There was good news and bad news for KeyCorp (NYSE:KEY) in the third quarter. Let’s start with the bad.
KeyCorp, the Cleveland-based parent company of regional lender KeyBank, fell short of earnings estimates due to a fraud case that cost the company $123 million.
In July, KeyCorp learned that Interlogic Outsourcing, an Indiana-based payroll processor and a longtime customer, had initiated a roughly $123 million overdraft from KeyBank to make wire transfers but didn’t have the money to cover them. KeyCorp is suing Interlogic to recover its losses, but the fraudulent activity had a significant impact on the company’s financial results.
KeyCorp reported net income of $0.38 per share in the third quarter, down from $0.45 per share a year earlier. The fraud case resulted in a $0.10-per-share hit; without it, the company would have beaten analysts’ estimates by $0.02.
The company said in an SEC filing that this was an isolated incident. A spokesperson told the Cleveland Plain Dealer that the company is taking steps to “contain and resolve” the issue. “We want to emphasize that our clients’ information and funds are secure. We will continue to investigate and pursue this matter seeking resolution for all our stakeholders,” KeyCorp spokesman Jeff Kew told the Plain Dealer.
Now on to the good…