the one caveat I would put there, Ken, is there hasn't been much loan demand.
We are seeing loan demand right now. To the extent there's loan demand, that could have an impact on the down cycle beta. The last thing I just want to leave you with is we've done a ton of modeling. We feel like we're in really good stead. No one knows exactly how all this is going to play out, but we've looked at a variety of scenarios, range of conditions. It starts with we have a lot of capital, we have a lot of liquidity, our business has a lot of momentum. From my perspective, I think we can deal with whatever comes.
Got it. Great. Let's talk a little bit about Key from a strategic, big picture perspective. Over the last half decade or so, you've really focused on honing the business model, focusing on targeted scale, not trying to be everything to everybody. When you think about when you took over as CEO, now versus then, what are the most meaningful differences aside from just the capital change that happened last year? How has that positioned Key better or differently to grow into the future?
Boy, that's a good question. It would be a short answer to say, "What's the same?" because we've really changed everything, and it starts with people. There's not one person that is in the same position that they were at that time. If you look at certain areas where we've really done wholesale changes, kind of going through the organization, places like finance, places like our risk apparatus, we've made a ton of changes, and I'm a big believer it starts with people. The next thing—you mentioned it as part of your question, Ken—the next thing is strategy. This notion of being really focused and knowing where you win, why you win, how you win. We're in seven industry verticals. We're focused specifically on asset-light businesses, namely our investment bank, namely mass affluent in terms of wealth management, and our payments business and middle-market business.
Payments is information. It is payments, but it is also information, a lot of software. Very, very focused there. On the consumer side, we are really focused. We have focused on primacy. By the way, the primacy thing played out pretty well in March of 2023 when all banks were worried about their deposits. Our primacy, both on the consumer side and the retail side, really, really played out well. I left certain businesses. For example, we had a $3.3 billion portfolio in Indirect Auto. We are a relationship bank.
Indirect Auto has never been cross-sold to anyone, anytime, anywhere. As a consequence, we decided—it was opportunistic because we did that during the pandemic when used car prices were artificially inflated, so it was a good trade for us. The other businesses that we have exited, vendor finance on the commercial side, same thing. That is white-label financing. That isn't the kind of business that we really want to be in, and so we exited that. I think that gives you sort of a flavor for some of the significant changes we've made.
As you've made those changes, where are you leaning in the most? In terms of what are the best growth and incremental return areas of those specific businesses that you've chosen to hone in on?
Yeah. They all make a ton of sense to us strategically, and some for a little different reason. Let me start where I was—I was just talking about our deposit base. The consumer business and driving low-cost deposits, I really think in the brave new world that we are all in right now, the gating item is going to be the granularity and the quality of your deposits. I start there because that actually funds the place. As I mentioned, we have about $37 billion of consumer checking accounts that are very, very—obviously, very favorably priced. That is really, really important, and it is also really important that we continue to grow that business organically. Last year, we grew about 3% organically in consumer, which is not a ton, but what is important is when you do grow to make sure you cross-sell it.
We're in some really good markets. It's kind of interesting. As you think about consumer, we're in markets that are really mature markets where people are older and wealthier. Think about places like Buffalo, New York, etc. As you think about I-90, there we have huge penetration in this mass affluent exercise, and I'll get to that in a second. Out west, you have a lot of in-migration. In-migration is really important in banking because then people need to make one decision instead of two. First, I'd say consumer is really important, not necessarily so much from a return on equity perspective, but it funds the place. Then you get into the other businesses that I touched on. I will tell you, I think immodestly, we have the best integrated corporate and investment bank of any bank our size.
There's only about 10 banks that have our capability. In order for someone to compete with us, they have to have a balance sheet, i.e., not just a boutique. They have to be focused on the industries that we're focused on. They have to have our capabilities. Most banks aren't willing to kind of break the mold and go to market based on industry. You really can't be impactful unless you go to the market based on industry. It's very, very hard. I, for example, wouldn't meet with investment bankers that don't spend their whole time focusing on the financial services industry. That's a business we think can get to $1 billion with just kind of the organic path that it's on. $1 billion in fees is a lot.
