Regions Financial (RF) 18 Oct 242024 Q3 Earnings call transcript

Good morning, and welcome to the Regions Financial Corporation's quarterly earnings call. My name is Christine, and I'll be your operator for today's call. [Operator Instructions].

I will now turn the call over to Dana Nolan to begin.

Good morning. Quarter Call. Third Regions to XXXX Earnings Welcome John results. will provide regarding our high-level commentary and David which under section documents, available earnings is in information and the are non-GAAP Investor Relations of website. forward-looking our statement disclaimer cover disclosures Q&A. our comments prepared These and materials, presentation

call turn John. I the will to now

and everyone. share million $XXX you, today. earnings you per call $X.XX. We resulting joining of Dana, Thank morning, quarter we earnings appreciate our of This reported good morning, strong third in

adjusted and as revenue improved grew on interest the and both For quarter, income reported net third total quarter-over-quarter. a basis fee revenue

In fact, experienced the almost every compared quarter. revenue category within second growth fee to

corporate continued the with on well as the further while sentiment cuts line modestly hesitant loans client cautiously portfolio. geopolitical quarter-over-quarter. paydowns until adjusted loans as expenditures and resolutions among in and growth the In greater certainty. with economic demand, of and noninterest the ending Despite rate expense reflecting to more, stability increased In the customers focus in customers are -- section revenue, resolution recent quarter-over-quarter, capital interest along declined selectivity stable, remained remains slightly credit Average general, customer of modest make optimistic.

stabilized. understanding during to the remains time quarter, as positioned stable our needs focus remixing tailored Average evolving deposits have solutions right. is on Our support them providing ending while ensure remained deposits and well are the we customers' to when declined trends slightly deposit

corporate bank metrics customers within to have the consumer credit remain our certain Although our and stress, and portfolios continue experience overall, healthy corporate stabilized.

strong begin process. recovery Milton. difficult our the want They a challenges will impacted communities of efforts. face recent and across Helene I'm speak needs storms times, support as customers, and I a including natural history of extremely are to the take disasters about proud associates to up, affected. wrapping they communities has the recovery to and teams fellow Before long were continue the communities incredibly -- our footprint Regions hurricanes, moment through helping and way the responding to our of challenging

we're successful execution of third proud results In driven of quarter summary, our our plan. strategic by the

investments us improve. highly talent and positioning as footprint, making we're macroeconomic to are in with Our technology benefit and products along services conditions desirable and the in

We and with successful well are to record for execution. a have generating plan in and a proven XXXX a continue great track team on finish a results leadership and top We're beyond. to of XXXX quartile strong track positioned

highlights some provide quarter. regarding will David Now the

Thank you, John.

business sequential remained sheet. the basis. In with loans the loans start remained stable loans quarter-over-quarter. quarter balance while portfolio, Let's on ending slightly stable average a Average declined

John to remain As certainty mentioned, more as continue soft of pipelines on are to a fronts. likely handful customers seek

card historic In customers remained liquidity addition, categories. offset in credit Average to consumer other remain modest also was rates growth levels. as in excess and declines utilization by continue carry below stable loans

We XXXX continue XXXX. to loans be get to down to compared back average modestly stable to

the Fed cycle. a spending averages standpoint, to throughout and quarter. in Competitive for CD advance below deposit demand softened, rate among ] down and customer due cut were consumers. rates experienced were slowing of levels we expectations about normal the largely From deposit ending is rate-seeking X%, summer stable declined the behavior [ further consequently, this

range. the remained in noninterest-bearing percentage stable the XX% result, a of As deposits low

of approximately $X.X an securities, and billion investment losses, realized $XXX security incremental in resulting third payback. we together Let's of billion expansion. million X.X-year shift reflects pretax increase to net of expectations. quarter in Year-to-date, income outperforming stability interest yield at linked of loss. $XX the have The in with income. our $X.X asset repositioned Net increased trends X% includes This a pretax million sales interest quarter, deposit estimated

interest rates unrealized duration and target the and loss in portfolio in helpful maintaining third lower has our been longer-duration strategy the moved buying selling as has the benefited Importantly, of duration shorter on quarter. securities the

we risk to management forward, capital and to evaluate goals. will respect Going with repositioning further continue

given are with However, periods market current opportunities dynamics. payback attractive near-term limited

like second to used bolster a sheet proceeds securities the the were to in of quarter liquidity. Similar transaction, the balance amount maintain September debt relatively of neutral billion order position purchase to $X and issuance

