Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Regions Financial Corp (RF, Financial) reported strong third quarter earnings of $446 million, with earnings per share of $0.49.
- Total revenue grew on both a reported and adjusted basis, driven by improvements in net interest income and fee revenue.
- Net interest income increased by 3% quarter-over-quarter, outperforming expectations due to stable deposit trends and asset yield expansion.
- Adjusted noninterest income rose by 9%, with notable growth in service charges, capital markets, and wealth management.
- The company maintained a strong capital position with an estimated common equity Tier 1 ratio of 10.6%, allowing for share repurchases and dividend payments.
Negative Points
- Average loans remained stable, but ending loans declined slightly quarter-over-quarter due to modest customer demand and paydowns.
- Average deposits declined slightly, reflecting normal summer spending and competitive rate pressures.
- Certain portfolios within the corporate bank continue to experience stress, although overall credit metrics have stabilized.
- Adjusted noninterest expense increased by 4% compared to the prior quarter, driven by higher salaries and benefits.
- Net charge-offs increased to 48 basis points, with expectations for full-year 2024 net charge-offs to be at the upper end of the 40 to 50 basis point range.
Q & A Highlights
Q: Can you provide insights into the NII momentum and margin expectations for the upcoming quarters?
A: David Turner, CFO, stated that the margin is expected to remain intact, with a slight increase in NII anticipated. The margin is projected to be in the lower part of the 3.50% range in the fourth quarter, with growth expected in 2025 due to asset growth, controlled deposit costs, and beneficial derivatives resetting.
Q: What is the outlook for loan growth, and what factors could drive a pickup in demand?
A: John Turner, CEO, mentioned that while customers are cautiously optimistic, loan demand is currently stable with some growth in middle market commercial and energy portfolios. A more significant pickup in loan growth is expected in 2025 as economic and political uncertainties resolve.
Q: How confident are you in managing expenses, and what are the expectations for positive operating leverage?
A: David Turner, CFO, expressed confidence in managing expenses, emphasizing a focus on controlling salaries and benefits. The company is committed to generating positive operating leverage in 2025 by prudently managing expenses and reinvesting in growth opportunities.
Q: What is the outlook for credit performance and charge-offs?
A: John Turner, CEO, indicated that charge-offs are expected to remain within the 40 to 50 basis point range, consistent with historical performance. The company anticipates stable credit performance, with consumer credit showing strong results.
Q: How do you plan to manage deposit pricing in light of potential rate cuts?
A: David Turner, CFO, stated that deposit costs are expected to decline even without additional rate cuts, due to maturing CDs and competitive pricing strategies. The company is well-positioned to manage deposit costs and continue growing net interest income.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