The next area that I'm really excited about, and this is kind of an example of going where people aren't, and that is mass affluence. I talked earlier about the wealth creation in this country over the last 15 years, which has been phenomenal. One of the things that that's caused is everyone keeps going farther up market. To get all the services, you have to have $5 million of investable assets, and then you have to have $15 million, and so it goes. What we said is not only has there been fantastic wealth generated in the last 15 years, but also anyone that's had a job and had assets 15 years ago is worth a lot more than they are today. We're armed with perfect information. We said we have a million customers. We have 3.5 million customers.
We have a million customers that have between $250,000 and $2 million to invest. Most of those people are probably either being ignored or they're just on some platform. They're in our bank. They've banked with us for 20 years. They know us. They trust us. We started really focusing on serving that group of what we call mass affluent. In the last two years, we've converted 45,000 of those internal customers, which isn't that hard of a sell. They've brought in about $5 billion of AUM that was off us. The last thing I would mention where we're always leaning in is the payments business. The payments business for middle-market companies is not just moving money around. It's providing them the information they need to help them run their business. Huge companies have a bunch of people that do this and do that.
These middle-market companies, they're not heavily staffed, and this notion of embedded banking is really, really important. It is basically software. By the way, once you get one of those accounts and it is installed, it is very, very sticky. All of you probably experience embedded banking when you get an Uber, you rate the driver, you pay in the app. That is a form of embedded banking. Those are the areas that we continue to lean in on.
Great. Excellent. The last strategic point is what I mentioned in the intro, which is last year, Scotiabank's 14.9% investment, which allowed you to build capital, restructure the balance sheet. How important is that to Key's ability to grow? What changes has that brought forth in terms of just your ability to think about what the company is capable of?
First of all, the Scotia Investment was a strategic minority investment. It was a financial investment for Scotia. What it really did is it augmented and sort of turbocharged the path that we were already on. I mean, the reason Scotia invested and invested at a premium is because we had a ton of momentum just in the core business. What it enabled us to do is pull that forward. If you think about broadly, we raised about $2.8 billion, and we were able to restructure about $10 billion of our assets held for sale. On those $10 billion, we now make about 300 extra basis points. What that did is it enabled us to very quickly build capital, very quickly get back to earnings.
That's about of the 20% lift that we're getting this year. About half of it was through the balance sheet restructuring, and about half of it was kind of wired in organically anyway. It did a lot for us. It enabled us to build capital. Right now, we arguably have a little more capital than we probably need, but there's enough uncertainty out there between regulations and between other things that I think having a little extra capital right now is a luxury.
Yeah. If we think about just kind of some of the operating environment things to talk about, what you just mentioned, you started off by saying that loan growth has actually been pretty good so far, continuing the first quarter. You mentioned now the 20% expected NII growth coming from both the balance sheet restructuring and some of the legacy items that we're rolling off the balance sheet. Given the uncertainty that's out there, given the daily changes in the yield curve, can you talk about your confidence in that 20% + and what the potential changes are on the margins that could swing that around a little?
Sure. There's obviously a lot of variables, Ken, that go into that. What I like is through a wide range of conditions, and we don't have to hit on every variable to get to our 20% growth. Obviously, the biggest things that drive it are, one, how are the business flows? What are we doing there in terms of does loan growth continue? What do the deposit betas look like? What does the actual curve look like? I think we're neutral, but if we don't do anything, we would tend to trend to be asset-sensitive because we have about two-thirds of our loan book that floats. So there's a lot of variables, but I think there are many paths, actually, to us getting to our 20% goal. Obviously, we'll see how it plays out, but I feel good about it.
Okay. One of the optionalities that KeyCorp has, coming back to your point about the investment bank, is KeyCorp has a really strong originate-to-distribute engine, but there's also optionality to retain in that engine. KeyCorp's always underwritten to retain, but there's a trade-off between capital and keeping loans on the balance sheet versus getting the fees through the investment bank.
Yep.
How much optionality do you have, especially in this environment, where you could kind of alter the path of loan growth by just deciding to either keep more, or would you still rather just try to get as much out the door and continue that revolver in terms of generating the fee side of the investment bank?
