RF - Earnings call transcript Q2 2019 | Regions Financial Corporation

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Operator

Good morning. And welcome to the Regions Financial Corporation’s Quarterly Earnings Call. My name is Shelby and I’ll be your operator for today’s call. I would like to remind everyone that all participant phone lines have been placed on listen-only. At the end of the call, there will be a question-and-answer session. Instructions] [Operator

turn to now begin. Nolan call the would Dana over to I

Dana Nolan

financial Turner relations you, second overview well will our under John our Regions’ Welcome of available provide supplement, are earnings of and XXXX of Thank our slide to website. as call. the quarter quarter. Shelby. presentation through take will you earnings section The conference highlights release investor performance an earnings David as the Turner and

are included These Our the disclosure materials, forward-looking call. non-GAAP reconciliations within the filings. statements today’s of SEC prepared as and today’s cover in presentation segment well and appendix presentation of question-and-answer comments, our as our

call that, to John. will turn With I the over now

John Turner

and you, joining all Thank Dana thank you today. for our call

saying we per and the market the increase quarter of XX%. in significant second operations from second our X% of by are year $X.XX, with We $XXX the of volatility, earnings reported results. earnings over share increase quarter of of continuing face me an Let a pleased million, begin prior

delivered income the generated growth and year, operating compared adjusted also solid provision positive prior X% pretax, leverage. with We pre

revenue, is This sustainable our focus expenses. need demonstrate strong. growth. remain And customer quarter's meeting deposits client We market our results on and and while reducing core business average grew new across loans producing relationships

St also experiencing Louis. and included which Orlando are We Houston, success in market our Atlanta, priority

Xx that the of location. terms Atlanta, of outperforming deposit growth household in in net pace new is in of the of each approximately example, total and we market For company. account the general are Further, respective account growth

same particularly in in for and of significant we've months growth Houston where six high. has new are been just a strong in bank, corporate banking the deposits time clients these across Commercial to number pipelines all credit markets. Shifting added

evidence our feel those can investments focus good Although about control. that we growing we paying off. provide remained future. things very we continue facts it's for to on We are our can believe these early, And

with net our These spend complete began just that largely our XX interest are months that will the time income some we of margin. will interest details about net hedging moment. We to a strategy strategy in instruments and stability discussing ago. provide Dave

focused adjusted remain also selectivity, credit because the returns. servicing underwriting, ongoing work and led rigorous risk on cycle relationship optimization year. indirect risk our including our to and point-of-sale of manage this a prudently activities, appropriate next to to decision exit allocation, balance capital through and mitigation insurance earlier well sound and We sheet limits. appropriate auto the of We positioned exit client This credit remain concentration

decision It between real lending business. also to our construction commercial and informed our strategic estate balance achieve within better term

of that's our to sustainable build the long meaningful commitment Another over term. a example business

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

backlog a Many of our customers have of orders.

through growth. future XXXX quality With long-term continued with economy we've rates importantly, continues domestic than of achieving supply economic support and And biggest performance targets declining path for while they and persist, current our easier, expansion, of revenue lower solid, lower momentum rates pressure growth expect, interest remaining will banking continue rates effective. become we some Should at reflect accelerate short into Fundamentally, faster insufficient and some respond, our softened half remains XXXX, interest the make the certainly revenue being economy financial and the the market's more stable To be to the challenge continuing labor. we will skilled normalization. relatively simplifying of will with efficient initiative. build To in established an lower levels second to grow credit on challenging. and

That being appropriately our to said, we adjust plans committed we remain all and can doing respond. to

long-term to well this we I believe market of despite quarter all generate the positioned another So about and economic performance and to summarize, solid where and was for phases and we're today uncertainty, good consistent volatility are the Regions sustainable cycle. throughout feel

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

David Turner

Thank you, John.

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

approximately X%. loans average grew adjusted quarter, This

recall, loan while As quarter we growth thinner that in generated large customers certain you corporate may from spreads. experienced late quality last high

these in anticipated the customers which markets. used some refinance of capital We

moderation have growth overall we our profitability. selectivity primarily in to client Although, focus continued experienced quarter relationship was due and some loan this on movement, the

growth. reasonably interested balance John are impacted adjusted benefit. risk approach our our remain but out As overall short-term economy not pursuing growth grow on demand maintaining to healthy, loan remain trying mentioned, We for nominal in loan the and focused by in returns markets disciplined

to to loans continue low we to in in growth be full-year said, average the expect single adjusted digits. mid that With

size $X.X sales. and we the to a maturities the through approximately portfolio. executed of securities combination During our also quarter, better strategies billion overall optimize reduce We by

