Good morning and welcome to KeyCorp’s Second Quarter 2007 Earnings Results Conference Call. This call is being recorded. At this time, I will like to turn the call over to the Chairman and Chief Executive Officer, Mr. Henry Meyer. Please go ahead sir.

Thank you, operator. Good morning and welcome to KeyCorp’s second quarter earnings conference call. We are appreciating you taking time to be a part of our discussion today. Joining me for the presentation is our CFO, Jeff Weeden, and also joining us for the Q&A portion of the call are our Vice Chairs, Tom Bunn, and Beth Mooney, and our Chief Risk Officer, Chuck Hyle. Before Jeff reviews our financial results, I want to make a few comments on the quarter. Overall, I was very pleased with the Company’s financial results, especially in light of the continued, competitive pressures, and the challenging interest rate environment. Key’s results were driven by this performance in several of our fee-based businesses and effective expense control. We’ve also continued to invest for our future. Our investments includes human capital making sure that we have the right people and providing the necessary training in technology including our new teller 21 platform is scheduled for implementation across the Company in the second half of ’07 in the first half of 2008, and an infrastructure with plans to modernize a significant number of our branches over the next three years. Beyond our financial performance, we also had some positive news on the compliance front. As we previously reported, the Comptroller of the Currency and the Federal Reserve Bank of Cleveland have removed the regulatory agreements with Key. I am extremely appreciative of the commitment and level of effort that put by our employees and little support provided by our Board of Directors as we strengthened our anti-money laundering and Bank Secrecy Act compliance programs. Now, I will turn the call over to Jeff for review of our financial results. Jeff?

Thank you, Henry. I would like to direct everybody’s attention first to slide two, which covers our forward-looking disclosure statement. This will cover both the presentation and the Q&A segment of our call today. Looking at slide three, which is our financial summary. As Henry mentioned, we had a very good second quarter with EPS from continuing operations at $0.85 per share compared to $0.74 per share for the same period one year ago. Our ROE in the second quarter of 2007 was 17.66%, up from 15.85% in the second quarter of 2006. Turning to slide four. The Company taxable equivalent net interest income for the second quarter increased $6 million from the first quarter and decreased $20 million from the same period one year ago. For the second quarter of 2007, our net interest margin was 3.46% down 4 basis points from the first quarter level and down 22 basis points from the same period one year ago. We believe that most of the near term negative pressure that we have been facing on our net interest margin is coming to end, and we should see greater stability of the margin around the mid 3.40% range for the second half of 2007. As of the end of the second quarter, our exposure to a 200 basis points changed in short-term interest rates over the next 12 months remains relatively neutral. Slide five, highlights the changes in non-interest income between the second quarter of 2007, the first quarter of this year, and the second quarter of last year. The strong growth in our year-over-year results reflects increases of 67 million in principal investing gains, $23 million from loan securitizations and sales, and higher revenue from several of other fee-based businesses. We also had a $40 million gain related to the…

Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions]. Our first question comes from Gerard Cassidy, RBC Capital Markets.

Good morning. Thank you. Jeff, could you… just a follow-up on your last comment about the guidance for EPS is coming to stop after ’07. What was the banking behind you guys changing your position on providing guidance?

Well, we have looked at a number of other banks that provide guidance and most of the guidance that’s provided today by companies happens to be in the form of specific line items rather than a specific earnings per share. As you recall earlier this year, we went away from providing quarterly guidance and with to an annual guidance. So, this is just the continuation of now moving away from earnings per share guidance all together.

Okay. It look like from your prior quarter, when we look at the ’07 earnings outlook, the guidance almost 280 to 295 for the full year and now it looks like you pumped that up to 300 to 320 on an annualized basis in the second half. What was… even though your margin is pretty much unchanged, what’s the positive change that’s up the earnings guidance, if I am interrupting it correctly?

Yes. Well, there are couple things, one, we have had… I think just the strength that we had in the second quarter with respect to principal investing and then our outlook for the balance of the year with respect to certain key our businesses, I think [inaudible] area and the National banking area, they are very positive on second half of the area with respect to some other Key based businesses. I think in terms of looking at principal investing for the balance of the year, the outlook remains favorable. As I think we said in our press release, we don’t expected to be at the same level. We experienced in the second quarter, but we do expect it to be favorable compared to prior years. And I think we also had… we had a favorable loan growth in the second quarter. And so, that give us more confidence as we head into the second half of the year, given our pipelines and some of the activities are taking place in the community banks as well as things that are happening in the National bank to provide the guidance that we did.

