RF - Earnings call 4 2023 | Regions Financial Corporation

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Operator

Good morning, and welcome to the Regions Financial Corporation's Quarterly Earnings Call. My name is Christine, and I'll be your operator for today's call. [Operator Instructions]. I will now turn the call over to Dana Nolan to begin.

Dana Nolan

Thank you, Christine. Quarter Call. Fourth Regions to XXXX Earnings Welcome John results. will provide regarding our high-level commentary and David which our section documents, available Earnings include in information and the are non-GAAP Investor Relations of website. forward-looking our statement disclaimers cover disclosures Q&A. our comments prepared These and materials, presentation call turn to John. I the will over now

John Turner

the call XXXX pre-provision Thank Dana, of earnings in tangible and billion, record pretax our of of average morning, morning, $X.X we one appreciate you everyone. at $X returns you, This We reported income common billion peer good our joining XX%. and on today. best full year reflecting equity group

Our experiencing. results to focus taken position underscore capital enhanced interest and We've the sustainable management comprehensive decade place to and allocation. company work of generate consistent, our and our credit speak has sharpening to risk platforms and while the earnings on rate past we're over processes returns environment the risk-adjusted regardless the economic

to and the the of face XXXX. as balance heading solid We'll well headwinds continues economic into framework, continue prudent uncertainty, positioning as lingering risk from we credit and about feel continued benefit capital and our adaptability Although diverse and strong our industry sheet, confident from and liquidity evolution to management. regulatory the geopolitical

approach continue banking for will In array of continue our Our serve to economic position proactive relationship success to hedging well. conditions. base deposit desirable strategies us in and an footprint, us granular

performance sustainable we profitability consistent, Our on deliver growth. long-term as strategic continues plan to and focus soundness,

the and alongside the doing right of way put and at customers excited on center the In who day. right work do their we to the XX,XXX things closing, associates Regions every I'm all needs focus

the some Dave regarding highlights provide quarter. Now will

David Turner

Thank you, John.

X% loans on sheet. to basis, the compared Average sequential over the loans grew and balance quarter with a year. start prior decreased little modestly ending while ending a Let's

quarter-over-quarter. Within ending declined portfolio, the average and X% loans business

to exhibit reserving a demand soft cautious have continue judicious full business behavior. where are remains We as capital Loan relationship. clients remaining for we can

We outlook. investments In but can when make others expect with long-term holding if have sentiment while off. clients across general, to they industries they they're growth, continuing a have are seeing varies to, defer, by was some home muted the sale Average in in ending equity loans offset GreenSky EnerBank quarter. partially mortgage growth we remained relatively and declines exit more and stable this and completed consumer portfolio as

partially low we noninterest-bearing to Looking season From which average a loan in in Across products, forward, modestly expect experience tax standpoint, the primarily increases to businesses, will business an to single basis deposits continue deposit the with growth X average and in remixing interest-bearing be reverse XXXX first deposits. on ending to quarter. from increased due expect we digits. we interest-bearing all

Consumer, rates the remixing relationship market of to checking pace pace of balances levels. continue continue to to believe see slowed. have we and will remixing However, we of but levels to closer pre-pandemic appear the to has is normalization, getting short-term as slow peaked balanced Within spending the

Our overall are balances deposit and unchanged. views on rates

stabilizing of checking out by and and midyear. $X billion billion remixing expect We balances low-cost incremental $X and total products of savings between

XX% This mix results the noninterest-bearing in in a low remaining percentage range.

start to shift incremental as income of hedging. X.X% interest billion mostly on cost and deposit driven $X interest net let's So as the mix in income. declined quarter by well approximately by the period the Net normalization active of

termination representing higher-cost a of but to above approximately cycle the the betas of million XX% for advances. lower-yielding increased in market paydowns in taking returned separate allowed Asset full by beta. over Notably, reinvestment costs yields attractive X%, and we and balance the X.XX% portfolio deposit and portfolio from benefited in that rate quarter, during Growth deposit loans FHLB advantage to our rate spread maturity were levels. deposits and the quarter, securities. added corporate replacement Interest-bearing of reported the all and securities rising outstanding the $XXX of

of retail the more This to in behavior rate-seeking a compared by slowing customers drove interest pronounced expectations. and pace income modest outperformance net

we over year net and late-cycle look the quarter be year. ] headwind. remixing interest trends expect of to the further the of to in the $X of a half stabilize additional income first As grow half hedges back XXXX, starting [ and billion X deposit we the will over first