X those net improving million points, our into another billion reinvested run basis yield rate yielding recognizing securities of lower higher and We approximately by proceeds yielding losses. also $XX while $X.X securities, sold of

appropriate rate performance The improving declining with protection a prepayment new securities ensure focus a were to in selected environment. on

of driven declines and of million public deposits accounts, higher the of corporate exit as segments first balance added quarter our within to seasonal approximately average during Exhibiting the as consumer support by side growth. approximately the fund that franchise, importantly and X% consumer core $XXX in billion reduction, increased deposit increased deposits of included average $XXX primarily X% almost growth million. still liability deposits cost this strength to consumer. during loan well deposits noninterest-bearing average Turning Despite the Average were sheet. total the increased an $X.X intentional decrease quarter deposits

These optimization $X quarter. a wholesale in needs prior the funding approximately are strategies the down Average FHLB also compared triggered advances to reduction quarter. billion during

how margin. So X.XX%. interest at income impacted interest net interest slightly first and was net totaled quarter down let's Net look the income compared margin to this and

quarter's to know, however, is largest costs deposit subsequently did deposit important this is down margin. What driver continued we peak expected, in within As pricing in quarter was pressure and the trend June. May of see the

the remain one cumulative beta lowest And for in the costs deposit Our industry. recent tightening the our total deposit XX%. cycle of is

an orderly XX% to currently beginning of in cycle. points, expect down of Assuming the approximately begins basis Federal XX deposit at the increments Reserve we initial beta ease of a rate

to rates. addition potential Federal for cost market as to includes driver was after of the and another in loan-in the as margin we in cuts declining this normalizing days, well anticipation in interest In LIBOR saw rate quarter's deposit by This the Reserve, decline decline rates.

second the half XXXX. is the interest Currently market declines in pricing over of further rate

this minutes few results. a spend our impact how looking at let's So could

net point June forwards relief While the income year. reductions, XX modestly which market expect basis full-year to would reducing roughly higher the XXX prior deposit we interest could provide includes some using than be

long-term margin the end fourth-quarter our low X.XX%, While approach would of range.

begins. However, we hedges of to expand XXXs as our forward benefit quarter's starting would the the expect first margin low-to-mid into the

sensitive chart broken Slide a want I of strategy, with floors along take out financial the notional build regarding benefit. to Now and of anticipated our our hedging in they some cumulative their you by walk become profile. details to through time contains forward use swaps of value future impact our hedges X our additional quarter the its effective. starting provides which expected and and The asset

We are XXXX. starting on our hedging substantially program. become those active January hedges importantly, bulk And Xst, the forward with of complete

to provided shock standard the have that future now. markedly the these look modeling the will have six forward to be illustrate our months negative hedges, different net future of program impact tenures extended starting, addition, dated maturities XXX years future rates provide impact respective many parallel To may from period their to net income period. to we income preponderance interest our with future estimated of point net interest is a interest for starting. forward hedges for each presented. gradual, These extent benefit an low a the of associated annual approximately of starting better our longer income Because you basis five remains In support hedging from

this The inverted table highlights relationship.

interest our this beyond. starting become effective, rate key our XXXX forward asset in starting forward The profile hedges from will reduced. our sensitivity hedges stabilise As is slide is sensitivity and takeaway our

ATM increased management and services. net remained revenue. with seasonally on investment management So our driven X% volumes Within growth quarter-over-quarter. impact and first trusts, Wealth consistent combined sales relatively Service activity. compared due to card with income investment in income, let's primarily fee the move combined increase income sales and mortgage transaction and higher from quarter. to and revenue increased fees MSR from market account higher continued mortgage revenue, hedge customer to an reflected noninterest Adjustment charges,

income. the declines as to like environment, decay. are in life prepayment However, in were Partially expected beginning offsetting increases declining and increase markets, rate other an insurance experience a on noninterest in we these capital

markets primarily to due to customer fees tied almost swap decline income due M&A valuation credit entirely capital were adjustments customer and derivatives. was in lower declining income. related swap customer The advisory The to market

markets capital total adjustments, would approximately market-based these have X%. increased Excluding income

reduction to first The expense and noninterest fees quarter, to in XXX expense, and increased decline by salaries of continues services benefits. to decline decline on was Furniture be Adjusted were ratio efficiency benefits outside the equipment and X% just XX.X% move A quarter. story positions expense, Let's noninterest to compared from the a levels under staffing good this Regions. increase which favorable adjusted but expense salaries a professional benefits. full-time in really combined offset unchanged prior quarter. partially for in in with equivalent contributed

even on estate. revenue focus cost, One Despite success environment in with our management. save expense corporate more opportunity expense the real is managing area challenging within necessitates

advantage sold XXX,XXX This office in of square took quarter and of we feet. market excess a building opportunities large

future to market transactions made square to another goal to decision benefit sale occupancy XXX of our feet. reduce the excess square exceed expense XXX,XXX are in space These of over will help and office feet also XXXX. expected by of us building a We million large