expected, highlighting advantage peaked flat at beta maintaining level This industry-leading interest-bearing our with quarter franchise. rate the prior than the Once at the XX% As to deposit while second held deposit X.XX%. of balances interest-bearing have costs Region's also deposit the deposit completes with funding rising pandemic. more full again, finishing remaining cycle XX%,

a deposit transition Now reduce profile. we falling the result a in well-protected to environment, expense rate ability to as hedging and

to the rates Fed rate beta. for the to interest-bearing as in the a position XX% with X.X% roughly In in have a begin expect the the amounted Over cycle. lower, quarter exit drift we we've those products quarter, toward from price and decline, beta mature consistent sensitivity term quarter. a we experienced Following reduction to deposit mid-XXs in rising ability and would to fourth benefit equating believe experienced funds falling higher deposits betas further neutral deposit rate initial the and our and time,

with asset to interest grow provides beyond. higher in net and fixed at rate support income coupled turnover the fourth the When this market quarter yields,

most in driven interest markets million. But capital favorable stabilization. increase increased and increased more we treasury quarter. the category, almost Let's fees of revenue Service time primarily markets increased and and $XXX markets revenue quarter. increased X at take service X% the advisory performance driven additional look to it due of every XX% charges approximately the $XX million expect quarter. run benefit the $XX capital a driven in environment, well generate fourth million expect quarterly as management by as a will during day in fees consistently can our market Capital rate Adjusted well an business fee fees as by in Over notably, income X%, to business management. in we around M&A charges, the wealth semiannual securities underwriting noninterest improvement by as placement

$X.X activity to expect X% billion Management Wealth now on billion record, in year-to-date increased to sales markets. Based be stronger we noninterest range. income results, adjusted year reflecting XXXX increased the a full quarterly and new $X.XX to

of expense. Adjusted fund move incentives noninterest related during and business. to to quarter, the We a on increased salaries HR-related driven expenses impact asset committed the resulting day in performance-based ongoing to B associated prior valuations. The primarily shares. escrow Let's recognized their company quarter, also in quarter million with increased litigation X% from Class by in the managing compared benefits remain our the prudently X X% to expense investments of increase and noninterest $XX expense Visa's additional to

include focusing and occupancy our continue will salaries categories, vendor benefits, spend. on We largest and which expense

including HR elevated XXXX we billion. valuations expect year-to-date results, outperformance in to Based adjusted now expenses and revenue $X.XX on noninterest approximately asset year full

credit expense to million charge-offs stabilize than overall results importantly, quarter. point exam. ratio was million performance include X.XX%. allowance Regarding X less asset as quality, SNC loss our to during the net impact increased at of $X And resulting completed John Provision continued the the credit and the indicated, basis $XXX recently for

office As percentage primarily of loans charge-offs increased expected, as X by driven XX credit net X average and a to information basis basis large credit. points points

declined a basis points $XXX declined percentage Nonperforming XX X business loans points to loans criticized and million. services loans of basis total as

few upper of be We of towards identified continue large XX point within interest. to charge-offs the to full portfolios our previously net to year credits end expect to basis range XX XXXX our a attributable

-- those However, are losses substantially for.

include third AOCI, The liquidity. Tier portfolio. equity our the active to to quarter. benefit X.X% dividends common equity We X to improvement while estimated second quarter. of meaningfully in the the with reflects adjusted X.X% capital Tier and the When from management repurchases of lower AOCI to rates from ratio Let's turn the to executing increased common $XXX an ended million X duration an interest from million and the during XX.X%, quarter estimated securities and $XXX common share in

to transferred near Additionally, the reduce as initial quarter, held the to we third of end billion regulatory to volatility as step new of the AOCI $X.X an future. we transition expectations in securities maturity the towards of available-for-sale

levels capital increase equity forward strategic to will proposed commensurate shares flexibility with maintain the and time regulatory X near the evolving line allowing continue invitation meet and to the going ratio, common us growth while objectives dividend term. to with expect along our We Tier level repurchase with consistent meaningful earnings. reported changes, to provide This current and over supporting

to move portion of we'll the that, Q&A call. With the

[Operator Instructions].

