Regions Financial(US:RF)2021-10-22 17:43Financial Data and Key Metrics Changes - The company achieved earnings of $624 million, resulting in earnings per share of $0.65, with adjusted pre-tax, pre-provision income increasing by 4% sequentially [6][22] - Adjusted average and ending loans increased approximately 1% during the quarter, with expectations for full-year 2021 adjusted average loan balances to be down by low single digits compared to 2020 [12][22] - Net interest income from PPP loans decreased by $12 million from the prior quarter, but is expected to pick up in the fourth quarter [14][22] - Adjusted non-interest income increased by 8% from the prior quarter, primarily due to strong capital markets activity [16][22] Business Line Data and Key Metrics Changes - Consumer loans reflected strong mortgage production, but were negatively impacted by exit portfolios and further pay-downs in home equity [12][22] - Adjusted non-interest expenses increased by 3% in the quarter, driven by higher salary and benefits [18][22] - Card and ATM fees remained stable, with debit and credit card spending above pre-pandemic levels [18][22] Market Data and Key Metrics Changes - The company operates in a 15-state footprint where unemployment levels are improving and are well below the national level [7][22] - The company reported strong new account growth, with year-to-date net account growth exceeding account growth for the preceding three years combined [7][22] Company Strategy and Development Direction - The company continues to make strategic investments in core and growth markets to deepen existing relationships and grow new customers [7][22] - Recent acquisitions, including EnerBank and Sabal Capital Partners, are aimed at expanding capabilities in consumer and corporate banking [9][22] - The company is focused on digital and data investments to enhance customer experience, with over two-thirds of customer transactions being digital [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery and the health of business and consumer customers, noting that credit quality has exceeded expectations [7][22] - The company anticipates net interest income growth between 5% and 6% in the fourth quarter, driven by a strengthening economy and higher rates [16][22] - Management is committed to generating positive operating leverage over time while managing expenses prudently [19][22] Other Important Information - The allowance for credit losses declined to 1.8% of total loans, reflecting better-than-expected credit trends [20][22] - The common equity Tier 1 ratio increased to an estimated 10.8%, with plans to manage capital levels through share repurchases [22][22] Q&A Session Summary Question: Loan growth sources on the commercial side - Management noted improvements in line utilization and production levels consistent with pre-pandemic levels, with commitments up by over $2 billion [24][26] Question: Deposit betas and assumptions - Management indicated that deposit betas for surge deposits are expected to be higher than core deposits, with a beta closer to 75% for the 70% of surge deposits likely to run off [27][28] Question: Long-term repositioning and asset sensitivity - Management aims to reduce interest rate risk while preparing for potential rate increases, with a focus on maintaining a balanced approach to hedging [30][32] Question: Capital markets revenue opportunities - Management expressed confidence in the growth of capital markets contributions to non-interest revenue, with ongoing investments in capabilities [41][43] Question: Capital allocation and buyback plans - Management confirmed plans to prioritize investments in non-bank acquisitions before share repurchases, aiming for a common equity Tier 1 ratio of 9.5% by year-end [46][22] Question: Loan sales and credit risk management - Management clarified that recent loan sales were minor and aimed at offloading loans that did not meet their risk profile [53][54] Question: Consumer lending opportunities - Management highlighted the strategic importance of focusing on homeowners, anticipating growth in mortgage and consumer lending [58][22]