KeyCorp in Cleveland agreed to sell a 14.9% stake in itself to The Bank of Nova Scotia for about $2.8 billion.
The investment should increase Key’s CET1 capital ratio by 195 basis points to 12.4% and its tangible book value per share by more than 10%.
Key said it intends to evaluate repositioning its available-for-sale securities portfolio to accelerate the timing of expected profitability, liquidity and capital improvements
“Scotiabank approached us with a unique opportunity to raise capital on attractive terms,” KeyCorp Chairman and CEO Chris Gorman said in a press release.
“While we continue to be comfortable with our current capital position, we determined that the investment enables Key to accelerate our well-communicated capital and earnings improvement while bolstering our strategic position,” Gorman added. “Further, this transaction creates greater capacity for growth by enabling additional investments in targeted scale across our franchise.”
The capital raise, along with the contemplated repositioning, would leave Key’s CET1 capital ratio in the range of 11.3% to 11.6%.
As part of the transaction, KeyCorp and Scotiabank plan to explore commercial opportunities together.
Scotiabank will pay $800 million for an initial 4.9% stake and buy the remaining stake street receiving Federal Reserve approval. The initial purchase is expected to close this month.