the continue excess equity we tax awards. in impacted progress to-date. space. benefits and XX.X% XX% is year- and XX% was digital by was it The production make up to openings rate invested Digital Additionally, effective with checking tax account significant digital up associated card are

shift to let's quality. asset So

remained credit benign environment, to perform Asset some certain well quality establish acceptable quarter, and XX expectations results range continue credit to of range normalization line charge-offs with in points with of stable while increased overall our continued, Net relatively this within in performance XXXX. basis X.XX% metrics line within reflected credit of expected to the for XX loans, our of risk appetite. our average a

of charge-offs X.XX% debt relatively restructurings total loans remained XXX% unchanged. while loan. Provision And to an in X%. decreased criticized modestly Services total equal resulting loans increased match troubled loans and accrual net allowance Non of Business non-accrual total

quality While expected. stable remains credit appetite, certain stated overall and risk metrics within be volatility our asset can and

me let capital comments liquidity. brief related give So and you to some

reach plan. for the company June, capital third that ratio repurchased declared related details $XXX we and We X.X% in in common at intend quarter announced approximate stock $XXX of going the quarter, Tier In our million and to million level managed target dividends. to forward. the common equity XXXX X shares During our million XX.X

to billion to includes plan up $X.XX ability repurchase of common capital Our stock. the

by performance. repurchases determined timing be and overall However, our financial amount the growth of actual exact and will loan

We next of meeting also at The quarterly expect increase week. stated XX% to our dividend of Board within will increase XX% to consider the this earnings. range their

Our full slide presented XX. are expectations on XXXX year

Assuming end growth the at to quarter market curve full-year at revenue the we target. forward of X% be would adjusted expect our lower end, to X%

expect down for year. to increasing our expense leverage focus expense the expect Given And noninterest are full-year generate we and the adjusted operating positive to to environment, be revenue management slightly. we stable on certain

have noted, And on are we responding we focused John the As as can we the things past. to remain the we changing control. dynamics in market

our in we pleased are summary, quarter financial So with results. second

to happy deliver throughout you we're sustainable questions. But plan, We and economic solid them one With do one designed any strategic question. and your ask that, to consistent a cycle. performance to primary take that limit have follow-up

Operator

[Operator Instructions]

from comes Ryan question first Goldman of Nash Your Sachs.

RyanNash

good Hey, guys. morning

it inflection you've So looks an and cost. like seen deposit

lowest they're XX%, So date. one like cycle to had of a you the faded

the talk just of bring the approaching Can and increasing. about do then as about rates? your sensitivities deposit talking and think most across So then a about changing I outlined, you're to given follow-up. on you to all And cost dynamics how across -- you you retail across about versus ability how deposit balance you about long-term X.XX% commercial? think wealth have sensitivity a you've short sheet, NIM Then the the feel the down

DavidTurner

Okay. This is David.

to extent deposit And rates that show encouraged we through to peaked have already that cost in by to we our give chart are cost. you ability able reaction to on put we the reduce But we short-term We month actions our we're down we competitive. the of expect the are even get team's of that in reduce clearly before basis month the points. cost. and the are So of to June -- we will took deposit that a that more couple to deposit us that continue

We of XX% interest change. but our deposits deposits are indexed; interest are have market our really address are money get priced if our as another rate bearing also that been deposits have indexed, type exception XX% that of to XX% bearing deposits of about we have

level pretty move if quickly continue that roughly we the year. changes X.XX% that market us which two get give for of can we the then Even margin at hold to the cuts confidence imply. some remainder our the So three the forwards we as that

RyanNash

second does as some you the the challenging improve my it be hit Thanks. could targets. still talked maybe environment don't then think to being your environment guess might low you and your do you targets? end to it Got positive you if efficiency continue approach the generate and follow-up, And the do hard about leverage, operating to to of expect target? rate if I be ROTC hit of able you even and

DavidTurner

Yes.

that, of Day Investor positive committed we three-year generating operating year a at would leverage. operating outlook made Clearly, generate some on the but commitment we we plan. still leverage put are positive our So that each rate pressure to

recall market was three thought we sure you and pulled quite we the going the whatever last the took to like If we plan it targets. make year had, met that behave didn't to either we it

like for we that. if have have And of six low whole this into point to period pressure in metrics. we we're plans. would months that so three-year persistent I confidence Clearly, out, our put on environment certain a does those rate But three-year

happen confident financial plan do what comments me. that a in lot commitment There from good that we to continue the ability the both and have And have that we're are to of our improve our John a things and and was can we so we will that toggle that do do performance. to we from prepared to was need

Operator

Evercore Your next Pancari, question ISI. John from comes

JohnPancari

Good morning, John.

