The paragraph is a transcript from Regions Financial Corporation's Third Quarter 2024 Earnings Call. The operator, Christine, introduces the call, and Dana Nolan hands it over to John Turner, who discusses the company's financial results. For the third quarter, Regions Financial reported strong earnings of $446 million, with earnings per share at $0.49. Both net interest income and fee revenue showed growth compared to the previous quarter, although adjusted noninterest expenses increased slightly. Average loans remained stable, but the ending loans declined slightly due to modest customer demand and client selectivity. Corporate customer sentiment is cautiously optimistic, but they're hesitant on capital expenditures due to economic and geopolitical uncertainties and the upcoming election.

The article discusses the company's focus on understanding customer needs and providing tailored solutions. Average deposits declined slightly, but overall customer health and credit metrics remain stable. Despite certain corporate bank portfolios experiencing stress, the company is proud of its third-quarter results, driven by a strategic plan and strong leadership. The company is also committed to supporting recovery efforts after recent hurricanes. Looking ahead, they are optimistic about finishing 2024 strongly and achieving top results in 2025. David Turner notes that while average loans remained stable, ending loans declined slightly as customers seek more certainty.

In the paragraph, it is noted that customers still have excess liquidity, and loan utilization rates are below historic levels, with stable average consumer loans. The outlook for 2024 average loans is expected to be flat or slightly down compared to 2023. Deposit balances were stable, and average deposits decreased by about 1%, consistent with expectations. With competitive rates declining ahead of a Fed rate cut, demand for CDs has softened. Net interest income rose by 3% due to stable deposit trends and asset yield growth. The company repositioned $3.6 billion in securities, realizing a $175 million pretax loss, aiming for a 2.5-year payback, and aims to continue evaluating further strategic repositioning.

In the discussed paragraph, proceeds from a $1 billion debt issuance in September were used to purchase securities, maintaining a neutral balance sheet and enhancing liquidity. Deposit costs have stabilized at 2.34%, marking the end of a rising rate cycle with a 43% deposit beta. Falling rates are leading to reduced deposit expenses, with an exit rate for the quarter at 2.2% and expected further benefits from maturing term products. This environment, alongside fixed-rate asset turnover, is expected to aid in growing net interest income. Additionally, adjusted noninterest income rose by 9%, with significant increases in service charges, capital markets, and wealth management, driven by treasury fees, additional business days, and improved M&A advisory and securities underwriting fees.

In the paragraph, the company anticipates its capital markets business to generate consistent quarterly revenues of $100 million over time but expects $80 million to $90 million in the fourth quarter due to current conditions. Wealth management set a new quarterly record with a 5% increase. The company projects full-year 2024 adjusted noninterest income to range between $2.45 billion and $2.5 billion. Adjusted noninterest expense rose by 4% from the previous quarter, mainly due to increased salaries and benefits, driven by factors like an additional day in the quarter and performance-based incentives. An expense of $14 million was also recognized due to Visa's litigation escrow. The company plans to manage costs while investing in business growth. Asset quality appears stable, with a provision expense $4 million less than net charge-offs, which totaled $113 million. The allowance for credit loss ratio slightly increased to 1.79%, and net charge-offs increased due to specific large credits.

The paragraph discusses financial performance and strategy, highlighting a decline in nonperforming loans and a decrease in criticized business services loans. It mentions an expectation for higher end net charge-offs for 2024 but indicates reserves cover potential losses. The company reported a common equity Tier 1 ratio of 10.6% after share repurchases and dividends, with improvements linked to lower interest rates and management of the securities portfolio duration. They transferred $2.5 billion in securities to reduce AOCI volatility, aligning with future regulatory changes. The company plans to maintain its capital flexibility to accommodate regulatory changes, support growth objectives, and continue increasing dividends and share repurchases. The paragraph concludes by transitioning to a Q&A session.

The paragraph is a discussion between Scott and David Turner regarding future expectations for Net Interest Income (NII) and margin trajectories. Scott asks if the anticipated margin of 3.60 is still achievable, given a potential small setback in the fourth quarter. David Turner confirms that the goal of 3.60 remains intact, though the margin might be in the lower 3.50s in the short term. He highlights continued NII growth, asset growth, controlled deposit costs, and the resetting of derivatives as factors supporting future margin increases. Following this, there's a transition to another speaker, John Pancari, who asks about the current state of loan demand and potential catalysts for an increase, acknowledging that utilization is below historical levels.

