Regions Financial Corporation Q3 FY2025 earnings call

• Strong quarterly earnings: Reported $548 million net income, $0.61 earnings per share, adjusted earnings $561 million or $0.63 per share. Adjusted pretax pre-provision income $830 million, up 4% year over year. Return on tangible common equity 19%. - Deposit growth: Achieved top quartile deposit growth and above peer median change in market share, with growth in consumer checking, small business, and wealth management accounts. - Loan growth: Modestly grew average loans, pipelines almost doubled year over year, loan commitments increased ~$2 billion year to date, but faced headwinds from portfolio shaping in higher-risk leverage lending. - Fee revenue: Wealth management had record fee income, Capital Markets (excluding CBA) reached record high, treasury management continued to grow. - Technology: Planning to upgrade commercial loan system to cloud platform in 2026, begin running pilots on new cloud-based deposit system in late 2026 with full conversion in 2027. - Talent: Successful in recruiting and hiring quality bankers in priority markets, on track with target banker additions and branch banker reskilling/reallocation efforts. - Balance sheet: Details on average loans, deposits, net interest income, non-interest expense. - Asset quality: Net charge-offs increased, but criticized loans improved, nonperforming loans decreased, allowance for credit losses decreased.

Average loans grew 1% while ending declined 1%. Corporate Bank had growth in certain areas but faced portfolio shaping efforts. Deposits were strong overall, with consumer deposits roughly flat quarter over quarter, commercial deposits showing strength, and expected full-year average deposits to be up low single digits. Net interest income was relatively stable linked quarter, with net interest margin declining six basis points. Adjusted non-interest income increased 6% linked quarter. Annualized net charge-offs as a percentage of average loans increased eight basis points to 55 basis points, but business services criticized loans improved significantly, nonperforming loans decreased, and allowance for credit losses decreased $30 million.

• Expect full-year average deposits to be up low single digits versus prior year. - Expect full-year 2025 net interest income to grow between 3 - 4%. - Expect adjusted non-interest income to grow between 4 - 5% versus 2024. - Expect full-year net charge-offs to be approximately 50 basis points and losses to remain elevated in the fourth quarter. - Expect net interest margin to rebound into the mid-360s in the fourth quarter.

• Risk from telecommunications industry dynamics with changing television media industry. - Uncertainty in the remaining $300 million of targeted loans to be worked through, though no significant additional reductions anticipated currently.

Q: Ken Usdin asked about loan portfolio adjustments and asset quality, including credit exposure in various sectors.

A: John Turner responded on credit exposures in office, transportation, technology, multifamily, telecommunications, non-depository financial institutions, etc., and the improvement in criticized loans and nonperforming loans.

Q: Scott Siefers asked about strategic focus and M&A.

A: John Turner stated the position on M&A remains unchanged, focused on executing the strategic plan.

Q: Steven Alexopoulos asked about net interest margin and operating leverage.

A: David Turner explained net interest margin outlook and positive operating leverage expectations.

Q: John Pancari asked about charge-offs, portfolio shaping, and potential future risks.

A: John Turner responded on the drivers of charge-offs, portfolio shaping reasons, and future portfolio management.

Q: Dave Rochester asked about loan growth, credit exposure in telecom, and asset quality.

A: John Turner and David Turner responded on loan growth expectations, telecom exposure, and asset quality trajectory.

Q: Gerard Cassidy asked about fraud in regional banks and deposit growth strategy.

A: John Turner and David Turner responded on fraud causes and deposit growth strategies.

Q: Ebrahim Poonawala asked about investment spend, capital, and regulatory changes.

A: David Turner responded on investment spend, capital management, and regulatory impact.

Q: Chris McGratty asked about deposit betas and M&A signal.

A: David Turner and John Turner responded on deposit betas and M&A stance.

Q: Betsy Graseck asked about CD impact on NIM and NIM outlook in different Fed rate cut scenarios.

A: David Turner responded on CD impact and NIM outlook in varying Fed rate cut paces.

Q: Christopher Spahr asked about salary and comp outlook.

A: David Turner responded on salary, comp, headcount, and technology impact.