Regions Financial Corporation Q2 FY2025 earnings call

• Strong Q2 earnings: Reported $534M net income, $0.59 EPS. Pretax pre-provision income up 14% YoY. Return on tangible common equity 19%. - Deposit growth: Average deposits grew, with 30% organic growth in total average deposits over 5 years. Priority markets saw strong consumer deposit growth. - Loan trends: Ending loans grew, with C&I and multifamily real estate driving growth. Pipelines up 17% YoY. - Technology investments: Rolling out new mobile app, planning to upgrade commercial loan system and deposit system, expecting to be a regional bank on modern core platform by 2027. - Dividends: 6% increase in common dividend, with 10+% CAGR over 6 years. Stock buybacks: $144M repurchased in Q2.

Deposits: Continued growth in core and priority markets. Consumer deposits in priority markets grew 20% more than core markets in Q2. Average deposit balances in Corporate Banking grew over 1% sequentially. Interest-bearing deposit costs declined to 1.39%. Loans: Ending loans grew 1%, with C&I and multifamily real estate driving growth. Full-year 2025 average loans expected to be stable to modestly up. Consumer loans stable with growth in credit card and home equity offsetting declines in other categories. Net Interest Income: Rebounded 5% QoQ, driven by deposit pricing and fixed rate asset turnover exceeding estimates. Fee Revenue: Treasury management revenue up 8% YTD, wealth management had record fee income, capital markets revenue grew at 14% CAGR since 2019.

• Full-year 2025 average loans expected to be stable to modestly up. - Net interest income expected to grow 3%-5% full year. - Adjusted noninterest expense expected up 1%-2% full year, with positive operating leverage 150-250 basis points. - Allowance for credit loss ratio declined to 1.80%. Through-the-cycle net charge-off expectations 40-50 basis points.

• Competitive dynamics in markets, potential intensification of loan pricing and deposit competition. - Uncertainty in resolving large credits in office and transportation portfolios affecting charge-off expectations. - Regulatory changes impacting capital requirements and flexibility.

Q: Impact of tax bill and bonus depreciation on loan growth and consumer spending?

A: Tax package creates certainty, helping businesses and consumers. Bonus depreciation expected to boost activity in equipment-related sectors.

Q: Margin improvement details?

A: Hedge notional maturity and credit recoveries contributed, with front book-back book effect providing tailwind for 3 years.

Q: Competitive dynamics in Southeast markets?

A: Experiencing competition, but focused on executing strategy, growing core deposits, and deepening relationships.

Q: Technology system impact on efficiency and strategy?

A: New systems expected to enhance revenue efficiency and cost management, with AI and generative AI potentially reducing workforce attrition.

Q: Operating leverage and technology deployment?

A: Committed to positive operating leverage, with investments and budget planning including positive operating leverage.

Q: Runoff in commercial book and consumer side?

A: ~$400M-$500M runoff expected in commercial book by end of year, consumer runoff negligible.