That's a great question. We talk about it a lot. The fact is we do what is ever in our client's best interest. Even if at some point we'd want more loans or we'd want more fees, we do what's in the client's best interest. Now, what's interesting is the times that you can actually grow your balance sheet is when there's some dislocation in the market. When everything's flashing green, just to give people order of magnitude, we raised $130 billion last year, and we only put 15% of it on our balance sheet. That's a function of, frankly, all the capacity that's out there and the appetite that people have for assets.
Where it gets really interesting when you have clients that know you and trust you, and they're trying to get something done, and they're trying to get something done in a market that isn't easy, where all lights aren't flashing green, that's, Ken, when you can structure it and put it on your balance sheet, get properly compensated for it, and you can always distribute it later. It all starts with what's in the client's best interest. I think sometimes people lose sight of the importance of distributing risk, though. There are all these people that are willing to buy risk. A lot of properly graded loans by themselves can't return their cost of capital. If you think about that, that's why we're a relationship bank. That's why we generate 40% of our income from fees. There is an inducement to distribute.
The other thing that's interesting is everyone always talks about, well, what are your loan spreads? Your loan spreads are interesting, but they're not interesting at all if you start to have, if you have tail risk and you lose money on the tail end. This notion of distributing it and not having tail risk, I think, is really important. Now, a lot of people are spending a lot of time talking about the private credit markets, which are real.
They're a $1.8 trillion asset class and getting larger all the time. Private credit's been around forever. That annuls to our benefit. It annuls to our benefit in that we've been distributing paper to the private credit markets forever. We have our own Unitranche funds. We have two that are very successful. We're going to launch a third. I think this whole notion of being able to distribute, I think, is so strategically important, not only for our clients, but for our business as well.
Yeah. You mentioned in your intro about just the investment banking activity that you see out there. Can you just kind of tell us how the environment feels? Obviously, kind of coming back to the uncertainty, a little bit of a pause. How do you feel just about the general pipeline backlog and just how clients are acting and conversing as we get through this period of uncertainty?
Yeah. I hate to be such a short-term give you such a short-term perspective, but it's changed a lot. We had this record first quarter. I already mentioned that for the first half, I think we'll be up 10%. The pipelines were great. All of a sudden, the liberation day hit, and there was a three-week pause, basically. There was a pause because the interest rates were just gyrating around. It's interesting. You can get a lot of business done at 4.4% on the 10-year, 4.5%. It doesn't even matter. What does matter is if the 10-year is 4.4% and everyone is thinking that it's going to go to 3.4%, guess what? No one's going to transact. There was a period of time of about three weeks when there was very little activity.
Now, having said all that, we were fortunate enough, Ken, to have some significant things happen in April. I would not say April was a great month, but it was okay. I have noticed it has changed. It has changed probably in the last week. What is happening is people are coming to the realization, I believe, that these rates are going to be higher for longer, that these tariffs are not going to be the end of the world, but are going to be some negotiated deal. I think if you look at all the companies that reported in the first quarter, on average, the companies were up like 13%. I think it is not like it is a panacea out there. It is not like there is not uncertainty, but companies need to transact, and they need to advance things. I am optimistic in the near- term.
I was pessimistic in the near term for three weeks in April. I think we've got the backlogs. The question is, when do people just pull the trigger? I think now that people are kind of looking at some level of just sort of some level of sort of flat kind of rates, I'm pretty optimistic about what's going on out there. Obviously, it changes day to day.
Yep. Absolutely. One of the things in an uncertain environment that you can control is the cost part of the equation. Obviously, there's some flex related to just that prior answer on how investment banking and comp-related items go. The bigger picture question is that with the kicker from the securities repurchasing and the big NII growth you're getting, you're going to be able to deliver a lot of positive operating leverage this year.
You've said that you expect to grow costs 3%-5% underneath that and still put up a lot of positive operating leverage, getting the efficiency ratios already down to 64% in the first quarter. Talk to us about just how do you gauge that right level of investment? How do you gauge the right level of spend growth? You won't necessarily have 20% NII growth every year, but how do you kind of triangulate all the things that you have to spend on to grow, to build the business, to keep compliant, etc., while getting that efficiency ratio further lower still?
