Citi Raises Keycorp Price Target To $10

In a report published by Citi, Keycorp's KEY TARP repayment reduces overhang. Citi said that KEY announced on Friday it is issuing $625 mil in common stock (70.6 mil shares at $8.85) to repay the $2.5 billion in TARP capital. “We are maintaining our full-year 2011 est., but are reducing our 1Q est. by $0.07 to $0.09 mainly to reflect charge related to TARP (from accreting $54 mil), and raising the remaining 9 mos by a similar amount to reflect lower TARP dividends. Note that 2012-2013 ests. remain unchanged as we were assuming TARP repayment in 4Q11. We are raising our TP to $10 from $9 to reflect resolution of TARP overhang, but maintaining our Hold rating. While KEY trades at only ~1x our 12 mo forward TBV est., we do not see a lot of value with 2012 ROTE of ~8% rising to ~11% by 2013.” Keycorp closed yesterday at $8.92.