And my final question is, speaking of loan growth, do you guys participate in the syndicated leverage loans that are being driven today by all the privatization of companies. And if so, what’s the size of that portfolio in the commercial loan category?

Chuck Hyle.

Hi. This is Chuck Hyle, speaking. We are not material participants in the leverage loan business. We don’t do a lot of, in fact, we do very few of the larger transactions to a very small group and a very small portfolio that focuses on some leverage lending, but the portfolio today is actually smaller than it was two years ago. It’s not a big business for us.

Thank you.

Our next question comes from [inaudible] Partners.

Thank you and good morning. I am just wondering on the litigation reserves appear over and done and behind us now. And second, would you say the same about the MasterCard gains. And then third, you had a number of peers or smaller brother end that have had some problems with private real estate developers. And I am wondering, why, or can you talk us through that in terms of why you avoid that or how you look at it?

Now for the first thing I cover is the litigation. This is Jeff Weeden. The litigation reserve that we established was for a case that was came to light that we had a unfavorable outcome on. And we’ve taken the full accrual for that particular case. We will still continue to pursue what other avenues we have available to us including the field. With respect to MasterCard, we recognized in the… we sold about 60% of our holdings in the second quarter. So, we still have additional holding of that particular company. And the last question with developers, Chuck Hyle will present.

Well, let me address private developer side. Our National Commercial Real Estate business is first of all focused more at a larger end of the business, and I think that certainly is helping us in this particular part of the cycle. Second point, I would make is that we very much restrict and essentially restrict many of our branches or smaller end of the business to get involved real smaller developers. We stay very much away from that, we run it on a national platforms. So, we feel we are well diversified and we run it through professional commercial real estate people, and that’s been our model for quite some time. We’ve also, as we said in previous calls, started ramping down our residential side of the real estate business, starting a number of quarters ago, condominiums almost two years ago, and real defentials [ph] probably closer to nine months ago.

Thank you.

Our next question comes from Gary Townsend, FBR. Gary Townsend - Friedman, Billings, Ramsey & Company: Hi, good morning. How are you gentlemen? With respect to guidance, first of all, can… it seems, though you are expecting some acceleration in the second half, can you just discuss the drivers in the second half of the year? And whether there would be, in your estimate, any nonrecurring income?

Gary, this is Jeff Weeden. As we look at the second half of the year, I think we just… what we are looking at is a stability on the margin around mid 340 range. We are looking at controlled credit cost, I think with our guidance that we provided. We are seeing some asset growth. And I think in terms of the fee income side… and Tom Bunn can address the pipeline for investment banking. But I would also remind everybody that typically we have either in the third or the fourth quarter a securitization that we complete in our student lending area, and so, that adds to our fee income also. And historically, if you go back, we typically have stronger third and fourth quarters. But fourth quarter typically being the strongest and the first quarter typically being the weakest of our quarters on historic basis. So, that’s really a lot of the basis point every time. If Tom, can you comment on the new business?

Sure. Clearly, we don’t have... first of all, on the condition of the markets for the next six months, but on the standpoint of what Jeff said, we tend to be seasonal our business with third, fourth being our strongest quarters. We are pleased with our first half performance, but we are optimistic about our pipeline and all that major areas including both M&A and capital market inclusive I think equity land fixed income of syndicate. So, we feel good about the second half, we expect again borrowing a capital markets issue we expect that to be strong half. Gary Townsend - Friedman, Billings, Ramsey & Company: All right. Thank you. Could you also just briefly discuss what you are seeing in terms of migration analysis in your loan portfolios?

This is Chuck Hyle. Yes, we have … I think probably like most banks have seen some migration in our portfolios I think clearly the home builders section is one area that we have been watching quite carefully and we have seen migration there. We don’t believe that and there will be any material loss that comes out of that, but we certainly have seen some migration. We don’t expect the residential side of real estate to improve much until well into 2008 and react accordingly. We have seen a little bit of migration here and there, but nothing a really, terribly dramatic across the rest of the portfolio. Gary Townsend - Friedman, Billings, Ramsey & Company: All right. Thanks for your comments.

