Regions Financial Corporation (NYSE:RF) Q2 2019 Earnings Conference Call - Final Transcript

Jul 19, 2019 • 11:00 am ET


Regions Financial Corporation (NYSE:RF) Q2 2019 Earnings Conference Call - Final Transcript


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John M. Turner

sale relationship earlier this year. It also informed our strategic decision to achieve better balance between construction and term commercial lending within our real estate business. Another meaningful example of our commitment to build a business that's sustainable over the long term.

This quarter we repositioned a portion of our investment securities portfolio, continue to focus on clients selectivity and relationship profitability within our loan portfolios and improved our funding mix. These actions will help support net interest income and the net interest margin going forward. Despite recent market uncertainty, the economy still feels pretty good. Our customers are more cautious than they were just a few months ago, they maintain a positive outlook and most continue to expect better performance this year than last.

Many of our customers have a backlog of orders, with the biggest challenge being an insufficient supply of skilled labor. Fundamentally, the domestic economy remains solid and credit quality continues to reflect relatively stable performance with some continued normalization. And while lower interest rates support continued economic expansion, they will certainly pressure future revenue growth. To respond, we will continue to build on the momentum we've established through our Simplify and Grow initiative, to make banking easier, accelerate revenue growth and importantly become more efficient and effective.

Should the markets current pad for lower interest rates persist, with short rates declining in the second half of 2019 and remaining at lower levels into 2020, and the economy soften faster than we expect achieving some of our long-term financial targets will be challenging. That being said, we remain committed doing all we can to appropriately adjust our plans and to respond. So to summarize, this was another solid quarter for Regions and despite the market volatility and uncertainty, I feel good about where we are today and believe we're well positioned to generate consistent and sustainable long-term performance throughout all phases of the economic cycle.

With that, I'll now turn it over to David.

David J. Turner

Thank you, John. During last quarter's call we spent time talking about certain balance sheet optimization efforts that were either underway or actively being developed, and today I want to spend a few minutes highlighting the results of those efforts. When we say balance sheet optimization, we're referring to the strategies we execute every day to challenge the efficiency of our balance sheet in order to maximize net interest income and margin as well as overall profitability and returns.

This quarter adjusted average loans grew approximately 1%. As you may recall, late last quarter we experienced loan growth from certain large corporate customers that while high and quality, generated thinner spreads. We anticipated some of these customers, which used refinance in the capital markets, although we have experienced some movement, the moderation in loan growth this quarter was primarily due to our continued focus on client selectivity and overall relationship profitability.

As John mentioned, loan demand in our markets remain reasonably healthy, but maintaining our disciplined approach impacted overall balance growth. We