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KeyBanc Capital Markets by the Numbers
$2.208 trillion
Raised $2.208 trillion in debt capital markets via 2,930 deals from 2021–25
$133.8 billion
Raised $133.8 billion in equity capital markets via 245 deals from 2021–25
420 M&A Deals
Closed 420 M&A deals across 8 industry verticals from 2021–25
Randy Paine, Key Institutional Bank President, featured on Bloomberg
Dani Burger [00:00:00] For this sector, where are the most attractive targets right now?
Randy Paine [00:00:03] Yeah, I think, as we just heard, we've seen an uptick in bank M&A activity, but I would characterize the environment as normalizing. There was very little M& A activity under the previous administration. It was taking a year to two years to get things approved, and that's come in quite a bit. It's a fraction of that time now. For Key Corp, specifically, it's not on our priority list, but in terms of other the depository deals, but. We're very active in terms of just tuck in knowledge based businesses. We bought some investment banks and done that very successfully. I think more broadly, lower rates are going to help fuel more consolidation, whether it's in the insurance space, fintech, and we are seeing that.
Dani Burger [00:00:51] I'd be interested to get your take Amit. I mean is it the big deals or is it these more kind of like tuck in things. We're in the space is the most attractive now.
Amit Garg [00:00:58] Yeah our view is that historically the big deals haven't really done the returns that everybody expected of them. So where the world is heading is what we define as precision M&A which is about tucking transactions that add capabilities or extend the business into new business segments where there are attractive returns like wealth management or really filling the gaps in your portfolio certain markets where you are underrepresented or you don't have the right scale in certain other markets.
Dani Burger [00:01:24] Angela I'd love to get your take on this because obviously you're coming from a different part of the world. More startups that VC type of nature. What would be your pitch to the investment committee. Where do you think is most attractive.
Angela Strange [00:01:36] Yeah, listen, A16Z invest across all areas of the economy. I've spent the last decade in fintech and financial services, both at the very earliest stages and the latest stages. And the way we think about it is every technology product wave creates a whole set of opportunities. As you look at mobile cloud, that brought us the neobanks. It brought us payment companies like ramp and Stripe. And we're just at the start of AI, which is by far the biggest wave yet. And so I think we see an influx of new companies that are going to be competing with the banks. We see a lot of companies that are selling into the banks to help them become more AI enabled. And both of those categories are going to be very successful.
Dani Burger [00:02:16] Can you put some more color on on what those categories look like. Angela what what type of companies are the ones either doing the disrupting or getting bought by banks.
Angela Strange [00:02:25] Yeah, we think as a lot of activity in maybe three buckets, the first would be described as software augments labor. And so if you think of a specific example, usually banks would buy a software and then they would have to hire sometimes thousands of people to then operate it. Compliance is a very good example. And I'll use one of our companies, Sardine, which sells transaction monitoring. Usually you would buy the software and then you'd have thousands of L1 compliance officer doing research into all of the alerts. Now the software does the software, and also a lot of the labor around it. And so you can think of, you can't hire enough compliance people fast enough, you can't train them. Every one of these minor tasks takes 15 to 45 minutes. That can now be accomplished with AI. And all of that is happening across various areas of the bank.
Dani Burger [00:03:14] Randy how are you thinking about deal making in terms of at KeyBank bringing in AI capabilities via purchases via acquisitions or growing it internally. How does that outlook appear to you.
Randy Paine [00:03:29] Yeah all the above. AI is going to be a game changer for for banks and certainly Key Corp. We really think we're in the sweet spot because we're big enough to make big investments in this area. We're going to spend a billion dollars on tech investment this year up from 800 million in 2024. But we're also small enough to deploy it at scale and do it quickly. And so we it's going to be, just as you heard from Angela, you know, a way to make for a better employee experience, a better client experience, as well as provide huge opportunities for us to get more efficient.
Dani Burger [00:04:03] I'm going to are you doing a lot of work here when it comes to AI enabling of various banks.