Our first Piper question comes Sandler. from with the line Scott of Siefers

one. you sort touch I'll ask kind wrap if could I'll of within on NII and of of hoping question, was nuance I into I And some then first follow-up the just David, guess momentum. the

next the trajectory. for up follow-on it prior like as previously and you've could will kind XXX bit the the [ over Does XXX the suggested think if little of there that And years. push back. next quarter a as couple advance off feels year we to of closer then of make enter ] margin is us from I track then knock feels on step fourth the remain path? a regardless, an upward still NII the and like

any on how periods? So over next the looks pacing the thoughts few updated

deposit bit to million the still a our XXX of We've book a of costs. Sure. think in going in control XXXX, terms of have are front million. we and as of derivatives Yes, that naturally $XXX that Those the little negative we'll part Scott, going little NII from us. lower regards we growth is the I a grow have to benefit asset into book to do with And had in to going of be that's bit we're benefit intact quarter our We're to the fourth this course, back And earning past XXX indicated. continue then quarter. still carry reset.

rates rates. as so come offset certainly helps And down, that lowering

we us that next margin. into So in year go gives can that grow confidence

question Evercore. comes next John of with from line the Pancari Our

you given if loan historical you quarter demand. on to more of either I just growth on driven see as when pickup? below terms is that what the then how you us at side. first utilization little or that, maybe I do And XXXX? be do are Just color And you that your know a fourth you look really guess indicated think loan about give the materializing levels. could pickup material catalyst what

Yes.

estate middle by maturing our are projects and little the downs would real So in lending. energy still we that's cautiously optimistic. the We've I balances portfolio somewhat is economy growth book off, and offsets and a pay there. business some experiencing our offset decline we're is are and which good, asset-based in the generally the paying of in by experienced slowing. say environment one. commercial card in market set space multifamily the that's positive growth originations The customers seen growth some declines And credit We've in had a the Interbank some though on our side. as particularly offset

some sheets see to modest think a strong, are but path activity when business compressing, growth more are they'll in we softer good I moderate there's okay. feel are certainty the the in invest we as later doing it's to is still are still loans bit. clear XXXX. begin So possibly quarter, prices well. as about direction have Pipelines We of their but money, more Businesses the last margins certainty were political customers still about a more will economy, XXXX and think environment more they we there's like continued Balance making in are want do in clear. than

bit XXXX. for John it's are be those growth John, and just range little that of in advantage markets then that add when great in a would a get and in -- X% we the I on a obviously in the little our -- XXXX. trajectory uncertainty the can over real of Yes. X% bit GDP is expectation to mentioned dissipates David. take We this

beyond And maybe I the do here. you revised can risks other see year? separately, And that pressure Great. then does about outperformance how then operating upwardly on expense guess talk side, confidence related? that of higher fee on again expectation expenses positive side, your revenue could leverage expectations in your barring for your next the influence the you expense revenue

the you No, you that. up, anything for estimate don't from what everyday managing done take And to of we've We us. the standpoint. a us our could estimate on we're thing see set Sure. once get of we're that just pretty expense given tight close that to good year, expenses. It's job the we've this an out an

our to positive reinvest savings is continue to in us we sets savings growth those to in in up expense leverage we which generate continue for at And 'XX. opportunities yes, to will use XXXX. of We because look to grow, some business want operating

So that's in major see we could create really kind fourth anything of in particular. uncertainty don't quarter the

Yes.

technology Our of making largest salary that underway, and time on moment project at is concern about so that a We that benefits, as believe have project that's don't we're on investments budget, -- expense, have a track, obviously, lot and the is big the we know. as we either. and controllable you

the Our next of America. from Ebrahim comes Bank of question Poonawala with line

around I question guess first credit.

towards I sectors think, talked David, end you mentioned about. the the charge-offs you've higher

we Just decline XX% forward, quarters? economy to maybe function at do a over you look we customer the the remains is stair the charge-offs given base think coming do in point today actually Or if that see XX% some where step range? is, sticky

performance, a Yes. maybe be look better the where XX quarter at Ebrahim, basis our charge-offs upon of in that we where our range pandemic a higher of portfolio. based composition business basis -- been they're of charge-offs lower and the prior we somewhere vacated between they're portfolio -- historical will of there average, because an it's historic particularly On think exposures, may back XX modestly because performance, and the to XX kind we quarter points large points. our

a We really point range performance good about is composition XX performance, our And based really now, portfolio our and typical. basis feel are historical right seeing we think credit upon of to consumer XX good that. and again, I the

the lower incremental deposit a costs in much cut to flex even think Maybe don't to we guess actually cut, order just I'm get you around with Or you And to deposit pricing. for deposit bring do first is X enough wondering the have the by rate November I assuming just able ammunition Understood. if needed points be signaling given XX question. basis cohort? David, cut? Fed rate any