Our next question comes from Matthew O'Connor, UBS.

Good morning. Your commercial mortgage loans help us bail increase sharply versus last quarter. I was just wondering if you could give a little color in terms of the market conditions for those loans, and as there is any mark-to-market write-downs in the second quarter?

This is Tom Bunn. The market is consistent spread have near [ph] which allows for more difficult… well, not more difficult a smaller gain in the securitization. Let me say for sale and overall we feel like that market will remain open. Our volume is very good. Our volume has better than it’s been… was better than we expected to be through the year better than last year. So, while spread had nearer we do feel good about volume, we do feel good about the market receptivity.

Okay. And then material mark-to-market write-downs this quarter from the narrowing the spreads?

No.

Okay. And just separately your service charges grew nicely year-over-year. I am wondering if you give us some color in terms of will that be driven on the consumer side or commercial side.

Consumer side. And it’s really driven by I think the success that if nearly bank had last year with their Nano campaign and the adding of accounts. So, we’ve been consistently adding checking accounts during the course of the past… basically nine to 12 months. So that just added to additional activity charges that are out there, and we renegotiate the contract with… on check processing and that also contributed to the increase in the fees.

Okay. And just lastly if I may. Your private equity gains obviously very strong and it sounds like pretty robust outlook there. Can you just give some thoughts in terms of what’s driving all that I mean I thought the portfolio is only $600 million or so, the upsize gains?

Portfolio I believe was closer to $900 million as what we have on the books and so. It’s a combination of both funds as well as mails and some direct investments. And we’ve had a couple of companies that have gone public and they have been very successful in that process. So, that’s what driving the profits.

Okay. Great. Thank you very much.

Our next question comes from Mike Mayo, Deutsche Bank.

Hi, good morning.

Good morning.

What changed with your guidance, I mean capital markets were strong, that’s not new, yet, seasonal strength in the second half of the year that’s not new. So, fundamentally, what you are feeling better about to raise expectations for the second half of the year? You mentioned principal investing is there and the securitization gains that was kind of known before, anything else in the back of your mind that you feel better about?

I think in terms of… while we can talk in terms of a number of different things. We’ve covered a number of those at this point with respect to just better flow of activity coming from internet. I think in terms of the community bank, some of the strength they had in the quarter with respect to deposit service charges, I think just the fact that we’ve performed so much better in the second quarter, and we’ve had pretty much effective expense control. So, we will continue to watch our cost, so that we can get some positive operating leverage in the second half of the year.

And what is about the service charges that are doing so much better?

Well, Mike, I think we’ve had several years where deposit service charges have decreased. And part of it is that the community bank models taking hold and we are just getting more accounts that we are attracting to the Company, and with those accounts… account additional activity charges.

And separately, your out of the merger penalty box, so what your thoughts about buying banks where, what size, merger vehicles et cetera?

Mike, it’s Henry. I can just tell you, it’s nice to be out from underneath the strength that we’re there. We continue to look for add-on acquisitions in the markets, that we’re in that, hasn’t changed. It isn’t like we are at the starting line of an auto race and we got a green light, and we are just going to go spend money. We have been talking to banks. We have some particular focus on areas where we think we are under shared. And we will try and be opportunistic as the time goes here. The market still seems very rich on the seller side. So, we are going to proceed in the same discipline way we have in the past.

And merger of equals?

We are never saying never to anything. But right now, we’ve got some momentum in our business model and we like to try to take advantage of those areas. We have 23 districts in the community bank, and the number of those areas are not optimal in terms of profit maximization for our shareholders and we are going to work on those areas first.

And then also adjacent markets?

Again, if the right opportunity is there and the right opportunity for our existing shareholders the benefit from that kind of an investment, we look at. It has been harder to do those kinds of investments than areas where we are already have a presence given the cost issues. So, we don’t prioritize it that way, but we would never say, never.

All right. Thank you.

Our next question comes from Terry Mcevoy of Oppenheimer. Terry Mcevoy - Oppenheimer& Company: Good morning. Could you talk a little bit about asset quality trends within the equipment finance line of business? If I remember correctly that area drove much of the increase in Q1 in terms of non-performing assets. And then the second question within Key’s private equity unit last quarter, there was a real estate related investment also moved into non-performing status. Any update there, and any movement in the second quarter within that overall line of business?