Amit Garg [00:04:06] Absolutely. This is the topic that banks are really interested in. They are seeing real tangible benefits emerge. I think a year ago we were talking about A.I. As lots of experimentation. Now we see our clients really deploy a scale for both their client benefits and candidly to operate better and more efficient.
Dani Burger [00:04:27] I feel like we have to talk about some of the risks of M&A getting done in this sector. Randy, you're pointing at me being like, yeah, I feel there's a big one out there, which is market volatility, concerns about how is that impacting your look ahead?
Randy Paine [00:04:39] Well, I think if you think about bank investors, specifically regional bank investors. They really aren't all that bullish on M&A. They'd rather see banks increase dividends, pay out, make higher levels of share repurchase, or invest in organic activity. And that's why we have really said we're not focused on bank M&As. But the other reason is for just what we talked about. M&A is highly distractive. And it's not without risk, the execution risk. And when you're talking about deploying this incredible technology across scaled enterprises, we'd rather be focused on that.
Dani Burger [00:05:21] Angela, I'd love to get your take on that. What do you think of that risk, that some of these things might act as a distraction and banks want to focus in on the core?
Angela Strange [00:05:29] Now I've got a strong, strong agreement with Randy. Listen, like banks spend 650 billion globally on technology, but 70% of that has historically gone to just maintaining systems. And the view has been, it's too risky to replace them. This is the year where the risk of not replacing them is gonna outweigh the risk of replacing them because the new systems are just so much better. For instance, now in mortgage servicing, usually you can get 750 loans per employee. The new systems will get you 3000, and the new companies think they'll go up to 10. They can reduce your time to get a mortgage from 40 days down to 20 days. So often M&A is helping you grow and become more efficient. Now with AI and technology, you can accomplish the same thing even better.
Dani Burger [00:06:11] I'd say there is some tension in there though. Do you do these things? Does it maybe risk a distraction or is it necessary? Amit, where do you fall in into this?
Amit Garg [00:06:21] I think it is necessary. If you don't disrupt yourself, you get disrupted. So I think we see that, yes, there is execution risks when you do big M&A, but if you don't actually invest in the right technology to continue to improve yourself, you get left behind.
Dani Burger [00:06:36] What do you think for where we had in twenty twenty six. We started this conversation Scarlett saying all of the deals that have been done we've had the big purchasers come in. I mean let's let's expand beyond key bank itself but the overall market. Do you expect there to be a lot of deal activity in FIG in financials this year Randy or do you think it might end up being more muted.
Randy Paine [00:06:55] I guess could it be a normalized environment, certainly a regain of more bank M&A, but I don't think there's any catalyst and I really think that buyers are focused on how they can transform their business with the deployment of technology and that's a huge opportunity as we've been talking about.
Amit Garg [00:07:16] Yeah no I think it will pick up. If you even if you look at the price to book of the banks. Yes we are normalizing but it still operates at a fifth of what the tech sector is or a third of what industrial sector is. And at what you know one one and a half price to look there's still a lot of differentiation in the market where we will see M&A pick up
Dani Burger [00:07:35] Angela let me get your thoughts on this not not only on where volumes look but I'd love for you to comment too on on how valuations stand for the industry at the moment.
Angela Strange [00:07:45] Listen I think that banks are very much leaning into AI in a way that we haven't seen across any of the other technology sectors. And. It not only improves their efficiency, but also enables them to scale and serve a lot more customers. Like if you think of AI as a horizontal, you now have an army of infinitely patient, knowledgeable, available employees that work 24-7. And so you can hire, you couldn't hire before. And you can also enable all of your employees to be more human. Do you want your wealth managers out talking to customers, or do you want them in the back office doing paperwork? And so I think we're gonna see the companies that lean into this technology the fastest scale much more quickly, and valuations will come along with that.
We’re in what I call the “sweet spot” - big enough to make significant investments, small enough to deploy quickly and at scale. That agility is our competitive advantage.
Randy Paine
Key Institutional Bank President
KeyBanc Capital Markets Solutions
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