KeyCorp shares rise on report of deal talks

NEW YORK (Reuters) – Shares of KeyCorp (KEY.N: Quote, Profile, Research) rose more than 3 percent on Thursday after a DealReporter article said the regional U.S. bank had held talks with Canada’s Toronto Dominion Bank (TD.TO: Quote, Profile, Research) about a possible deal, analysts said.

KeyCorp could be bought for $10 to $11 per share, CLSA analyst Mike Mayo said in a research note.

Key’s shares were up 3.3 percent at $9.34 in afternoon trading on the New York Stock Exchange. The stock was the top gainer in the KBW bank index (.BKX: Quote, Profile, Research), which was up 1.8 percent.

“Early option activity shows at least one investor believes a deal could take place by purchasing a so-called bullish June $10 call-June $8 put risk reversal,” said Patrick Mortimer, director of options trading at Pipeline Trading Systems.

Mayo wrote that a takeover of the Cleveland-based bank was not “far-fetched.”

Negative fundamentals with revenue challenges, a planned departure of Key’s chief executive and a stronger Canadian dollar would help, Mayo said.

A KeyCorp spokeswoman and a Toronto Dominion spokesman declined to comment.

Henry Meyer will retire as KeyCorp’s CEO on May 1, and will be succeeded by Vice Chairman Beth Mooney.

KeyCorp could also attract other bidders, such as US Bancorp (USB.N: Quote, Profile, Research), Mayo wrote.

Key is one of the few large banks yet to pay back U.S. bailout funds handed out during the financial crisis.

(Reporting by Paritosh Bansal in New York and Doris Frankel in Chicago, editing by Dave Zimmerman)