Yes, this is Chuck Hyle. On the leasing side, we’ve seen over the last couple of months really a stabilization in that portfolio. The small ticket side is stabilizing and flatting and we think things have moved in the right direction there. And on the big ticket side, it’s been pretty much the same. So, I think the outlook for us is a bit better there than it was at the turn of the year. And as far as the real estate investment, we commented it on the first quarter. We have now control of that asset. We are running the marketing of those units, and our experience over the last month or so is actually better than our expectations a quarter ago. So, we are quite optimistic on that particular property. Terry Mcevoy - Oppenheimer& Company: And within the four major markets, could you talk about deposit trends, growth by region, pricing competition by region et cetera?

Yes, I would be love… to be glad to answer that question Terry, this is Beth Mooney. We are starting to see some good growth in our Western markets both in our commercial loan growth as well as our consumer loan growth. As we’ve talked in recent quarters, consumer loan growth specifically in the home equity product has been difficult to show growth given the level of pay offs in the market given the interest rate environment. But we have seen stability in our Western markets in both commercial, business banking, and consumer loan growth. And in the Great Lakes in our Northeastern market, we are seeing nice commercial and business banking loan growth but given those housing markets, we do not see the consumer loan growth rebounding there yet. As it relates to the deposit markets, we are seeing a linked quarter growth in our deposit offering and the pricing still remains incredibly competitive in Great Lakes in our Northeast market. And there is a much more rational pricing in the West, and as a result, we get some of our strongest growth with our current price offerings in our Western markets. Terry Mcevoy - Oppenheimer& Company: Thank you.

Our next question comes from Ed Najarian, Merrill Lynch.

Hi, good morning everyone. My questions have been answered. Thank you.

Our next question comes from Kevin [inaudible].

Good morning. Most of my questions have been answered as well. I just had a quick follow-up… a couple of quick follow-ups. On loss provisioning, would you anticipate provisioning to match charge-offs over the second half of the year? Will we see a relatively stable reserve to loan ratio or how should we look at loss provisioning?

Hi, this is Jeff Weeden. The expectation for the purposes of how you project that out would be that provisioning and charge-offs would approximate one and another.

Great. And I apologize if I missed commentary during the discussion. Strengthen in non-interest barring deposits, I heard somewhere near 20% annualized growth on a linked quarter basis, could you tell me what’s driving that?

A lot of that is coming from our commercial mortgage servicing area. We continue to add servicing as well as the escrow balances that are associated with that.

Great. Thank you very much.

Our next question comes from David Pringle, Salespoint [ph] Research.

Good morning. Thank you. You had mentioned that you expected a slight upward bias in credit in the second half. Could you give us an idea what areas you expect that in? And then I have a follow-up.

Yes, this is Chuck Hyle. I guess the portfolio that we are most focused on, as we said in the past, the residential real estate side of the business. We’ve seen some migration, and while we see perhaps some increase there, we don’t believe that the charge-off numbers will be materially increased from where they are today. And we are also watching the community bank and the business bank. I think that’s where we are in the cycle is that’s some of our companies may begin to feel a little bit to scratch and strain, but again, we haven’t seen a lot of migration in there, but we are keeping our eye on it.

What leaves you to believe that the part of the CNI book will be under so much pressure?

I am not sure, much pressure. It’s a bit of pressure and it also relatively point. And we have come off such benign time and we are at that point of the cycle, and things have been very good for a very long point in time. So, we expect maybe a little bit of uptick from the very good times we have been having over the last couple of years.

Sure. And then, how are you all willing to disclosure condo exposure?

We have not, but if you look in the Qs and the Ks, you will see the residential breakdown in there and it’s in that number.

Sort of that 2 billion to 3 billion range.

And it’s coming down quite well.

Thank you.

Our next question comes from John Mcdonald, Banc of America.

Hi guys. I had just a quick reminder, on your capital levels and buybacks. There is a lifting of the regulatory payments in your M&A interest, change anything with regard to the buyback strategy?