Sure. I really focus on operating leverage. That is why, obviously, it is a fait accompli that we are going to have operating leverage based on the NII. That is why we came out and told you and everybody else we are going to generate positive operating leverage on our fee-based businesses as well. That is because, if you think about it, the efficiency ratio is an outcome. It is an output. What I want to really focus on is I want to continue to invest in these businesses. By the way, even in the worst of times, we always invest in our business because you have to. Interesting. I learned a hard lesson many years ago when I was running an investment bank and did not invest in an analyst class because it was a tough time. I have never forgotten that lesson. You invest every single year in your business.
Even if you look at 2022 and 2023, we were investing continually in people, in technology. We were also taking out costs. One of the things about costs, we spend about $4.5 billion a year. I challenge our team all the time, every year, to find $100 million that we then turn around and invest. Since I've become CEO, every year, we've modernized at least two major systems. We've moved all of our major systems to the cloud. We have half of our apps in the cloud. We obviously have continued to invest. One of the advantages of continuing to invest is then you can take more costs out. If you continue to invest and you have continuous improvement, then you have automation, then you're using AI, then you're using all kinds of different things to invest.
We're going to be very, very careful. As I said, when you're spending $4.5 million a year, this year, for example, we're going to spend $100 million more on technology. We're going to spend $100 million more on technology. I want it spent in two areas: areas that make it easier to bank at Key and areas that make it easier to work at Key. I think it's there to be done. 64% is a little higher than we'd like it to be, but you'll see that just in the ordinary course with our earnings start to come back to 60%-ish. We do have a business that's a variable cost business, but it is a little more expensive than, for example, if you were buying a bunch of paper and putting it on your balance sheet.
Yep. That's fair. Few businesses tend to have a little bit higher efficiency ratio, naturally. On that point, you mentioned about technology and all next-gen thoughts around cloud. You mentioned AI, etc. As a regional bank, as a large regional bank, how do you get the sense that you're doing the right amount? How do you get the sense that whether you should be playing leader, fast follower? How do you make sure that you're keeping up with the big banks and your peers around you?
I think one thing is to really know where the market is and know what your customers value. At the end of the day, our job is to build things and to have things that our customers value and need. I think we have a really good handle, Ken, on what we need to do. You've got to continue to invest in the business. We'll spend $900 million. We have about 3.5 million customers. We'll spend $900 million this year. We're constantly figuring out it's not just how much money you spend, but are you spending it in the right place? We're constantly looking at that. You have to modernize all the time. Obviously, things like cyber and regulation, you've got to continue to invest in those.
I feel good about what we're investing, but I'm always challenging the team to make sure we're investing in the right things. By the way, it changes. What you needed to invest, we talked yesterday in a team meeting. We have a system that we put in eight years ago that's done just fine. Now we think we can do much better. You got to make those changes.
Yeah. We talked at the beginning about how you feel like your customers are in generally pretty good shape. Also, you've gotten rid of some of those portfolios that might not have been customer-facing. Generally speaking, in a world where you've de-risked over time and kind of slimmed down and focused in, how do you feel about where Key stands from a credit risk perspective today? Tie that then back to the environment and just the things that you're incrementally watching for.
Sure. Those of you that have not followed us that long, coming out of the GFC, we said we were going to make some fundamental changes in our real estate business. Our real estate business at that point was not much different than anyone else's. Basically, lending to a bunch of people and hoping at maturity, you get repaid. We said, "We're changing that completely." We ripped that business down to the absolute studs. We said, "We're going to focus on a few asset classes, namely multifamily and affordable." We were really going to lean in. We were going to finance people that were very targeted in who we were going to finance. We want people that owned multiple buildings, not somebody that was so one, it was client selection.
The next thing we did is we made balance sheet changes. For example, we had about $16 billion of loans out before in the global financial crisis. We shrunk that down to $9 billion. We said, "We're going to get really" we had 10% in construction. Today, we have 2% in construction. That 2% is all affordable. I won't bore you with a bunch of details, but I think there's been like three defaults of affordable because the perm is already in place by the time it's done. We just made just a whole lot of changes. We changed that business to the underwrite and distribute model that we've been talking about. I'll tell you, as we think about our real estate business today, I don't worry about I mean, I see all the facts.
