Welcome to KeyCorp's third quarter 2008 earnings results conference call. (Operator Instructions) At this time I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Henry Meyer.

Welcome to KeyCorp's third quarter earnings conference call. Joining me for today's presentation is our CFO, Jeffrey Weeden. Also joining me for the Q&A portion of our call are Vice Chairs Tom Bunn and Beth Mooney and our Chief Risk Officer [Chuck Hyle]. Slide 2 is our forward-looking disclosure statement. It covers both our presentation and the Q&A session that will follow. Now if you turn to Slide 3, before Jeff covers our financial results, I want to comment on the way we are strategically positioning Key to deal with the current economic environment and the challenges facing the financial services industry. In my 35 years in banking, we have successfully managed through a number of difficult credit cycles and as I reflect back on those past cycles, I cannot recall a time when we were more prepared than today. Key has continued to strengthen its balance sheet by maintaining strong capital levels and continuing to increase its loan loss reserves. At the end of the third quarter, our tier one capital ratio was 8.84% and we had a total risk based capital ratio of 12.31%, both of which place us well above the well capitalized regulatory standard, and positions Key to respond to future business opportunities. In the third quarter, Key's loan loss reserve increased by $133 million to $1.55 billion which represents 2.03% of total loans and $161% of our non-performing loans. We believe we have been consistent in our conservative reserving philosophy which has and should continue to serve us well in this credit cycle. Key has also continued to practice an active risk management. As previously reported, Key is in the process of aggressively reducing our exposure to the home builder segment of our commercial real estate business. As of the end of the third quarter,…

I'll begin with the financial summary shown on Slide 5. Key reported a loss of $0.10 per common share in the third quarter compared to a profit of $0.57 for the same period one year ago. Items impacting the third quarter results are shown on Slide 6. The most significant item identified on Slide 6 is a continuation of the build of the loan loss reserve. During the third quarter, we continued to add to our reserves as provision exceeded net charge offs by $134 million. In addition, as we described in our earnings release this morning, the Lehman failure resulted in the cancellation of various derivative contracts, leaving Key exposed to changes in market prices with respect to where we operate match book positions. Because these markets moved quickly during the hours following the cancellation of the Lehman contracts, we incurred a loss of $54 million to cover exposures with other counter-parties to restore the match books we maintain for customer positions. I'll discuss in a minute the update on the previously announced commercial real estate loan sale. The reversal of the litigation reserve relates to the [Hansadore] case we settled in September. This case was reserved for back in the second quarter of 2007 and was in our principal investing area. This reversal almost fully offset the $24 million negative marks we incurred in principal investing during the third quarter. And finally, on this slide, we note the severance and other exit costs we incurred in the third quarter, including those costs related to marine and educational lending areas that Henry covered in his remarks. We expect to incur additional costs which we currently estimate in the range of $10 million to $15 million range, related to these areas in the fourth quarter of 2008. Turning to Slide…

(Operator Instructions) Your first question comes from Matthew O'Connor – UBS. Matthew O'Connor – UBS: Slide 29 in the appendix is very helpful. It lays out all the exit portfolios, about $10 billion. It's a pretty big number relative to your loan portfolio and as you think about this rolling off, should we think about it pretty meaningful deleveraging of the balance sheet, or would you look to replace some of these assets? I'm thinking beyond the draw down of commercial loans.

I think there's going to be opportunities for us for new lending relationships going forward in the markets that we serve within the Community Bank and also within national banking. We would look for this particular portfolio longer term to provide us with additional liquidity to redeploy into those particular relationships in the markets. The expectation would be somewhere between $600 million a quarter that this would run off at least for the fourth quarter and looking out a little bit beyond that. Matthew O'Connor – UBS: And then related expense, give up as these assets roll off?

I think on the expense side, what we took was a severance and other exit costs in the third quarter. It was about $19 million in total. About $10 million of that was related specifically to the marine and educational lending business, and we expect that we're going to see an additional $10 million to $15 million of exit costs associated with that in the fourth quarter. That's for not only severance, but we wrote off about $4 million of good will in the third quarter, and then we'll have some occupancy costs that will go away. On a go forward basis, we would expect to see about $20 million to $25 million of annualized cost improvement as we get into 2009.

If you look at our businesses and you look at the changes that we've done in the real estate business, the refocusing of those businesses plus the consumer finance business that Jeff has talked about, when you look from September of '07 through the announced changes which will take effect in December of '08, our head count in national banking will be down about 20% point to point. So that supports the numbers that Jeff just talked about. Matthew O'Connor – UBS: I think all of the large mid west banks have come out with earnings. We're seeing a couple of similar trends. One, deposit pressures out there, two, it seems like everybody's shrinking assets by the balance sheet and there's no margin pressure because of deposit pricing and general liquidity issues. The kind of environment we're in right now, is this when we finally get some consolidation among specifically the Ohio banks. I'm thinking the [TARP] capital, there's some thought out there that it will only be available related to acquisition. I'm wondering how you think about that and any commentary specifically on what Treasury [inaudible] capital.