Well, we will continue, John, to manage our capital. So, that we have a flexibility to both look at organic growth M&A related activities as well as to continue to look at share repurchase.

And any change in terms of Denovos appetite either because of the things you are getting crowed or because you are having success in some of that initiatives, what’s kind of an update on just Denovos appetite?

Yes, John, this is Beth Mooney. We have done a limited number of Denovos this year, just a handful of those, a few consolidations and closers. We are in the process of the evaluating our Denovos strategies for the next two to three years. And I would see a selectively come up with a plan to build an incremental branches that we have not finalized those plans yet.

Did you see sub using the Denovos towards the new markets, Beth?

No, John, I would not. Henry mentioned that we are sub-optimized in a number of our markets where we have high growth and no share. And I think we have ample opportunity to look at expansion and very attractive market where we have a presence.

Okay. Thank you.

Our next question comes from Mike Holton, Merrill Lynch.

Hey. A couple of questions. First on kind of back half of the year commentary around fee income. I know it’s seasonally strong time for loan sales and securitization point. As you think about that year-over-year, should those… should that be up over last year’s back half?

I haven’t given a lot of comparison there to look at compared to last year. I am really taking and looking at from this point forward. Last year we had other businesses that were part of the Company, that are no longer in there.

Okay. And then you had mentioned the MasterCard just hold about 60% of what you hold. In your guidance for back half of the year, are you assuming any additional sales of MasterCard shares?

No.

Okay. All right. Thanks.

Our next question comes from David Konrad, KBW.

Good morning. I guess another question on fee income in terms of trust. And the trust and wealth management business was up, up really strong this quarter. I think on a core basis maybe 5% on linked quarter and 10% year-over-year. Just wondering in your guidance if that type of growth rate was sustainable or what’s your outlook for the next two quarters in the trust side?

This is Tom Bunn. Let me address the victory side of that and then let Beth talk about the retail side of that. We’ve been very pleased with the growth in victory from asset under management side. The acquisition of Austin Capital, some of areas that we build out have shown a very good growth as well as core diversified and other strategy. We’ve set that continue quite honestly. We think the performance of those strategies is above benchmark, and we will continue to track assets going forward.

Yes, David, and then, the retail sector, we have two drivers of our growth. One, we are seeing growth in our core wealth management businesses, the individual particularly around asset management. But probably the biggest drivers for us is our platform investment program, Key Investment Services, which we really effectively started in the first quarter of 2006, and that business has been growing north to 20% on a linked quarter and more than that year-over-year. So, the big driver for us is the success with that platform program that we are offering through our branches.

Okay. Great. Thank you.

Our next question comes from Michael Rogers, Conning Asset Management.

Yes, good morning. Looking at page 17 of your printout on commercial real estate loans. I noticed sure it’s come before, but I have asking anyhow. The Southeast residential properties portfolio is outsized relative to the rest. And I guess, please give me some background on, why this large, relatively large seemingly other footprint portfolio. And secondly is there any Atlanta and Florida exposure here where particularly in [inaudible] I guess things were particularly weak in terms of pricing conditions. And lastly, how much does the market in general in that region have to fall before you get concerned about having to take real losses?

Let me just the first half of that from the standpoint of our strategy in real estate business. Tom Bunn. We have always view the real estate business… commercial real estate business a national business. And obviously, over the last five, ten years, the Southeast have been a very strong market. We are in those markets physically, and so, therefore, these are markets we live in, these are markets we have offices in; these are markets we participate in. That led us, as Chuck mentioned earlier, to begin to withdraw or reduce exposure in certain of those markets as much as two years ago. We noticed high condominium markets in Florida and some other regions, which resulted in us as Chuck said been more active in managing our condo exposure in those markets. So, we look at this business… we look at business as a very geographically and product diversified business. And so, we… and unlike as some of our businesses, which are franchised based, this tends to be national based and Southeast just part of a national approach. Chuck, do you want to talk about?

Yes, I think this really actively following [ph] on that, we have… you will see a trend line in the Southeast residential properties exposure coming down over the last number of quarters. And we expect that trend to continue. And again, a point I made earlier, we have tended to focus on larger entities in the real estate business not the small guys, and as a result, we think they generally have stay in power to get through any kind of tuff. There is still a lot of liquidity in the real estate business less than obviously in residential properties at the moment. But we have adjusted our portfolio strategy accordingly by deemphasizing certain businesses early, and emphasizing other parts of the real estate business that we think around the ascendancy. So, that’s how we tend to manage this business.

