Regions Financial Corp. Q4 FY2024 earnings call

• Regions achieved record earnings in 2024 with strong financials, including $1.8B net income and 18% ROATCE.
• Benefited from a strong and diverse balance sheet, solid capital, and liquidity.
• Core markets support a deposit advantage, with top five market share in 70% of core markets.
• Plan to invest in talent, technology, and markets over several years, including adding ~140 bankers across segments.
• Focus on priority markets, enhancing branch small business and online/mobile capabilities to capture market share.

In 2024, Regions saw record revenue from Capital Markets, Wealth Management, and Treasury Management products/services. Full-year earnings were $1.8 billion, EPS $1.93, and ROATCE 18%. Average and ending loans declined modestly; deposits grew modestly. Net interest income grew 1% in Q4, net interest margin was 3.55%. Adjusted non-interest income increased 9% full year, driven by record results in Capital Markets, Treasury Management, and Wealth Management.

• Full year 2025 average loan growth expected ~1%.
• Net interest income projected to increase 2%-5% in 2025, with first quarter modest decline due to fewer days.
• Adjusted non-interest income expected to grow 2%-4% in 2025.
• Full year 2025 adjusted non-interest expense expected up 1%-3%, expecting positive operating leverage.
• Net charge-offs in 2025 expected towards higher end of 40-50 basis points range, with losses more elevated in first half but already reserved.

• Impact of interest rate changes on asset yields and funding costs.
• Credit quality risks in previously identified loan portfolios, with potential for elevated losses in first half of 2025.
• Regulatory changes affecting capital management, such as AOCI inclusion in capital ratios.

Q: Outlook on expenses and how efficiencies create capacity for investments?

A: David discussed managing salaries, benefits, occupancy, vendor spend to fund investments, with focus on streamlining processes and technology.

Q: Thoughts on deposit pricing evolution?

A: David mentioned deposit pricing is important, aiming to be competitive, grow deposits in priority markets, with through-the-cycle beta expectations and hedging.

Q: Loan growth expectations and pressure on returns?

A: John and David discussed C&I growth robust, but investor real estate challenging, consumer with mixed trends, focusing on risk-adjusted returns.

Q: Expense guidance and IT budget?

A: David said expense guide incorporates IT investments in new deposit and loan systems, on track and on budget.

Q: Investment in bankers and revenue growth?

A: John stated investments in bankers will be measured, expecting revenue growth from investments, committed to positive operating leverage.

Q: Credit charge-offs and ACL ratio?

A: John said charge-offs could drift higher in some quarters, but losses reserved, coverage ratios may come down with improving economy.

Q: Fee categories performance and outlook?

A: David discussed episodic nature of Capital Markets, service charges predictable, Wealth Management growing, card fees affected by rewards liability.

Q: Deposit growth and fee income investments?

A: David talked about focusing on customer needs, investing in products/services customers need, like MSRs and wealth group acquisitions.

Q: Loan growth and repositioning of securities?

A: John and David discussed loan growth headwinds, repositioning of securities to manage interest rate risk, target HTM portfolio at 25%.

Q: Bankers hiring and tech progress?

A: David said hiring is a multi-year ramp, tech conversion on track, new systems to provide competitive advantage.