still if know the despite backdrop efficiency attainable just expectation you're level you XXXX Thanks. On the, guess topic giving let longer-term still an or XXXX. expense you XX% cetera? et Can rate think, it's us that just just had and about by below ratio are for hedging how thinking I in you just the

DavidTurner

Yes.

tried three is to time. So long then, years mention as to Ryan a I

on hedging you time, the that could damage be, be for so cut that of the just would If pretty persisting close our rate can hard tough. this the did rate get this to that environment XX% it ratio of XX% that's all would entire get pretty entire because be in because rate we hit want we to time efficiency But place. pretty math we expenses much environment franchise. three-year even would We in again don't a to to do our is persisting period

JohnTurner

expense remain But focused effective investing in on our going while I we're to I management say, John, would business. mean

deliver investing continue to just to slightly commitment to expenses environment. flat to us hopefully our on our interest expect can while a business. you And is challenging in what maintain so growing down despite rate And revenue

DavidTurner

add we very would me ideal. rate yield have to because we curve rate environment. interest are as talking If have margin. the XX% that's we the with Let obviously flat higher and have to rate we environment slope low that slope where some have, pressure A low environment If with about a that rate with environment that's on helpful. John

JohnPancari

Got helpful it, That's okay. color.

DavidTurner

sorry, efficiency. am I

JohnPancari

got it. Right, right,

up my and Okay around credit. then follow are

on still wondered come little front? charge-off non a Where color bit despite if increase moderate more And Just your on we a from? the saw commercial the charge-off. quarter then also get they can higher the increasing performers in the

that you we Thanks. implying up So about seeing pick are that? Can a what is inflows driving here. talk

BarbGodin

in to working driven Barb. quite it a that we've -- one loan, resolution. it's was a it charge-offs out And came by came Sure, for been Relative of to sector finally on while. healthcare the something

systemic anything the three And don't really this NPLs, see drove those one has the from which we, to any expect was two, off. there. we don't paid that we numbers point at in loans been of them. So loss Relative it other since

systemic. nothing again So,

We of are the our of basis balance still seeing year. we the are the again year. to balance the XX outlook credit range points to for the in And is XX again being committed stable going for

Operator

of Bank. question Matt next Your comes Deutsche from O'Connor

MattO'Connor

Hi. There loans. sheet balance outside is on puts of the kind and of takes

You securities, reinvesting talked about them. and loans

Just think forward I earnings relatively got restructuring? we going there. ex all make just those of want with as the stable about kind assets, sure takes and are puts the I to loans,

DavidTurner

you of would toward investment end Matt. were those transactions tell of Yes, the some the I quarter.

that a you look at our average, from earning below our you pressure of bit So --we're with trade is going ending third on if the into quarter. average to feel was, little so assets

And earning reductions. interest as the much not we rate really to to income mix. able on as react it pricing net deposit should it's is growing on have So and assets being margin

MattO'Connor

Okay.

be kind level? XQ on assets of average bit XQ buckets of down the will loan So the a non those -- verse so earning

DavidTurner

the in the happened portfolio of quarter. the because that at investment security particular trend end In

MattO'Connor

healthcare the the right or following on And then or which Yes, one inflows, up early that of moved that stage did something The up was of credit different? commercial just line before okay. driven to and numbers me. delinquency discussion relate also off paid loan

BarbGodin

that parcel XX up day was our That seasonality. a at all. is part our nothing were and just day part, marginally. it's there Part in is XX buckets, Yes. XX-day seasonal there buckets in and down, of is And of systemic

Operator

Your question Demba SunTrust. from Jennifer next of comes

JenniferDemba

this morning. Question point just interest us non-bank and Thank give of Could bank you you is you. on Good your M&A. in idea an what M&A? at for level

JohnTurner

Yes. Thank you.

interest of don't see the We of remain change hasn't analysis material We any in the Bank execution our changed. and M&A focused plans. M&A Our on Bank in economic M&A.

And watch so our customer continue to but need we're continue is management which opportunities announced to to grow to With Holland, revenue look it's done. we're to we And and one it's We're meet again grow it a complementary our others capability respect the meet acquisition to of transaction going market. diversify like adding to smaller capabilities that occurring, us, going changed. pay and and a a position capabilities. to attention We helps business. we hasn't M&A, by that to add healthcare and to non-bank diversify But customer wealth the revenue to excited needs. help for the continue that we've think what's about, meaningful that some recently

to but do our again always and our looking that actively continue to at transactions businesses, rate to active servicing capabilities there. looking We rights the have have other become remain and more with within will But challenging for add those we'll opportunities been we're find. to mortgage environment acquisitions,

Operator

Your Peter Wedbush. next winter from question of comes

Peterwinter

morning. Good

could because in I you're putting expense of just about doesn't the if more levers wondering like side. talk certainly some you investment. the slowdown, a on was You it bit guys emphasis the are little seem