There's no question that Treasury's intent for the capital is to make more loans and it addresses some of the comments that you started with which is the deposit raising is still expensive especially as we continue to see downward movement from the Fed which lowers the prime rate and we do run into sort of a floor on the deposit side. I have said for some time, and I think this very unstable and unprecedented financial environment that we're in will lead to further consolidation in our industry at a time when the financial services industry, banking in particular stabilizes. I think there's still a lot of uncertainty about the future, about the state of credit quality, where it's going, how deep the recession might be, how long it might be, what that will mean for consumer portfolios. So I wouldn't expect to see a lot of M&A activity other than the troubled institution activity that we've seen that is much more rifle than shotgun. But I think we'll see more shotgun as the market stabilizes over the next 18 to 24 months. Matthew O'Connor – UBS: So behind the scenes is not regulatory or government pressure to consolidate?

No. That has not been an issue that we're aware of or that the bank's aware of. I think in more detail than you want, but we've seen an inverted PE where the bigger banks were in the 10 to 12, the medium banks were 12 to 14 and the community banks were running at PE's of 16 to 18. This access to capital and growth has brought a lot of those ratios down to where acquisitions in a more normal environment should be easier to do. So I think we'll see more activity. But it isn't the government as much as it is, I think Board's and management from some bank realizing that there aren't enough companies still willing to pay four times book which is a number that we saw on a number of occasions in 2006 and 2007. I think that rationalizing of where the buy/sell meet will help activity get done.

Your next call comes from Anthony Davis – Stifel Nicolaus. Anthony Davis – Stifel Nicolaus: Just a little more color here on the [Snake] portfolio. I just wondered what the size of it right now, but a percentage of those loans are non-accrual and how your internal grades compare with the results when national is down. [Chuck Hyle]: The size of our [Snake] portfolio hasn't changed dramatically. In fact it has hardly changed at all over the last number of quarters. In terms of how we've come up on the ratings in this last go round, we actually compare quite favorably to the national averages. We are running in some of the categories about half of the national average, and I think the reason for this is that we have very much stayed away from the large leverage loan business that we saw a lot of back in '06 and early '07. We've stayed completely away from it and I think that one of the focuses of this thinking this year was on a lot of those large leveraged loans, the so-called covenant light deals. That's where the national averages have gone up quite dramatically. We stayed away from that and our [Snake] portfolio reflects that. Anthony Davis – Stifel Nicolaus: The second largest component of CRE is retail behind residential construction, yet you're not showing any change in the MPL's there. I wonder if you could give us some color on what you're seeing in terms of risk classification migrations, 30, 80, 90 days length, just how you feel about that portfolio?

It obviously a portfolio we have been scrutinizing a lot over the last six to nine months. Thus far, the numbers have held up extremely well. About a billion of the $2.6 billion is completed and the completed projects are very close to 100% leased. The remainder, the $1.6 billion of construction, the way we've underwritten that portfolio has been, we don't start construction until it's 50% leased. In most cases it's higher than that. A very high proportion of the portfolio is underwritten to at least break even coverage on debt service, probably two-thirds of it, a little bit higher than that. It's very geographically diversified. I think we have no MSA that accounts for more than 5% or 6% of that portfolio. The average size is about $10 million, so it's not a lot of big stuff. But clearly, the retail side given the changes and the economic outlook over the last month or so, we clearly are watching that very carefully, but thus far any of the bankruptcies in the retail side have not have had an impact on this portfolio. We've not had any exposures to those names. So we're watching and looking very carefully, but thus far I think we've underwritten the portfolio well and we're going to keep watching it and see how we get through Christmas. Anthony Davis – Stifel Nicolaus: Across the company you've got various types of relationship businesses here. I wonder if you could talk a bit more about the attractiveness of the community banking versus the national banking relationships today and what that implies here for future strategy.

We have been trying to exit the non relationship businesses, and I'm not sure that they fall perfectly on national versus the community bank. We have in our national banking group some strong relationship businesses and we're continuing to put dollars there as we've said where the returns more than justify the cost of that capital. What we're doing is getting out of a lot of the indirect businesses. Those only recently in Key bank history have become part of the national bank. They're really consumer driven, but because of the way we classified where they were doing business, and it's really the indirect. It's really where there isn't a specific relationship. The reason for that, I have my people claim that there's a relationship if there's a loan. That's not a relationship to me. We do analysis that shows that those clients, corporate and retail who do more business with us have more services with us, that those returns are way above our cost of capital. So relationship means to us doing more than one thing. I'd like to be doing two or three things, but it's really that focus that we're continuing. This is not new. We've been doing this for seven or eight years in trying to work our way towards more of the relationship, to it really being the dominant strategy, philosophy and way we do business. And this economic environment has just pushed us to say, let's just exit these businesses that are commodity and indirect.