If I could ask how much do you think you will have to see in any given market, or in the general sense, market prices drop in general before you get more concerned about real charges-offs here?

Well that’s a really difficult question to answer. I mean there is so much of this is driven by micro markets and where you actually are. Lot of variables, of course we have watching very carefully certain markets in terms of the supply coming on and where market prices are going. We continue to feel that we have a good equilateral. We have been very conservative in our underwriting standards in terms of LTVs. And many cases we have the support of some quite large and strong sponsors. So, that give us a view that we are in pretty decent shape.

Thanks very much.

Our next question comes from Jim Agah, Millennium Partners.

Hi, guys. I am sorry if you addressed this earlier. I wanted to ask about the big revenue pickup in equipment finance. Were they any residual gains in there?

There was a gain on the sale of certain leases that’s the line items you saw in our income statement that related to gain on settle of loans and securitizations. So, that was the primary pickup there.

Okay. And then… that explains it. And then, the regional… just the consumer bank, I can’t pull slide up, the consumer bank profitability, the revenue is down a lot quarter-to-quarter and year-over-year. Was it… and I was trying to reconcile to see your fee income?

I think what you have look at is if you go to the press release and look at… sorry do you know the press release?

Yes.

You will find in there that again last quarter included all the revenues associated with the gain on the sale of the McDonald branch network, and also the few revenues associated with it. So, looking at that, there is approximate $193 million worth of revenue that would have been associated with the first quarter activity related to McDonald and sale they are up. And if you go back to the prior year, there is also additional revenue I think is around $54 million associated with that. Again, we got a schedule this broken out on our first quarter press release as well as going back and looking at the impact on at least on net income in the second quarter of press release on that page two.

Okay. And then as you go forward, I know you guys mentioned there was some adjustments here on loan to core to deposit growth like it looks a little better than reported. The loan to deposit ratio is starting to look a little high. Do you look at that ratio at all as you targeted? Do you have sort of an outer range limit, which suggest that at some point, you have to get more core funded, you have to buy more regional banks?

Well, I think in terms of the loan to core deposit, and the loan to deposit ratio, it is the ratio that we continue to track and follow. It is actually showing dramatic improvement over the past five years. It used to be on a loan to deposit ratio. We were up in the mid 140 range. And so, it’s come down to 110%. So, we believe we have made a lot of progress on that, and I think with our forecasted projected both low to mid single digit growth and both loans and deposits for the duration of this year. We are very comfortable with that overall ratio to where we are today.

Perfect. Thanks guys.

And we will take a follow-up from Brian [inaudible] Partners.

Next time, good. Thank you.

We will take a question from David Sprinkle, [inaudible] Research.

Look, I am doing some wrong. What was your tax rate for the quarter FTE?

Our tax rate for the quarter on FTE basis was, I believe, is around 30.8%.

And that was dealt little bit from the first quarter?

It was. And it also is below our guidance that we provided. We are providing a tax rate of approximately 32% going forward.

So, 32%, so a couple of percent higher. So, effectively you had the MasterCard gain higher securitizations and very nice quarter of principal investing and $42 million in litigation reserves?

And we also had a charge that we put in for the provision for unfunded commitments going to a $6 million expense from the $8 million credit in the first quarter.

What are the litigation reserves for?

Described those earlier.

Sorry.

They dealt with a suite that was over in Hawaii and we made a full provision for it.

Thank you.

And there are further no questions at this time, Mr. Meyer, I would like to turn the conference back over to you for any additional or closing remarks.

Thank you, operator. Again, I would like to just thank you all for participating in the call. While there were some one-time issues in our second quarter, through it all we are experiencing some strong growth in the basic drivers our earnings, our deposit growth, our fee income, both on the investment side, the service charge side. So, that’s why the guidance of $50 to $60 for the second half of the year. And we feel comfortable with the positioning that KeyCorp presented this point and time. With that, we are going to end the call, operator, again, thank you for your help and to all of you there stayed with us. Thank you.

And this concludes today’s conference. Thank you for your participation. You may disconnect at this time.