DavidTurner

really is in customers, Peter, to to for continuing Yes. look ways make for investments make we are statement important looking talent, technology. banking because to easier that our last

simplifying number to over our we have one. categories, to continue a pay attrition. ago. to a streamline on that our program is leveraging have expenses, positions intense improvement to top look a focus way for to that. and most through to our We at started focus that And and opportunities of half continue Down our little we And control benefits year some going to on have do we by this XXX to operations quarter, and continuous being gets that leverage to an technology. If we're expenses salaries really handled grow three

next space comments, had We've we looked category we're some feet occupancy, in as exiting. of prepared XXX,XXX biggest at our had square that we our

smaller of run what spends, Some on purchasing category we we save will some well. of equipment, for occupancy. that to and it And be as can save out just our we if or we Also we exited; here put sale our of have people, have have category will. held furniture, we in be space there would a you vendor as and fixtures rate space getting third kind us fourth

have is what consulting be. We on purchasing lot a controlling from in terms do we a put helping a, that of us may products it hours standpoint of case or really a rigor in standpoint. demand had Whether or procurement management whatever the is need from

of challenging a pull have that we, And leverage, we're, expenses. just type you controlling terms of this to in you commitment operating positive string can revenue environment to so every and

JohnTurner

beginning I too improvement. of things work times, the of of digital that's that our opportunities occurring. And the a asked talk our said that we're, as just benefits through initiative we're briefly use the that John? has I'd continuous add, John Owen see couple really with only about few we're initiative to improvement see who And simplify grow really to pleased a other Peter, and we we've drive led capabilities

JohnOwen

XX second morning, about grow our new We've bringing quarter year-to-date. about Yes. already number completed up to the that XX Good everybody. to initiatives In We XX list. simplify initiatives. and had

traction. in that talked second and XXXX. Day, Investor through launching the back about the today our we of digital go side platform about point of really lending to, I That think applications some in digital seeing we initiatives consumer half When We're things XX come house. of the We our XX% taken will complete the channel. another has of to

really XX% traction up of e-signs e-close of e-side, of we're good lending capabilities. the On this, loans, direct about digital our are of to closing part

account digital On the we're a in front. opening,

point part I more working we simplify had and we've make year, card streamline account we a smooth streamlined getting XX% and our we are increases in about digital grow a a of quicker now to, think you we've And I and to application, for in account how digital now about the how and process. and do would that process increase revise credit I'd opening, checking opening card team as accounts. process XX% credit production channel. the do about

So really good traction there.

On use we look roll continue the how the we across front, AI to AI for out cases can on bank.

in what We've center. You're things familiar with with center in expanded all the we've contact done the a couple AI. contact

our launch virtual really we're those of password agent those seeing where traction password having is center. that in AI We top month is good calls now of resets. and One one handle launched resets, and which this the into our we

virtual types sure area last call The the AI assurance expenses the make XX%. Quality thing quality our success and following functions, agent our actually reducing with about that QA and is we're good having go Assurance where in by disclosures and scripts. right categories that That's our we're right and through are having AI really reps

traction good with well. AI So as

Peterwinter

flat first strategy margin for year to I forward and going expect with ask next kind up? the could the of Should the to really the the in starting gave beginning in we outlook next kick margin year to if then hedging in And be quarter. you

DavidTurner

Yes.

all way the their we're next work to year. so forwards through think for actually assuming the extent, that I

lower neutralized the I is of trying do the impact on from show see from margin prevents program stabilize and you of X grow income and of hole. to out can effective, which to to actually the hedging policy you which more margin having more trying on are we're think chart, interest where us what and derivatives us through helps and just insurance more slide more hedging As a net coming we rates, become

to can putting and you you So earning that have. organic give have the good growth you assets balance growth the want kind of to now on sheet

to having not have. work think we're headwind say, many a So against others we like might

we depending And assets ability put so the we do earning to in terms in grow of have what XXXX. on on

Operator

Jefferies. comes Your Usdin of Ken from next question

KenUsdin

morning, Good guys. Thank you.

a follow-up last on question. that Just

gives hedge you this of scenario page only takes are changes that saving helpful, really just on potential be the one one, cuts how in put before might to understand on. might up from a trying of get the don't to the three end same different just the get --just place three it out a that there the but getting the but decline in I the if potentially us Like is come forward semantic that your wondering curve. cuts which you terms So or is And of in way if in just X wanted the like just of is slightly cadence change how we I'm more Fed fully curve?