Your next question comes from [Ed Nigorian – Merrill Lynch] Ed Najarian – Merrill Lynch: You alluded to a longer term higher loss ratio on commercial real estate outside of the residential construction portfolio. I was wondering if you could give a little more perspective on that from a timing and magnitude standpoint. And Henry, I wonder if you could address you comfort, clearly strong capital ratios, if you could address your comfort level with the dividend going forward. [Chuck Hyle]: I think on the residential side we do believe we have the worst of the portfolio pretty well behind us now so I think those loss rates will come down. But given that we've seen virtually no charge off activity in the rest of the commercial real estate portfolio and given what I said earlier about the change in the outlook for the economy, we do expect to see some migration there. We've seen very little in retail. We've seen virtually none in other parts of the commercial real estate portfolio at this point. But the given the potential severity of the economic shift, we do expect to see some migration over the next couple of quarters. I guess that's the way I would summarize our view on commercial real estate.

On my comfort level with the dividend, as I think all of you know the Board reviews our dividend on a quarterly basis. We were comfortable, I was comfortable recommending the $0.75 for the third quarter and we'll take a look at where we are in the fourth quarter, but our participation in the capital program, the reversal of some of the charges that we took related to the IRS, and some of the reserve building and one timers lead me to be very comfortable with where we are on this data.

Your next question comes from Michael Mayo – Deutsche Bank. Michael Mayo – Deutsche Bank: Could you elaborate more on the draw downs that you mentioned, that it hurt the margin. Why is that? Are the terms just locked in stone and the borrowers are getting good rates or is there something else going on?

As we've all been in this business for awhile, we know in the cycles as you go into a very strong cycle, corporate renegotiates their revolvers, three to five year revolvers in very aggressive terms. Unfortunately the bank let them. And so what we see as we go into this cycle and corporate who have established lines of credit in some cases have been shut out of the capital markets, either the CP markets or long term debt markets. They've turned to these revolvers and these revolvers have 2006 and 2007, 2005 type pricing and are probably in place for another two or three years. What you're finding is while they are generally tied to ratings, they are still very aggressively priced and they certainly would not be priced in those revolvers not be priced in those ranges if they were redone today. As we see revolvers mature and get re-priced and restructured, not surprisingly rates across the board and spreads, fees, etc., are all going up. But we are living with a legacy of established revolvers that corporates' are using to draw. And we're seeing utilization rates as you can imagine because of the capital markets, utilization rates going up. What we've seen in the institutional bank, from a low of 24% it's now right around 39%. So that's the spread compression that Jeff talked about against those revolvers. Michael Mayo – Deutsche Bank: How much are we talking about here? We're saying 2006 pricing on new 2008 loans which are mandated due to the lines of credits that have been in place, so how big is this?

Are you talking about the draws on the facilities? Michael Mayo – Deutsche Bank: Yes.

From a market compression standpoint, it's a combination of things that we provided. In my comments, these particular draws, we also have. Michael Mayo – Deutsche Bank: How much is being drawn down in dollar amounts?

The dollar amount of the draws?

It will vary. Some of them come in at $100 million chunks as you can imagine. Michael Mayo – Deutsche Bank: In aggregate. Is it bigger than a bread box?

It'd be $1 billion that we've seen draws on them. Michael Mayo – Deutsche Bank: That was this quarter?

That was this quarter. Michael Mayo – Deutsche Bank: So you expect that to pick up?

It's hard to say what we would expect to see in actual pick up.

Our view is you're seeing the markets loosen a little bit as you're seeing a lot more come in, not nearly what it's been historically but as it comes in, as you're seeing the CP markets fall, it's our impression that we could be or should be at a peak as we go through the fourth quarter and see this fall as you go into the first quarter. This is all tied to liquidity in the capital markets and I think every bank that you talk to are probably having this situation happen. We think it is a market driven phenomena that will fall, and we're already seeing some fall as we see rates tighten and the CP market fall. Michael Mayo – Deutsche Bank: To clarify on the NPA outlook, what's your outlook ahead for NPA's and loan losses in aggregate?

I think on the NPA's, our general view is that we are plateauing. We expect in certain sub portfolios to see elevated levels of non-performance, but in general, subject as always to the economic environment, that still is the wild card here. Our expectation is that we are plateauing on the NPA side.

With respect to losses, our guidance that we provided there would also for the fourth quarter would be in the 1.20% to 1.60% of annualized net charge offs. Michael Mayo – Deutsche Bank: Anything else new besides the auto floor plan loans you want to highlight?

