KeyCorp (NYSE: KEY) may be a top bank for safety of assets, but at least one firm has tempered some of its earnings expectations ahead of the super-regional bank’s earnings estimates. Janney Capital Markets lowered its estimates and lowered its fair value estimate.

While Janney’s report maintained its Buy rating, the fair value estimate was lowered to $17.00 from $18.00 versus a prior closing price of $13.06. Janney’s Sameer Gokhale lowered the bank’s 2015 and 2016 earnings per share (EPS) estimates to $1.08 from $1.10 in 2015 and to $1.15 from $1.22 in 2016.

It turns out that the lack of an expected rate hike and loss provisions impacting net interest margins (NIM) may be the harmful factors here. Sameer Gokhale said:

In the absence of a rate increase from the Fed, we expect KEY and other banks to face continued NIM pressure. We are assuming no rate hike from the Fed in 2015 and a 25 bp increase in 2016. For 2015 and 2016, we are estimating a net interest margin of 2.82% and 2.92%, respectively, compared to 2.94% and 3.14% previously.

We expect an increase in loss provisions overall coupled with NIM pressure to create a challenging environment for most banks, including KEY, in 3Q. However, we expect loss provisions to be driven by loan growth rather than a significant deterioration in credit quality. Therefore, we are now estimating a more modest reserve build in 2015 and 2016 than we had previously forecast. For 2015 and 2016, we are estimating loss provisions of $169 million and $254 million compared to $177 million and $274 million previously. We continue to estimate net charge-offs of 27 basis and 40 basis respectively in 2015 and 2016.

Again, Janney does see KeyCorp positively. The firm sees the bank continuing to focus on improving operating efficiency. Monday’s report said:

In addition to focusing on commercial loans, in particular, C&I loans, with a more attractive growth profile, KEY also has a significant amount of excess capital (we estimate $2 billion of excess common equity or about 18% of the company’s current market cap). We would expect KEY and other banks to use their excess capital to fund acquisitions or increased buybacks, helping support earnings per share growth and share price appreciation.

KeyCorp shares closed up $0.09 at $13.15 on Monday, and the 6.5 million shares was about two-thirds of a normal trading day’s worth of volume. KeyCorp has a consensus analyst price target of $15.83 and a 52-week range of $11.55 to $15.70.

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