DavidTurner

Yes.

about think our working. have really Ken, things things We two to couple So, sensitivity.

the of end short curve. the point your to is First

beta and XXXX. short where cuts receive confidence in tied deposit to speaking on the we us XX% cost that talking month derivatives are that So about protection reduce other our is one our we have received the short in gives LIBOR, have generally curve deposit in term that with so the end to the of ability derivatives, the are fixed fixed we

you have three we if even one, end, short So in under scenarios. those two, cuts have the any protection of

It's long end is part then the of curve. happens what to the second the

as even a to portfolio end. flatter don't our the, a lower us we are on the slope as the coming have the the investment for environment, we tied And well horrible curve so reinvestments we know. protected are lower in long you are because have the and yield have to off to want It's really us is we like industry slope in if curve rate if which

about is bit. a it the, it's because long as increase So we'll three as can we're where get end, maybe least and whether at even or stay at react not one, we as the appropriately concerned long two

KenUsdin

it. Got

the XQ, regardless then environment? pretty feel XXXX circumstance except most curve meaningfully in that So X, of flatter a good pacing mid you for loaded can any happen XXs

DavidTurner

over caught on it why We've year XXXX put We we exactly half did going XXXX to going latter in in forward, caught, forward on had a bit our of are ours. have be We floors asset we increases a through beginning this those in going That's did, feeling protection. is about want environment. expectation XXXX. little swaps And stay place we've rate what just But to exposed has to the which can a ago of be the we thought XXXX -- starting. we're we peer be XXXX. been the with beginning in in part sensitive, duration this we pretty putting in are there so of right. thought And five started good that years every as take and we would we and have

really good then. have we So protection

KenUsdin

clean but out they which very Okay, six, you've last that you money charting And on kind the much a average they page book? one them of on could on be there. those average as forward for put the got meaningfully they are X.XX% up they there general floors got is the are obviously The then in strike or the of depends the or on, X.XX% swaps are fixed-rate on at Are -- all around different they for it. swaps and just ones? across

DavidTurner

to averages. be enough. but we've you, the given the that from your here time points models. averaging that using is nothing representative this that's think do to ability the a there give to be we averaging lot will disclose going skew going There so we more went you The really XX Yes. And to to

Operator

America. from Our Najarian question comes Erika Bank next of of

ErikaNajarian

I the morning. to earlier to Ryan's just wanted Good question. response clarify

we And deposit May? think about basis and XXXX that curve XX if anymore, XX% what think costs that and data the right we that about could of and as is then the the points? reverse is cuts get three think, you not will initial in of beta, the ultimate Or do peaked cut? XX for deposit those As given forward be what sort on points basis maybe already deposit

DavidTurner

Yes.

at going XX. I to think we're start

we're time at over up. XX think I cumulative going

you XX a through. expect at starting that you're if drift as down would goes bit So time to

you're what that's think I asking.

ErikaNajarian

interest would bearing expensive deposits of I identifying of XX% then initiative that XX% is taper rather especially terms accelerate. So that it the as off clarify to repricing quite are initial indexed? of you -- cuts guess on And in the the terms in your the the immediate taper or percentage of than would impact either

DavidTurner

Yes.

exactly right. You're

just engine we the So get that the our the of to to exception the end it of the we the from down XXs at -- at all and And pick starts XX the of you're the and swaps. of And as our day that looking at deposits going benefit into that drift the our higher our get compared market then XX receive indexing of we then driver peers. floors. at XX% pricing benefit of is

ErikaNajarian

rate Got clarify, it. difficult and this isn't efficiency And, John, XX on in below just wanted environment. loud clear that you to and

on commitment. an something period that's this earlier did as reply slightly three-year flat And to You answer, a that down regardless should expenses the a question about rate still what we of environment? to a is over think

DavidTurner

Yes.

So this is David.

our changing So an the there. to to guidance slightly was answer flat down XXXX

what inflation then years, our base X.X% next every into is does baked have year. expense and if it revenue X% question to clearly, We three this think in mean for I your environment. we we're challenging the

so want relatively And have cuts, if see we we expenses to keep to stable. continue to

X.X%. to We to ways find that cut have

we if and on then to that even investments to got of find So we want top make more.

environments, that three generate of years. those is each commitment of those would operating Our leverage positive any we under

meet do. that laid to curve our to what months expectations flatter now, lower commitment there. environment, Clearly, rate years a six whatever we're only makes a three it going we've XX% that's that we're was do from out. But very And we seek The takes tough. yield to

XX% not giving on by we're up stretch. any So

Operator

Your of comes Saul Martinez next from UBS. question

SaulMartinez

everybody. Hey. Good morning,

deposit path a XX% cuts. for future confused And either thereafter the I'm little still So beta. glide on bit guess I

further sort it in going they that of So bearing that first period other And does are XX has on or from the cuts that to are That's drags rate a on first saying decline be accelerate immediate cuts, what commentary rate on beta an pricing is see filters going a not a you'll something you cost? the in? time is interest point beta XX% XX the your over decline over Because interest your terms the and deposit bearing some decline cost or cut, of lag decelerators as that seems deposit to couple in that of on quarters that new banks as there basis occur? deposit like, been is what happened.

