Rate volatility and economic anxiety made for a tempestuous year at regional banks across the country – especially in their residential and commercial lending divisions. But Angela Mago, president of Key Commercial Bank and KeyBank Real Estate Capital, looks back on 2022 as a shining moment for her team and a vindication of her bank's longtime prioritization of developing relationships with clients.
Mago reports to Chris Gorman, chairman, president and CEO of Keycorp — one of 12 direct reports — and has 1,131 employees in her organization.
The bank reported assets of about $200 billion in 2022, up from about $186 billion the year before. Mago, who has spent her entire career to date at the Cleveland regional bank and oversees middle-market and commercial real estate lending, says her team did a "really remarkable" job of "getting in front" of quickly evolving trends and proactively working with clients to manage their portfolios.
"You have to pay close attention because changes in interest rates can be very volatile through the real estate sector, so that was something that we spent a lot of time on in 2022, really focusing on the impact on customers and working with our borrowers to make sure that they had good strategies around interest rate management," Mago said.
That meant Mago's team did a lot of restructures, including ones that involved asking clients to take difficult actions like paying down debt, reducing the size of a facility or providing additional collateral to ensure they had sufficient interest reserves to carry them though a higher-rate environment.
"I'm really pleased to say that every client that we asked to step up and help replenish an interest reserve did it," said Mago. "They did it because they wanted to protect their own investments but also, I think, because they value their relationship with us."
Mago attributes such institutional trust to the bank's longtime emphasis on developing core clients — the ones who turn to her bank first when it comes to upgrading funds, accessing core treasury capabilities or even automating their payables and receivables.
Interest rates began to climb as the commercial real estate sector was struggling to recover from lower demand due to remote work policies necessitated by the COVID-19 pandemic. That's a trend that will likely keep playing out this year as office leases continue to come due, Mago said.
Meanwhile, Mago laid the groundwork to expand the bank's commitment to affordable housing, specifically via the development of a low-income housing tax credit equity syndication.
KeyBank issued $5.3 billion in affordable housing loans in 2022, up from
"Getting into the syndication business enables us to raise equity from other investors," Mago said. At the same time, it eases the financial burden on the bank and puts more equity dollars in play. The goal is to accelerate equity syndications to $1 billion by 2025.
Mago and her team have also been working on a debt loan fund in a strategic bid to leverage the "trillions of dollars in real estate that will be maturing in the next year alone," she said. At a time when, according to Mago, many banks are pulling back from real estate, "I think our timing is actually going to be very good."
If Mago's efforts were a hedge against the high interest rate landscape of 2022, they were thrown into sharp relief last spring, when the collapse of two West Coast banks put pressure on regional bank deposits.
"When you're somebody's core operating bank those relationships are sticky and those deposits are sticky," Mago said, adding: "We've seen the value of deposits in this current high-rate environment."
Mago's continuing efforts to identify, hire and promote diverse talent continued to pay dividends last year. Diversity among bankers rose to 28% from 25% in the commercial bank, and to 30% from 25% in the real estate capital group, she said.
