Aug 12 (Reuters) - Canada's Scotiabank has

bought a minority stake in U.S. regional lender KeyCorp ( KEY )

in an all-stock deal worth $2.8 billion, the banks said on

Monday.

Scotiabank will issue shares priced at $17.17, representing

a roughly 17.5% premium to KeyCorp's ( KEY ) last closing stock price.

The investment will be done in two stages, with an initial

component of 4.9%, followed by an additional 10%, the lenders

said.

Cleveland, Ohio-based KeyCorp ( KEY ) had total assets of roughly

$187 billion as of June 30. Scotiabank said it expects the deal

to close in fiscal 2025.

"While we continue to be comfortable with our current

capital position, we determined that the investment enables Key

to accelerate our well-communicated capital and earnings

improvement," KeyCorp ( KEY ) CEO Chris Gorman said.

(Reporting by Manya Saini in Bengaluru; Editing by Shailesh

Kuber and Arun Koyyur)