of we interest fixed to persist, half of billion. the billion and outlook, driving respect income peaking we improve With full be interest to net turnover with betas will the The range. deposit mid-XX% to interest-bearing trends the overcoming year headwinds rate the growth However, year. continue and expect in expect between $X.X to second asset income net in benefits XXXX $X.X

for rates assumes from XX with long-term year-end. point guidance rate cuts stable remaining basis Our

the and expected a similar However, assumes have in we the market income net deposit The prepared of beta types deposit price rising end interest protect well deposit XXXX responsible is experienced small costs rate as cost funds. for to beta Fed immediately These rates end of the from other relatively rates. are driver what the balances income during net increase margin. index while corporate the environment. deposit interest in higher fall, manage in is include In XXXX majority path that interest-bearing income will with high we interest be deposit of cycle. net XX% our interest a lower for portion changes to a insulated falling range the reprice primary to A deposit performance. lower deposits rate market of beta The assumes environment, will the

maturity. with CDs other average a X-month The is primary contributor

environment, While rate are these cost. this a offset falling positioned products to lag we will in

a records increases revenue increased income Full to look decline as X% offset grace income a the both and income $X.X at X%, as for and primarily late expense. adjusted to billion. by be outlook, to treasury fee year due full feature respect capital implemented take declines quarter markets offsetting overdraft sequential and reductions during in the capital year in Adjusted was the income were let's in noninterest XXXX Partially categories. markets company's management revenue. quarter. other of With between in and wealth most XXXX impact So noninterest $X.X declined in noninterest the well expect adjusted mortgage second modest as new billion we management these

Reported costs. special on significant noninterest increased to quarter $XXX noninterest to move million in million X severance-related and Let's compared items. X% expense. adjusted FDIC $XX included expense the for prior the but assessment

Full fund expenses in expense investments operational decreased to committed year quarters. losses and lower primarily second operational X.X% Adjusted We noninterest in excluding primarily business. noninterest remain approximately adjusted third elevated driven X%, the our losses. or increased expense X%, by to prudently managing experienced

focusing categories, benefits, include expense continue largest our salaries vendor will We spend. on and which occupancy and

asset noninterest expect We quarter increased XX quality basis XXXX $X.X year adjusted to Reported standpoint, full to overall continues as billion. performance credit annualized net the expected. From points. be an normalize approximately charge-offs fourth expenses for

sale, However, GreenSky loan net X point the the impact decreased of points. excluding basis prior XX the adjusted versus charge-offs to basis quarter

our were in Full basis downgrades ratio points. adjusted during was identified and NPL loans loans loans net XX points. as year nonperforming total Keep mind, to industries criticized percentage increased due increased business basis Total previously to risk. XXXX, the charge-offs average loans of XXX points services XX primarily XXXX Nonperforming as and within between basis a higher quarter.

allowance $X XXXX. expense to of excess We The for $XX certain adjustments net risk an or Provision was to million net and higher the credit quarter, excluding ratio increased loan adverse X.XX% allowance $XXX sold points. expect in and million portfolios. primarily basis basis was to increased as credit X provision consumer migration X higher incremental qualitative allowance loan see loss as to during levels credit risk these includes well expense portfolio our in further the increase charge-offs continued sale. for the to would the in have million normalization towards quality points related risk for normalization due ratio loss The

XXXX average basis points. charge-offs XX Our towards acceleration quarters. from recent to modest levels We've seen these XXXX normalized in net were

net As points. and result, XX expect XX between our year be ratio a to XXXX charge-off basis we full

liquidity. Turning to capital and

common repurchases of we'll and share to commensurate X expect We us growth the the allow Given the continue with estimated in to ended an regulatory changes in ratio provide line year flexibility while million earnings. ratio move X proposed Tier we portion near of million dividends increase the equity with and With evolution time common meet the will $XXX to the This during strategic dividend that, over Q&A implementation of XX% call. term. around sufficient equity along environment, to level the $XXX our objectives executing quarter. Tier common maintain supporting the while XX.X%, the the to

Operator

question Instructions] line [Operator with Scott Piper of the from Sandler. Siefers Our first comes

Robert Siefers

repricing deposit hoping commercial sort thoughts of main of levers for thoughts you've consumer presumably, guidance. discuss Maybe some to the just having or any had. seen little peaked the the And a take already already deposits? your pressure ease you on you've bifurcation actions out was and on maybe about for comments about within any more had the between opportunities Appreciate NII you could that to costs. then opportunities Fed sort the with specifically I NII