No, should expect into to the to fourth I cost quarter. decline think continue deposit you the

to an cost maturing exit We XXX We in interest-bearing in some work XXX. We closer have X. the that range being several rate. in are things CDs that script on had put XXX, going today,

look quarter, you were at was XXX. if the for we So where it

to another cut. coming indication see you of gives benefit if you that the the continue that even So should down that don't get we

too. further you more obviously, be in on but side, to factor reduction cuts even also Now investment REIT would cost, yields have asset in the the

back in into continue resulting we think NII NII. the think the terms of So from we we're that we to to well positioned and fourth Scott We grow first the and in 'XX. got question can quarter

comes line Najarian next question UBS. with Erika Our from the of

a the sense repricing. several quarters. give David, of another wondering deposit on for question the I'm cadence over if could you next us

immediately. neutral X%? in easy and forward forward? some think stuff deposits of haven't So what us a obviously, a that long X.XX% index typical wasn't And retail neutral we we can a should and the think maturing how maybe has through your the about more we to will repriced, the once spread when X rate such level reprice How going seen look deposit deposit has if time, like rate repricing is

baked into Well, questions several there's there.

that seeing if as that retail that customers, of So your ] yield And maturities, for and ] first some our the the X.X% wealth of We're customers. fourth you at [ the quarter $X number. look [ part we will much was got as flight been. maturing here small in business not we have be between probably had is which then we question,

going months that's dissipating. now care to the mentioned I And that And to as average of our we so of are expectation to guess, an closer CDs to to are new X. closer X trying rates it, to take would keep rates I down, probably XXX for this Still earlier, the CDs it. is duration opportunity have maturing, are XXX with come

We rates challenge NIB shift that quickly. pretty see can standpoint, continue a those out From money money of went into the came market. you to can market deposit

quickly. X% rates about in you're our think I -- able talking At be costs so deposit to pretty mechanism a the funds, range. X% Fed to And adjust

point So couple spread of a those hundred basis between X.

Deposit cost.

Yes.

Got includes you mean helpful. -- it. noninterest-bearing. including That Very

Yes.

Our total deposit costs.

Yes, including noninterest-bearing.

underinvestment and question efficiency hit second of Perfect. stories banks the and often challenge, And you to teams been John, doing you. lot so always board speak, the the investment. balance management -- for And and guys A right in have is predecessors. have of of remaining

election we think well the our next your we calibrate I year, remove expectations benefit should about NII fees will the suspect in relative if trajectory David As we the expenses XXXX, to uncertainty, mentioned setting can as setup for for just other is. words, okay, generate should In X% revenue-wise in than the expect, whatever it to rather it and operating regions Street just revenue there? flat up environment better positive or what expect a leverage from just that

what to at A end look is positive to XXXX. in the operating we have. lot Yes, day, do of at we're we're revenue of committing the the generation we going leverage

how free expenses. constantly can the not we more to cap ground or that out revenue trying can do people. We how up in in technology we and figure more putting we have invest it's more people based We're have just we boots much because compliance, challenging, free up grow investment and the It's much we that cyber a generation consumer to have. core we're continue to our for on the on want the can on we but markets in terms of and obviously

need operating expense to We positive it think can more gets a bigger we revenue, of to operating shareholder leverage. generate can to piece use generate creates base leverage. that's make come And value that calibrated over then but back where to investments, those we So the time. positive generate we

business where Wealth back to to making us been again finally grow. and Capital bankers, expect when X% were story money revenues I great improve. business, began eliminate year, wealth Treasury and a then we've that in think, I look example, our that do think, are adding just grown have, investments growth would up there. opportunity is relationships X% by that will and It's as to our next committed track, since some our XXXX, where small we year-over-year In Markets and finding finance management investment year-over-year. we we've up expenses continuing under XX% we been Mortgage expanding assets capabilities an Management, And relationships on X%. We across you area Erika, up for an we an is to believe business. some we're add, at ways we're those if business use to to And footprint. as management, is

make will believe expenses a intend pathways the finance number that expenses, So and us allow investments. of to we to we through that we to investment in have growth grow, eliminating those

next Deutsche of Matt the question Bank. line from O'Connor Our with comes

if guys talk card know fee the ATM wondering a was like about could dollars impact few million you just and in that I and not I all it's line. QX down for the there. down was been I on And just just quarters it at down, overall picture. for X it's us looking But the what's past was how going and year-over-year. remind

depends mix that. bit that and on enable you're that's it didn't us between to one over credit grow, -- on noise want to That's that what systemic only and telling little pick grow okay? debit so get Matt, volume a can you're you There's and really shouldn't the in, a that time. you of and season me. a thing nothing all there just Yes,