The paragraph discusses the current and future economic outlook from the perspectives of John Turner and David Turner. Customers are cautiously optimistic, and while the economy is slowing, it remains positive overall. Growth is noted in middle-market commercial sectors and energy portfolios, but offset by declines in real estate, particularly in multifamily projects, and mortgages. Credit card balances and interbank originations have seen slight growth. Pipelines are softer, but there is an expectation for modest loan growth in 2025 due to greater certainty in the political and economic environment. Businesses remain strong and poised for investment when conditions are clearer. David Turner adds that real GDP is expected to be over 2% in 2025, and they aim to leverage market conditions for growth once uncertainties decrease. John Pancari inquires about the increased expense expectations.

In the article paragraph, David Turner discusses his confidence in the expense estimates for the current year, stating that there are no foreseeable risks that could significantly alter them. He emphasizes the company’s ongoing efforts to manage expenses and reinvest savings into business growth, positioning for positive operating leverage in 2025. John Turner adds that salary and benefits, the largest expenses, are controllable, and reassures that a significant technology project is on track and on budget. Ebrahim Poonawala from Bank of America then shifts the discussion to credit, asking about the potential consistency of charge-offs in the range of 40% to 50% given the current economic and customer conditions.

The paragraph discusses the expected range for charge-offs, which is between 40 and 50 basis points, noting historical performance and current consumer credit performance indicate this range is typical. Ebrahim Poonawala then asks David Turner about the impact of Federal Reserve rate cuts on deposit pricing. David Turner believes deposit costs will continue to decline into the fourth quarter, aided by maturing CDs and exiting at a lower interest-bearing cost. He suggests that even without further rate cuts, cost reductions are likely, but additional cuts would further reduce costs. Turner is confident in the bank's positioning to grow net interest income (NII) into the fourth quarter and 2025.

In the paragraph, Erika Najarian from UBS asks about the future of deposit repricing over the next few quarters. David Turner responds by explaining that a significant portion of deposits, particularly retail, is set to mature soon, but there isn't as much pressure for higher yields as before. He mentions that some maturing CDs with rates around 4.25% to 4.50% are being replaced with new CDs at around 4% rates. Turner also notes that deposit shifts have occurred, with money market funds absorbing some transitions, and explains that they have mechanisms to adjust rates promptly as needed. He anticipates that with a 3% Fed funds rate, deposit costs would fall around 1%, maintaining a spread of a couple hundred basis points.

In the paragraph, Erika Najarian asks about setting expense expectations relative to revenue growth for 2025, given past management efficiency and investment strategies. John Turner confirms a commitment to achieving positive operating leverage in 2025. He explains that they focus on revenue generation and core expenses while seeking to free up funds for investment in areas like technology, compliance, and hiring. The aim is to generate revenue growth, which will enable further investments and ultimately create shareholder value, all while maintaining a balance of positive operating leverage.

In the paragraph, David Turner emphasizes the company's commitment to reallocating expenses to fund business investments, highlighting growth in sectors like treasury management and wealth management. He mentions specific growth figures, such as a 5% increase in treasury management relationships and an 18% rise in revenue year-over-year. Wealth management relationships and assets under management are both up by 9%. Turner also mentions ongoing improvements in capital markets and potential investments in the mortgage and small business sectors. The conversation then shifts to Matt O'Connor from Deutsche Bank, who asks about the decline in revenue from cards and ATM fees observed over several quarters. David Turner attributes this decline to temporary factors related to volume and seasonal variations, assuring there's no underlying issue hindering growth in that area.

The paragraph discusses the potential for growth in debit card interchange fees by increasing the number of checking accounts and, consequently, debit cards in customers' hands. David Turner mentions the importance of expanding the customer base to achieve growth, while acknowledging the potential risk of changes to debit interchange rules, though they don't foresee changes by 2025. John Turner highlights Regions' strong customer engagement, as evidenced by Visa's power score, which reflects active debit card usage. He expresses confidence in growing fee revenue by continuing to increase the number of households and cardholders. The conversation concludes with Betsy Graseck from Morgan Stanley preparing to ask about the implications for deposit growth.

The paragraph discusses a company's strategy for growth, focusing on consumer and business accounts, and mentions a 30% increase in deposits since 2019. The company aims to balance deposit and loan growth to optimize net interest margin and manages $8 billion in off-balance-sheet cash for corporate clients, ready to adjust rates for liquidity if needed. Betsy Graseck inquires about potential investments in capital markets, specifically in private credit, to which David Turner provides insight on their current strategy and investment focus.

John Turner discusses the developments in the private credit space, noting that while there are new models emerging, his company is not currently inclined to engage with them due to aspects like higher leverage and fewer covenants that are unappealing. Instead, they are focused on optimizing investments in capital markets, specifically in small and real estate originations, and their M&A advisory platforms, Clearsight and BlackArch. Turner mentions the potential to enhance these platforms with additional capabilities, such as fixed income sales and trading, but emphasizes that their main focus is to execute well on their existing investments. Following this discussion, the call is concluded.

This summary was generated with AI and may contain some inaccuracies.