Regions Financial Corporation (NYSE:RF) Q1 2018 Earnings Conference Call Transcript
Apr 20, 2018 • 11:00 am ET
Thank you. The floor is now open for questions. (Operator Instructions) Your first question comes from John Pancari of Evercore.
Good morning. On the McKinsey study, just wanted to see if you can update us with your -- any expectations you've developed out of that in terms of a targeted efficiency. And how much of that - of any target that comes out of that, would you expect would be revenue versus expenses? Thanks.
David J. Turner
Yes, John. This is David. So we've -- we had elements of McKinsey built into the guidance that we've given you for 2018. We're still working through - we just kind of got the first part of this done in the first quarter. There's a lot more to do. And we're going to update you on kind of a three year, this is going to be a longer journey. This is not a 2018 only.
We'll have elements of this working through a couple of years, two to three years, actually. We're going to update all that at our Investor Day, which will happen in February of '19. With that being said, there's elements of McKinsey of how we keep our expense number relatively flat this year, and there's elements of McKinsey on how we get the growth in revenue of 3% to 6% on NIR for 2018 as well. As we think about the total commitment on revenue, it's about 70% of it is expense and about 30% of it is on the revenue side. That's our best guess, thus far. We will refine those as we go through the remainder of our Simplify and Grow initiative.
David J. Turner
From an efficiency ratio standpoint, we've given your guidance. It will be below 60%. As you know, we had -- when the tax rate change that cost all of us, all of our peers, for the tax adjustment for us it's about 50 basis points going the other way. We did not change our guidance because we had Simplify and Grow, and we also had our insurance transaction in mind at the time. So we think we're confident we'll have an efficiency ratio below 60% in '18. And that being said, we think, over time we're going to need to be in that mid-50s, and we're working towards that.
Got it. Thank you. That's helpful. And then separately, on the capital side. You mentioned the insurance sale. And along those lines, can you just talk to us about how you're thinking about the business mix? If there's other areas of the business that you think you would possibly exit. And then conversely, how are you thinking about additions to the business in terms of whole bank M&A, and maybe a thought on the environment? Thanks.
John, first of all, the Regions Insurance has been a part of our business for a while. It's a very - we made a very analytical, thoughtful evaluation to that. It was a valuable asset for us, a very talented team in