DavidTurner

Yes.

quicker going XX% move of So a another can ours deposits, we interest billion little to. quickly exception we have happen on to are we felt indexing that like because that of the bearing $XX of XX% price our

high floor to start an couple only that off. for pretty you early though maintained be you to up think XX if get in absolute XX, off terms a point So that quarters. taper And think taper can perhaps has on. that of deposit point so has it We're some as we that to cost. could At some we of at be

that does help? So

SaulMartinez

Yes.

I so pretty the But you're is saying so. then think XX% immediate?

DavidTurner

That's correct.

SaulMartinez

what not the of does. about asking NII and driver think shift about being XXXX earning net income that with income beyond bigger large know interest we that balance you've in on net sensitivity, year, too loan it mix Okay. this When But rate how a a interest that. guess conceptual XXXX. net grows independently we income think average degree. line just not environment question and regardless for you interest for in it's rate not I rates, should a neutralized thinking your I growth extent be certainly occurs more growth growth and growth NII of the I'm then to necessarily but early much growth more of have to stabilized and guidance. of

DavidTurner

margin us us watching growing low from rate continue participate margin deposit keep we massive we and tailwind therefore program that our have protection to a to the NII grow that communicate do of in we exactly to not NII opportunity not out hole us to what earning is hedging grow to to gave, of but neutralizes our as environment give insurance assets was rather having it That's giving trying cost. headwind. a And climb were this could

franchises NII balance deposit Our think growth. grow still continue our help with number us we that's one to appropriate sheet to And competitive going advantage.

SaulMartinez

helpful. remind renewed or now that do no, for it balances guys and there final but outlook I How are you other commitment think can fines one auto and do? missed don't much GreenSky quick you one I us indirect indirect can the the what what consumer, Okay, there. have if sneak how that's I exited should know not If for and balance your the line we expectations about, other consumer in.

DavidTurner

quarter million. see indirect vehicle look this if on $XXX so you XX, hour supplement our past decline you'll in page And some at

the we're decline. that. kind on renewing some of of take mean on year that's sorry for So I auto, the rate. I'm kind average run $XXX that will GreenSky. time. We're not million not indirect auto It'll about whole The be

SaulMartinez

Yes, GreenSky, okay. Thank you.

JohnTurner

clarify to We need Yes. that.

on top average payout indirect portfolio. indirect we $XXX on average And that's will year, kind and auto with I that X.X year as to full it's right, think weighted or respect the to portfolio the month portfolio, sort next unsecured million expires X the runoff expected over right. then contract on two out of it that then the of

Operator

Marinac Christopher comes Your Scott. Janney next of from question Montgomery

ChristopherMarinac

invest producers. the opportunities? into to footprint this next or about environment year where year of a Regions' come [Indiscernible] wanted of few in about hiring new Good Is environment Thanks. this the that morning. perhaps ask external I late markets you the or because teams

JohnTurner

as all all time. Yes. estate is -- corporate, we're I business our well commercial mean the of leaders' real recruiting actively

similarly. business consumer Our

are know are in in their the best is businesses. the their tasks who and in always our their contiguous of of markets markets specialized bankers One --one best to who bankers

investing recruiting. continue Atlanta, so we've particularly that. Louis, do had Houston and actively our we're priority already and we St. are markets in always and Orlando this success recruiting good And year And across where to we'll

Operator

from Barker Kevin comes question next Your of Piper Jaffray.

KevinBarker

a little It that on us target quarter. this color CET the would the give can then term cycle. off would you us maybe the a with CCAR hoping then for of X and And was third quarter? maybe pretty in X.X% rest just I aggressive the of seem more a tail buyback buyback help cycle? the imply morning. the And out through ratio the you Good near through cadence

DavidTurner

quarter. put exactly run we in do We term. quicker we're because our capital, that or that you're that buying have short in X.X% every think to dividends at based that loan quarter. we company level Yes. and that Obviously were X.X%, prepared can the going we Kevin, on single level third buyback does to our then into imply a we going what uses here That that's to a -- But us so will right. growth of will need the risk of more to it get exactly it to get buyback to some be a we of up to our the keep profile. and back that we comments

that It and will we moderate will the after use ability. repurchase

we us our and smaller we're of then to and board organic be buybacks at increase, some to buy dividend company. versa. we capital earnings. stock will grow If grow foremost, and use rest, vice that $X.XX will going of a XX% keep use back so to have the don't can keep think stock optimized X.X%. the buybacks Then the to we'll we'll billion we is So loan faster, about for authorization loans Should loans our allocation that first in buyback how growth capital for pay up of and XX% we'll