I don't worry about our portfolio at all. I mean, we have no rent controlled. We have less than $100 million of B and C class office space. Now, part of it, if you're a good risk manager, sometimes you get out too early. I had a pull-out of all the gateway cities in multifamily in 2021. It was in retrospect, we could have stuck around and done well for a while more. These cap rates were getting bid down to like 2%. Two percent with escalators in for rent. Those are just priced to perfection. It's one thing if you're an equity investor. I guess you can take that risk. If you're renting money, that's not a good risk. You put all that together. I mentioned it earlier, we built out this third-party loan servicing business. I really believe this.
I think our real estate platform is the number one platform in the country. I am out recruiting people. I think we are very good risk managers. By the way, real estate has kind of a, obviously has a certain connotation. Real estate customers are good customers for banks because really financing is their raw material if you think about their business. That is our real estate business, Ken. I am really proud of it. I think it is on a great trajectory. We continue to hire a lot of people. For example, the last thing we have built in real estate, we have a big affordable, we are top two or three affordable in that business. Now we have built out a whole equity platform. There is a lot to be done there. I feel great about our real estate business.
Just as we think about credit as it relates to the C&I business in terms of we talked a bit already about the tariff potential impacts. You went through that 850+ clients. Do you worry about defaults going up? Do you just generally expect defaults to go up? Or do you feel like that there's just a solid base underneath the customer base that they should be able to handle? Again, to your point, however this gets negotiated out over time.
I really feel like we've seen the fallout from the biggest hiking cycle in the last 44 years. We've seen for the last four quarters, every credit metric has actually improved. Now, you might have noticed that we did build reserves in the last quarter to the tune of about $125 million of additional reserves. That was based on the macro. The liberation day came. A lot of uncertainty. Why not, right? I mean, we got to be proactive. We didn't know where it was going. I feel like, look, there will be defaults. There will be charges. I think last quarter, we charged off 43 basis points. We've always said through the cycle, we'll charge off between 40 basis points and 60 basis points. I think we're actually on the improvement side with respect to kind of all the credit metrics.
Excellent. Let's talk a little bit about just capital and capital strategy. You talked about the increase in the base. You recently announced a share repurchase authorization. Talk us through the cascading choices that you always are thinking through in terms of organic growth, dividend, buyback, and acquisition.
Sure. As you can imagine, that's something that I talk to my board about every single meeting that we have. First and foremost, as I said earlier, having a little extra capital right now, I don't think it's a burden. I think it's a luxury. I'm not really that worried about it. Kind of the first order of operations is to support our clients and our prospects. As I said, we're starting, Ken, to see that, which we hadn't seen in a while in terms of loan growth. That's the first thing that we do. The second thing is to invest in additional people and technology. We've spent some time talking about technology. What we haven't talked about this morning is we're investing in a lot of people in our wealth business.
We're going to hire another 50 people in terms of our bankers and our integrated corporate and investment bank. We're going to grow it by 10% in terms of bankers. As you can imagine, this is the season when we're heavily recruiting. It's going extremely well on those fronts. We did actually have done a lift-out of some teams in both Chicago and Southern California. We'll invest in people and technology. The next thing you'll see us invest in is niche businesses. One thing I'm really proud of is our ability to buy entrepreneurial businesses and plug them into Key. I've been a banker for a long time. Not many large companies are very good at that. At the end of the day, what most large companies do is they buy some small entrepreneurial business and they plug it in.
Once they plug it in, they proceed to destroy everything that they really wanted and liked about the business and why they paid a premium. I think we have a pretty good track record. We'll continue to buy these niche businesses. We're constantly talking to people and we'll do that. You mentioned the dividend. Obviously, the dividend is important to our investors. As a consequence, it's important to us. I mean, right now, and I'll get to the right now, our dividend is yielding like 5.2% or some huge number, which actually is a good segue to the last kind of order of operations as we think about capital. That is, do we want to use some of this excess capital? My favorite way to use our capital is for our clients and prospects. Make no mistake.
If we have excess capital and Basel III Endgame has sorted out and we're kind of in a steady state on some of these other macro issues that we talked about today, I think what we would do is we'd look at, do we want to do any balance sheet restructuring on the edges? Nothing like the two that we did last year, but you could do something on the margin. Lastly, as you pointed out in your question, our board authorized a $1 billion share repurchase. My bias right now, if we had excess capital, would not be necessarily to raise the dividend. I think our stock's undervalued. When it's yielding 5.2%, I would want the flexibility of potentially going into the market and doing a share repurchase. That's kind of how I think about kind of our capital.
