KeyCorp (NYSE: KEY) said today that it plans to repay $2.5 billion in government bailout funds under the U.S. Troubled Asset Relief Program.
To do that, Cleveland-based Key said it plans to raise $625 million through a common stock offering. Key also said it plans to start a separate registered public offering of senior notes.
The Federal Reserve has informed Key that it had no objections to the planned capital actions, Key said in a news release.”These actions position Key to grow,” said Henry Meyer, KeyCorp CEO, in a statement. “Key has successfully returned to profitability, fortified its capital position, reduced expenses and is benefitting from its early and aggressive actions to reduce our risk profile.”Mr. Meyer added, “Our goal has been to be patient in repaying TARP in order to reduce shareholder dilution. We believe this is the appropriate time to put TARP repayment behind us and that repayment now is in the best interests of KeyCorp and our employees, customers and shareholders.Key also said the Fed had no objections to a plan for the banking company to raise its quarterly dividend to 3 cents per share, from 1 cent at present, effective in the second quarter. The company’s board will consider the dividend increase at its May meeting.The Federal Reserve today completed another round of stress tests for the 19 largest U.S. banks, which included Key. The Cleveland bank was one of three of those banks that has yet to repay TARP funds.”We believe the U.S. Treasury’s investments in Key and hundreds of other banks across the nation contributed to stability and strength of the U.S. banking system during the financial crisis,” Mr. Meyer said. “We are appreciative of having been a recipient of the TARP investment. Key paid an aggregate of approximately $282 million in dividends to the U.S. Treasury during the investment period.”
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