David Turner

is of to note deposit this our One that Scott, our is customer David. Sure. important interest-bearing the about thing really beta. driver is base XX% of

at look indexed. book. are commercial little of our that, those related to you And half If over deposits is that

So to changes that changes. those when data Fed rates, the extent

down as XX% will talking XX%, come you're rightfully down. about almost So of that come rates

represents other The deposits. consumer

of out these accounts accounts. CDs money noninterest-bearing money of and both to market been seen migration The competitive. we've have there So these be piece, market where

making long have competitors down. that We degree. is our to too some are we working on sure have really CD mechanisms what to But watch don't maturities. we go Part doing that of start our to

short. So fairly we've been

I prepared are think X comments, I is CD months. mentioned term in average the

want [ fact much don't we with like Fed. of think that going to shorten happen forward going to matter that. side ] is as we so The And extend the what a coin was to

but at hit have And baked on X our which think that be probably meeting. short-term going that, to to to note, of we of rates. market ] think And that's important than we presentation. that's May the our slower is faster. our to guidance versus Page Now midpoint we it's in believe, the neutral cuts we -- I [ what It's know think starts X the to we're guidance, to different participants going

range on costs. have good a a We've pretty talk of plan And managing think NII kind the performance about deposit It's about we we Page range. tight I a betas. do to X, our really given on you so and And it's so. all

day. we and up, as if follow a betas mid-XXs. probably we're XX gone rates finish our of have So had kind We the said we'd what in

If then upper at be we'd at knowing the we'll beta XX% if end the of things range. the come at we perfectly end rates that lower as be our then only back down, range. have we're match coming down, won't of

particular, in of doable, is a of related to midpoint little relative which we side. our think very to over So the beta, commercial that a on deposits half -- that XX% is half is that index

Robert Siefers

Perfect. And side. the then on maybe lending

client understandable. soft very demand, noted You is which

Just how year demand trend as the unfolds. expect you to curious

John Turner

time. back Platform of on continue contribute period Scott, the growth asset-based would the projections believe we Yes. we is this growth. Again, in lending, likely which John. and to the EnerBank we of middle -- economic through banking experience mortgage growth are, we that banking consumer be will toward activity and would will of current to year. be believe our have modest, and second market picks the side, business and will some the [indiscernible] half up typical core any year towards I this of half small occur And our

Operator

Our comes Poonawala next Ebrahim the question of of from America. Bank with line

Ebrahim Poonawala

I on was there fee the in revenue, particularly dwell to you up fee wanted income do guide. you to what markets can a growth see if Maybe are assuming follow where weakish quarter. fourth you across capital maybe Just into

your the would in And you boost market purchases for to quarter? should as income mortgage do outlook that expect So servicing do be that And on fees? within mortgage capital income? rights you more then did

David Turner

Yes.

you it's -- So David.

pick the tough some is first So your quarter. think hampered deals, line the seen little banking income towards corporate to We of year rate of will. chance both really fourth that real a particular, The we pushed rebound, you markets probably timing. actually, think relief a half got has rate rebound, on up -- we Been capital think markets, the estate M&A we've M&A our back if environment in of capital bit world first a finish had bit. quarter. those a the in has those tendency point into in We the a pretty in

book. our We have our a business good as grow servicing loan to markets we capital be support pretty you we muted. capital position. We think our XXXX. rebound have for So to feel rights, to know, will Relative good about loan look mortgage growth

one to servicing rights the been look to of other put mortgage work, has we So ways those. to capital

it. asset feel class we're about at because good We good that

have been packages economics an on and when we of group have market. our the We to to a make a return, that the have sense as room But that grow to a a we're that. to We overhead. but year be get work hit those number fixed servicing, have can If and we servicing they low-cost make of risk-adjusted looking do do the we'll the adding people we of suspect opportunities there'll appropriate a advantage. lot to to There's add sure overhead add to we don't we usually fixed are. without of lot during couple grow the bid

John Turner

consumer grow growth. Yes. checking and I'd is add households One accounts to contributes consumer to continue X things, just that Ebrahim. we

the had to number And to accounts then best in Management continue certainly the and services as operating we that some time, originating treasury year we management we're probably ever revenue in to see in we providing and had we're Secondly, expect fee of year finally, in increases management wealth maybe best had had XXXX. we've grow it's the Wealth customers.