Not really. I guess we have seen a little bit of weakness in the middle market in the commercial side in the Great Lakes region, but very strong still in all of our other regions. But really the material one, the one that's most noticeable is the auto dealer floor plans.

Your next question comes from Gerard Cassidy – RBC Capital Markets. Gerard Cassidy – RBC Capital Markets: With the Fed funds rate cut, what do you see your fourth quarter net interest margin and if the Fed cuts again another 50 basis points before the end of March of next year to help stimulate the economy, what would the margin look like under another Fed funds rate cut for 2009?

We haven't provided 2009 guidance at this particular juncture but with respect to our fourth quarter guidance of 3.0% to 3.10% which would bring the margin down from the 3.13% for the third quarter. We have in fact factored in an additional Fed cut in that particular margin forecast. We're anticipating that the Fed funds could be in the 1% range as we go through the fourth quarter. I think that would continue to pressure the margin into 2009 until you have such time as you have enough turn over in your loan portfolio to re-price credits at better spreads. But as you know, when the funds rate gets down around 1%, you end up with deposit rates that are below 1%, the ability to go down in the same proportion as any Fed cut becomes very limited. Gerard Cassidy – RBC Capital Markets: What kind of economic outlook are you using to feel comfortable that MPA's are plateauing around this level. [Chuck Hyle]: Until about two months or so ago, we had a mildly recessionary outlook and in the last three to four weeks we've worsened that economic outlook to more of a severe, not overly severe but a recession over the next two to three quarters, unemployment going up probably getting close to 8%, so we've been factoring that in to our projections over the last two to three weeks. Gerard Cassidy – RBC Capital Markets: With a fairly severe recession then, do you still think you're plateauing the number of non-performers these levels? [Chuck Hyle]: We do at this point, but clearly we get new information all the time, some good, some bad. We don't know. We haven't factored in the impact of any stimulus plan. So there's just a lot of uncertainty. We certainly from about September 15, took a more negative view on the economy in all of our projections. Gerard Cassidy – RBC Capital Markets: Moving to the commercial real estate portfolio, excluding construction loans, not that part of it, on your investment or income producing properties and the loans that support that, over the next 12 months, what dollar amount will come up for refinancing in that portfolio?

I don't. I can tell though that we expect that that portfolio to continue to reduce. We are being exceptionally selective in any new business and we are taking exits and pay downs wherever we can, but I don't know the percent of that business. [Chuck Hyle]: In terms of the non owner occupied portfolio that we have, it's identified on Slide 15, the $12.7 billion portfolio the unfunded commitments have been coming down steadily over the past year. So if we were to go back a year ago, there was approximately $6 billion in unfunded commitments in that particular portfolio. That's down to $3.9 billion. So it's been dropped. Last quarter it dropped $.5 billion between the second quarter and the third quarter on the unfunded portion of it. So clearly there's movement in activity within that book of business that's happening right now. Gerard Cassidy – RBC Capital Markets: One of the concerns is, as you know from what we read is that number of commercial real estate operators, particularly mall operators that have debt rolling over are unable to roll it and they're running into problems. We're now focused on, you have always been strong in the business on the retail side, if you had a lot of properties for refinancing in the next 12 months. [Chuck Hyle]: Clearly we're having to look at those particular deals when they do come up. Some of them, there are refinancing opportunities and others we're going to have to look at. It may take a year for them to get refinanced. As you know, we've said in the past, we're not a permanent lender so when we go through that particular process, we will continue to look for the markets to free up and move those particular credits into the secondary market.

We are still seeing some deals getting refinanced out on a permanent market. The life insurance companies are still active. They haven't increased their volumes from standard percentages but they are still active and we are still getting some of them done in that market. Gerard Cassidy – RBC Capital Markets: On Page 14 of the slides you gave the credit quality by portfolio, 3Q '08 and you have your commercial real estate line and you put $453 million of MPL's. In the prior quarter you broke that line out into commercial mortgage and construction. Commercial mortgage was $107 million in the second quarter, construction was $256 million. Do you have that breakout for that $453 million between the two categories?

It's in the press release. So you can go to the press release or on Slide 32 also, you can get it by percentages if you're looking at it. Just going back to Slide 32 you'll see the break out in terms of percentages. That probably helps a little bit.

That concludes our question and answer session. I'd like to turn the conference back to Mr. Meyer for any closing remarks.

I want to thank you all for taking time from your schedule to participate in our call today. If you have any follow up questions on the items we discussed, please don't hesitate to call Vern Patterson, our Head of Investor Relations at 216-689-0520 or Chris Sicora at 216-689-3133. That concludes our remarks. Thank you and have a great day.