DBRS downgrades KeyCorp

DBRS said it downgraded KeyCorp's issuer and senior debt ratings to A (low) from A, subordinated debt to BBB (high) and non-cumulative perpetual convertible preferred stock to BB (high) and confirmed the FDIC-guaranteed senior notes at AAA. The rating on the short-term instruments remains R-1 (low).

The trend is negative except for the FDIC-guaranteed notes, which have a stable trend.

The agency said the downgrade reflects Key's struggle with steep asset quality deterioration over the past two years and DBRS' expectation of further declines in the credit quality of the company's commercially focused loan portfolio through 2009 as suggested by the 42% quarterly growth in nonperforming loans.

KeyCorp's ratings are supported by a community banking-focused commercial banking franchise with historically diverse yet stable revenues, DBRS said.

The negative trend reflects the agency's perception that significant amounts of potential losses remain embedded in the company's loan portfolios.

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