KeyCorp Shares Surge After $2.8 Billion Investment from Bank of Nova Scotia

Key Takeaways

• KeyCorp shares surged Monday morning after the bank announced a $2.8 billion investment from the Bank of Nova Scotia.
• Scotiabank will acquire about 163 million shares by the first quarter of 2025 after the companies receive regulatory approval.
• Cleveland-based KeyCorp called the investment a “unique opportunity to raise capital on attractive terms.”

Shares of KeyCorp (KEY) jumped Monday morning after announcing that the Bank of Nova Scotia (BNS) acquired a 14.9% stake in the bank, valued at roughly $2.8 billion.

Scotiabank will buy approximately 163 million shares over a pair of transactions, with the first being an $800 million investment at the end of the month. After the companies receive approval from regulators and the Federal Reserve, which they expect to take place by the first quarter of 2025, Scotiabank will invest another $2 billion in KeyBank.

KeyCorp Taking ‘Unique Opportunity to Raise Capital on Attractive Terms’

“Scotiabank approached us with a unique opportunity to raise capital on attractive terms,” KeyCorp CEO Chris Gorman said. “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.”

Scotiabank will be purchasing shares set at a fixed price of $17.17 per share, a premium of roughly 17.5% to Friday’s closing price of $14.61.

KeyCorp shares were recently up about 13%, reaching levels not seen since early 2023. Scotiabank’s shares fell some 4%.

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KeyCorp Shares Soar After Bank of Nova Scotia’s $2.8 Billion Investment

KeyCorp, a Cleveland-based bank, experienced a significant surge in its shares on Monday morning following the announcement of a $2.8 billion investment from the Bank of Nova Scotia. The investment involves Scotiabank acquiring a 14.9% stake in KeyCorp, which is valued at approximately $2.8 billion.

The transaction will occur in two phases. The first phase involves Scotiabank making an $800 million investment at the end of the month. The second phase, subject to regulatory approval from authorities and the Federal Reserve, will see Scotiabank investing an additional $2 billion in KeyBank by the first quarter of 2025. In total, Scotiabank will acquire about 163 million shares of KeyCorp.

KeyCorp Sees Opportunity for Capital and Earnings Improvement

The CEO of KeyCorp, Chris Gorman, expressed excitement about the investment, stating that Scotiabank presented a unique opportunity to raise capital on attractive terms. Gorman believes that while KeyCorp is currently comfortable with its capital position, the investment will accelerate the bank’s capital and earnings improvement plans while strengthening its strategic position in the market.

Scotiabank will purchase the shares at a fixed price of $17.17 per share, representing a premium of approximately 17.5% to KeyCorp’s closing price of $14.61 on Friday. This premium reflects the confidence that Scotiabank has in KeyCorp’s future prospects.

Market Reaction and Outlook

Following the announcement, KeyCorp’s shares experienced a significant boost, rising by about 13%. This surge in share price brought KeyCorp to levels not seen since early 2023, indicating investor confidence in the bank’s future growth potential.

On the other hand, Scotiabank’s shares fell by approximately 4% after the news of the investment. This decline may be attributed to concerns about the bank’s capital allocation and the potential dilution of its existing shareholders.

Overall, the investment from the Bank of Nova Scotia is seen as a positive development for KeyCorp. It provides the bank with a substantial capital infusion, allowing it to pursue its capital and earnings improvement plans more aggressively. Additionally, the investment strengthens KeyCorp’s strategic position in the market, potentially leading to further growth opportunities in the future.

In conclusion, KeyCorp’s shares soared after the Bank of Nova Scotia’s $2.8 billion investment, signaling investor confidence in the bank’s future prospects. The investment presents KeyCorp with a unique opportunity to raise capital on attractive terms and accelerate its capital and earnings improvement plans. With regulatory approval expected by the first quarter of 2025, KeyCorp is poised to strengthen its strategic position in the market and drive further growth.