Cleveland-based KeyBank plans to launch a digital bank in March aimed at serving healthcare professionals, Chris Gorman, the bank’s chairman and CEO, told analysts during a fourth-quarter earnings call Thursday.
Through Laurel Road, the digital student loan refinancing platform it acquired in 2019, KeyBank said the new digital bank will serve the healthcare segment and expand the consumer franchise nationally.
“This launch will broaden our offering for Laurel Road clients to include deposits, additional lending products and other value-added services,” Gorman said Thursday. “We believe that both Laurel Road and consumer mortgage will continue to be relationship-based growth engines for our consumer business.”
KeyBank purchased Darien, Connecticut-based Laurel Road Bank’s digital lending business in April 2019 for an undisclosed sum.
“Laurel Road continues to originate high-quality loans that provide us with an opportunity to build broader, digital relationships with healthcare professionals,” Gorman told analysts Thursday.
The subsidiary originated over $2.3 billion in loans last year, including $590 million in loans this quarter, Gorman said.
Laurel Road’s pace could position the online lender to originate $2.5 billion in 2021, KeyBank CFO Don Kimble added during the call.
The subsidiary, whose clients are generally in their early 30s and have graduate degrees in the medical industry, has exceeded the bank’s expectations, Gorman told American Banker on Thursday.
“Think about a digital company that refinances student loans for doctors and dentists that are accredited, employed, have an average salary of about $200,000 per year,” he said. “These are great clients to get.”
KeyBank’s plans for a new digital bank come as the lender prepares to accelerate the pace of its branch closures.
The bank plans to close 70 branches representing 7% of its network in 2021, with most closures expected to take place in the first half of the year, Gorman told analysts.
“Our decisions are driven by client behavior, as more activity continues to move toward digital channels,” he said. “We expect limited client attrition, as a high percentage of the impacted branches are located within two miles of another Key facility.”
When asked about the regional bank’s M&A strategy, Gorman said the bank is not focused on whole bank consolidation or acquisitions.
“I’m really proud of the job we’ve done over many years of being able to buy entrepreneurial firms and successfully integrating them into our business,” he said. “I think you’ll see us continue to go out in keeping with our focus around targeted scale, buying these niche businesses that can help us really serve our targeted client basis.”