So there's big not a there. story

And does reform card quieted has seem the like Okay. risk interchange of debit it down.

hopeful So in line that item that a future? the of is growing you're

continue the to way is to Yes. I mean to that customers. grow grow

opportunity on think, just in the to that, are people accounts again, in I and And that And us we do going invest so people's cards we hands. markets ticking as being have checking in I talked especially the to the more accounts, give the about. we're that growing in more we focus

grow. think opportunities yes, that's to I So

there law If interchange in goes it has don't from all We change know is at down. You do is says that rules. now. there's a terms risk that that it no point quieted where through, there debit to that it the right has of out

So now, that continue something to monitor count in we're will that. going happen we right XXXX. But don't to as that

terms a that we in quarters first And before, Matt, of which Region's a utilization, uses believe Yes. of debit customer fee score, And in there's so consumer households, power point, I'd continue to in talked that a base long of customers, we activation power has David's cards, Visa remind their this XX reflection is now, just as hands, have we opportunity put for when customer cards and customers' to been you debit very that a and utilization. we publishes score, row revenue plenty about grow particularly base actively category. to associated grow with more that's as can cards

comes Your Stanley. the Morgan Betsy of final line from with question Graseck

Yes, of balance wondering here. a we And obviously. a lot about are what's fuel growth? of talked I'm couple cleanups you sheet, for implication the deposit for how thinking the know because I that And about deposit the One, rates.

more people. and pre-pandemic been we're gets and of a back that of the than business, markets the of again, our including focusing XX% since It up markets. investments since in kind businesses and deposits wealth core migration strategy We're in in past. our accounts checking consumer that on the of people small about we're a really business, making We're a where effort accounts in to, XXXX. putting in operating growth being company of in, into our terms on of lot has have And of we

a we think we to so good opportunity grow. And have

we've Betsy. to and done We balanced, think trying be with be just that. competitive fair we not we're low-cost have trying I We're provider. the to be mean and to rates,

to And opportunity our so going have to grow. we're

little our margin. if and And for for and sheet we're could we want. to On to get increase net we're that. do balancing it. not growth we they had is managed growth our fee rates do the interest hadn't that, of We the and But paying we cash ever that deposit liquidity billion loan corporate to our But would want maximize banking there. we needed What we off $X for get rate side, grow about for a we balance the them, customers. it

Sure.

the billion corporate and helpful the color, there that's appreciate No, banking. in $X Okay. I

opportunities I'm piece et you power I'm private an invest capital we're banks that investing just that on are to of grow, that there spend in wondering you the other about, absolutely the ecosystem thinking things to the what question you're And other continue capital I and The And that here thinking markets investment does is anything looking focused credit on is originate, to would things. specifically, help into say not. be had in source, Or cetera. is wondering, would more I'm for is line? markets, about in? structure, area There's that there

I think we're credit models the a the following developments in there, different are of that They're new. private couple space. emerging. all And

follow we'll in origination of Much have some so at And in with our point. what we way inclination of that we're any this doing. markets specific but don't things credit interest, far that we're seeing nice the are so in private

lessens, So at closely. following don't higher leverage, just again, interest we're that But originations point. development that us this

great In of want some placement markets, investments. M&A Clearsight real terms those, rare and in made of as small continue our to example advisory originations, doing an investment BlackArch seeing optimize capital estate revenue the We separately, benefits well. our to we've both platforms, and

fringes, add-ons burning investments far. the to so and look some add we advantage to some those have do investments well execute take we to either sales made we've to have made any over the of around think income we've and anything don't other than fixed potentially potentially to the capabilities But trading desire I time. capabilities that opportunity on or businesses

the for I would over John like closing Turner to to call comments. turn back

call our on participating appreciate weekend. in company. we Well, much great Thank so you our Have for interest today. your a Great.

This concludes teleconference. today's

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