Yeah. And a couple of sub-questions on that. Your point on the dividend, the dividend payout ratio has been in the low to mid-60%. As earnings grows and you grow into that, what's the right range or the proper zone for KeyCorp over time?
Yeah. Good question. I think 40%-50%. There's no real science to that. We'll get to the upper end of that range just in the ordinary course probably this year. I think 40%-50% is probably a good number for the dividend. When you get kind of steady state, obviously, the total payout range, depending on what's going on, could be significantly higher than that.
Right. The one thing that you did not explicitly mention in your uses of capital is bank acquisitions. A broader question I wanted to ask you, in addition to how Key might participate in M&A, is just your general views as we get this regulatory softening, change in heads at the Fed, movement on Basel III, etc. What is your general view of how you see the industry consolidating over time? To what extent do you think Key might participate over the long- term?
Sure. Broadly, what I've shared with my board is I think as it relates to depositories, there'll be very little activity until there's a lot of activity because that's just how consolidations work. That's how I think this will play out. Right now, there's a few things that are holding it back. There's no question that there are changes. There's a couple of kind of small deals that were approved relatively quickly. I think we were all surprised how quickly they were approved. Some idiosyncratic issues on those deals. I think there's a big difference between a couple of months and 18 months. I think that's a positive. A couple of other things holding people back, these unrealized losses, these are real.
I think people need to figure out kind of how to work through those. Right now, with larger banks, I think there are a lot of people that would like to be buyers and not many people that want to be sellers. With the smaller banks, my instinct tells me there are probably a lot of people that would like to be sellers and very few people that want to be buyers. These things get sorted out. I think that as it relates to us, one, it's not where I'm spending a lot of my time right now.
I just talked about kind of how we're focused on capital. I think we need to prove to the market that we can execute the plan that we have, which is a very significant organic growth plan. Our good work needs to be recognized by the market so we have a currency that we want to use. That is really the focus of ours. We have this huge organic opportunity right in front of us. I think there is time to get that executed.
Yep. And one further on the regulatory front, what are you guys most hoping for in terms of how D.C. settles out, not just on the tariffs and trade front, but literally on the balancing act of proper versus over bank regulation?
As it relates to Key, we're not that focused on any one thing right now because we basically looked at the proposed rules and we made the changes that even if they were implemented as currently described, we'd be fine. For example, marked capital, our marked capital right now is almost 10%. I think ultimately our goal when we set it will be somewhere between 9%, 9.5% and 10%. By the way, we generate a bunch of capital. You think about deposit outflow assumptions that after what happened in March of 2023, I think everyone needed to reevaluate their deposit. We've made those changes. In terms of liquidity, I mean, I think last night we had $13 billion at the Fed or some such number. We're in good stead as the rules are. Going forward, though, there's a couple of things that we really care about.
One are the stress tests. The stress test, the opacity of the stress test, the black box nature of the stress test. Very, very hard when you're running a business and your SCB on the same portfolio, your SCB goes from 2.5 to 3.1. We have so much capital. It doesn't matter. As you plan for your business, I think having clarity and not having and not the opacity there. The other thing that I mentioned that is so important that I think is underestimated by people that aren't in the business is just not have these duplicative efforts because that's a huge time dividend that some very senior people can spend taking advantage of these huge opportunities we've got out in the marketplace. Those are a couple of things I'd hope for.
Excellent. So we covered a lot of ground here. Any final thoughts that we should take away about KeyCorp as we think about investing in the company?
No. I think it kind of came out in your questions. I appreciate all your questions. I think I modestly think we have a really, really good management team. I think we have a very definitive strategy that's a bit different than the other 4,400 banks. I think we have some built-in trajectory both in our balance sheet, which is math, but also, and more importantly, from my perspective, in the marketplace. I think it's going to be an interesting period for us. Thank you for having us.
Great. Thanks very much for joining us, Chris. Appreciate it.
Thanks, Ken.