Regions Financial Corporation (NYSE:RF) Q4 2019 Earnings Conference Call - Final Transcript

Jan 17, 2020 • 11:00 am ET


Regions Financial Corporation (NYSE:RF) Q4 2019 Earnings Conference Call - Final Transcript


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John M. Turner

while leveraging technology and making banking easier for our associates and customers. We'll continue to focus on the fundamentals of our business generating positive operating leverage through discipline expense management and prudent investment decisions. Our priorities sit on soundness, profitability, and growth in that order.

Thank you for your time and attention this morning. Before I turn the call over to David, I want to thank the 19,000-plus associates here at Regions for their commitment and dedication throughout 2019. Because of this team, I'm confident about 2020 and feel good about our plans which support delivering consistent, sustainable results through all phases of the economic cycle.


David J. Turner

Thank you, John. Let's start with balance sheet. Adjusted average total loans decreased less than 1%, while ending total loans increased modestly. Adjusted average consumer loans increased 1%, led by increases in indirect other, credit card, and mortgage, partially offset by declines in home equity. Average business loans decreased 1% and were impacted by our continued focus on client selectivity and overall relationship profitability, as well as lower line utilization and elevated paydown activity during the quarter.

We continue to focus on risk-adjusted returns and are not interested in pursuing nominal loan growth for short-term benefit. That said, we expect full year 2020 average loan balances to remain relatively stable on a reported basis and to grow in the low-single digits on an adjusted basis. Similar to 2019, we expect 2020 loan growth to be led by business services lending, specifically C&I loans with modest growth in owner-occupied commercial real estate and investor real estate. Within consumer lending, we expect growth in residential mortgage, indirect other, card, and direct lending.

Turning to average deposits. Reflecting seasonal trends, average corporate segment deposits increased 4%, average wealth segment deposits increased 1% while average consumer segment deposits remain relatively stable. Of note, total non-interest-bearing deposits grew 1.5% during the quarter. Deposit growth in the business segments was partially offset by a 51% decline in the other segment deposits, due primarily to reductions within wholesale corporate treasury deposit categories reflective of a lower need for wholesale borrowings.

So let's look at how that's impacted net interest income and margin. Net interest income declined 2% linked quarter and net interest margin declined 5 basis points to 3.39%. Net interest margin and net interest income were negatively impacted by lower market interest rates. However, this was partially offset by declining deposit cost and a more favorable funding mix. Lower loan balances reduced net interest income but benefited net interest margin.

With respect to funding, we've completed the cash tender offer during the quarter for approximately two-thirds of our outstanding 3.2% parent company senior notes incurring $16 million in extinguishment costs. The estimated run rate benefit in 2020 is an increase to annual net interest income of approximately $15 million and a 1 to 2 basis point improvement in margin.

As expected, total deposit cost declined 8 basis points compared to the prior quarter to 41 basis points and interest