KevinBarker

Okay.

stable at there ratio in better other you place? the very given that for authorization the imply assets way in have single maybe or near So Is risk it this the to have doing relatively given keep X.X% buyback term. close you order in would decrease some that to the the order or somewhere growth cycle it even keep weighted we you're balance anything closer within to in that imply loan digits to seem or authorization that would the sheet low or

DavidTurner

growth quarter return little bit mid-single down No. adjusted a quarter. that the this still a it any than had expectation We're a change. given teams slowed --we, sense digit grew expected. makes growing standpoint. can from risk our We for there first year. Again see we are pace loans the quicker low to have a out quarter you when We the We

our though growth us even haven't fourth strong. been for pretty pipelines as the couple it's for hand quarter stronger not other been good. look quarter last pretty actually --has third on the The The years over

share our that would buy to on to the And side. our stock that between buyback. we We're toggle capital we type We sense. relationship our use and than we want X.X% client to use also makes the if all manufacture risk-adjusted will sticking loan My we're to the grow our commitment to one stock don't not back and we appropriate is grow point the we want buy -- get So organically trying on capital can't those But back. returns that we have that much loan we to goods, growth growth. our or to use rather loan and other. appropriately,

Operator

of Your RBC. comes final Cassidy from question Gerard

GerardCassidy

negotiations, you lot with what's and wage going is we Can currents the et in seen share But accelerating. seems Question. strength of low the be be and the unemployment guys business on cross we've to consumer with a rate on commentary know all business of the growth country in there us -- economy by of this our the trade the cetera. seems to some side with how

business. are could tie into XXX in of So with customers basis us And that you of curve forward your cuts sharing about XXXX. some rate the you give what points insight their can business you

what you Just seems forward guys rate being little I'm aggressive just a as on see curve think. like But to the those curious cuts.

JohnTurner

optimistic. we prepared good into have that Well, said of significant a economy that would of any on sub be or Customers your more still the we the very availability the consequence forward half restaurant as their I still curve. we any issues good to our we variety having business don't sector, so, It on XXXX was But of them see. as industry of second any quality customers you appear they're skilled other in my look we've the I pipelines before to answer is fast sense really Most over and optimistic, see XXXX other our constraint of days within are the I the it caution stresses business don't XX the of results see labor. remarks, think really at so our across cautiously out called good. are cannot tell primary tie than credit I no, clearly question, last the part were sectors owners. casual,

that's constrain thing from investing environment. rate to not tends And interest businesses the the that

the rate customer's so our to And eyes I of through our forward curve. can't really the economy view tie

GerardCassidy

the Very good. of XXXX? X you update you January where And reserves then build Day CECL, on up share guys us when estimate in an can on stand and we with may get of

DavidTurner

Sure, Gerard.

feeling looking to something So run we've parallel in to good hard working January X. about really as XXXX. our been that XX-Q here teams where Day on have to some give we this year. adoption shortly We're indication might -- put our being also We're for been prepared the in be would

mentioned As consumer we've really before, portfolios hit get relative portfolios. hard to commercial

business consumer so our loans. have we about loans, loans of versus our XX% And services

on get hard much the XX-Q side. the as credit HELOCS, seasonal credit, But filing. those in cards, stay on commercial not here adoption shortly mortgages, our pretty those tuned unsecured So hit

End Q&A of

Operator

turn John over to Turner remarks. I'll closing you. call the back for Thank

John Turner

selectivity, volatility and thank underwriting, the Client their I we resource on sound servicing, allocation the you adjusted we despite expense we that can can think quarter everybody effective hope things Well, have tell solid focused for a market. in credit management, control. We're risk interest. returns.

focused And well on We We have to we're our plan. positioned rate our good And continue stay neutralize we to a believe think plans. sensitivity. we interest on execute to that.

Regions. in interest your And have for you a day. thank great So

Operator

This conference concludes call. today's

You may disconnect. now

Dana Nolan	Investor Relations
John Turner	President and Chief Executive Officer
David Turner	Senior Executive Vice President and Chief Financial Officer
Barb Godin	Senior Executive Vice President and Chief Credit Officer
John Owen	Senior Executive Vice President and Chief Operating Officer
Ryan Nash	Goldman Sachs
John Pancari	Evercore
Matt O'Connor	Deutsche Bank
Jennifer Demba	SunTrust
Peter winter	Wedbush.
Ken Usdin	Jefferies
Erika Najarian	Bank of America
Saul Martinez	UBS
Christopher Marinac	Janney Montgomery Scott LLC
Kevin Barker	Piper Jaffray
Gerard Cassidy	RBC

Regions Financial (RF) 19 Jul 192019 Q2 Earnings call transcript