Cleveland-based KeyCorp gave more information on fraudulent activity that resulted in a $123 million increase in its loan loss provisions for the quarter.
On the bank's third-quarter earnings conference call, CFO Donald Kimble gave updates on the fraudulent activity the bank found in July and originally reported to be about $90 million, net of tax. KeyCorp recognized the fraud as a $123 million pretax increase to its provision for credit losses. The after-tax impact was $94 million.
The fraud loss was due to net overdrafts from multiple operating accounts from one business customer, but there were no outstanding loans with that entity, Kimble said on the call. The bank is continuing to pursue all avenues of recovery, and while Kimble could not disclose too much information on the fraud loss due to ongoing litigation, he said the bank will provide future updates in its public filings.
KeyCorp reported $200 million in provision for credit losses this quarter, up from $74 million in the second quarter and $62 million in the year-ago quarter. Excluding the fraud loss, Kimble said the bank's provision for credit losses was $77 million this quarter.