Ebrahim Poonawala

and forward? the loan-to-deposit see steady David. mid- probably pricing helpful. cut, XXs flexibility. just the to is guess the get pricing some state you ] us deposit in one this if one of bank high somewhere your you the ratio on provides could sense see XX% a in flex we I drift other And where at into running That's XXs going this you Or one, give that [ is just ratio

David Turner

Yes.

where and X of So lot have of don't put upper to don't want the sure regards It's than At median deposits. we just our ratio. activities to solve for to competitive we to we deposit We pricing be some have our customers, the not those a our lower base. the have. kind of to to a really us gives run to bit all on pressure that fair X, were at It peer trying maintain opening XX% result bank we loan with deposit making Remember, of by just of were a we flexibility points. to end comments be push. that balanced have the don't but little

to chase bit board. costs deposit us rate. We flexibility have And to a good why be it and not a core lower the have to that's deposit gives base our with across have tended

Operator

next question comes from of Our line Manan with Gosalia the Morgan Stanley.

Manan Gosalia

are mentioned you just that? they to think you longer-term of Can certainty conversations be environment your they Is light rates it the for in and there what's So helpful. on any driving it down? about I and would there? earlier waiting the call investments, on part Is talk clients come more they're deferring that can. need if rates

John Turner

Yes.

Borrowers related all U.S., I then conditions, the than believe, what think, ago, to but the are, that currently today described. they I based to improving XX to initiate be I cost the uncertainty the here all rates to rising had political probably clearly, upon And has just investments above, had interest costs, things geopolitical restraint. line think environment and days an created have, of impact some that's in rising still of long-term XX conditions, the optimistic appear cost economic more that labor of goods, impact. with have economy, were reluctant I in some

Manan Gosalia

I of and you a peers we deposit on think as think go as accelerate we suggested about that okay, number resolution betas will of rates as growth these rates when down, a have that of I'm matters on your loan picks some confidence flip go assess So XX% and down that range up? back low the the to of and just that does on of end that level to then competition But the high deposit trying XX% beta? mean side, get down.

David Turner

to [ year Well, relatively still for fairly always we to competition muted. deposits to want you the do think rate. loan Which have has for be is don't going ] growth been intense. use is And

a a of with an that And we all is business. of and account leverage want the type the which what the account model, of You do. of funding. off We to have consumer operating of comes banking checking relationship

we to of all of, no wholesale speak paid us, borrowings For have advances. off FHLB our

up the to deposit base. reprice our lever have having incremental there we to growth ability So cover to without

competition deposits, meaningful there's incremental that all if be don't will So for it pressure in on I or particular. think us

Operator

Our next from with comes Ryan question the Goldman Nash line of Sachs.

Ryan Nash

X% about we Maybe a growth. you basis. outside Maybe of this David, just in loan on capital. you question an on quarter. know XX%, your about about over talk had I of uses maintaining slides, how think some adjusted the buyback talked capital

about restructuring. capital talking little thinking about portfolio I from bit incremental think how talk uses just December, about we were a potential securities here. the in for Maybe you're of

David Turner

Yes.

me we the So obviously, of about think it. as checkpoints just let go through kind

loan to capital use to muted. So It's be want to we going growth. our support fairly

mentioned, we I our As a dividend, XX% XX% fair want to earnings. pay of to

think have looked our work of And to for we'll we as covered. mentioned that's searching us look at grow. to in excess think put look I We to We've So a ago. more capital can that business. growing that we continue businesses calls then help couple rights, we just

repositioning. We have securities talked about the

We continue that. to evaluate

just on is to ability from the made enough And get far environment any adapt want to We too the quarter we of whatever to XX% with every yet. our be. have going XX%. close accrete capital capital fact away do the we And that, don't outside that to is our to pegged think not that regulatory decisions we're to

our hurt right able There's going so right we're think and to return, we is ramp we thing the maneuver a no XX% what the to level an number look capital regards and be. to the to continue lot and in there's to need do spot to us -- think up like, place an for to be of uncertainty that's to unnecessary with optimal to

Ryan Nash

and different Maybe bit it. a net at interest a margin Got to perspective. interest come little net income of from

first guidance you you net over out know settling NIM do to us where time? the and around Maybe end. next the talked how settling we've daring course to XXX for look of foresee about quarter it for about you X.X% talk years. about a the out you we be historically, see Maybe the color gave you on the X% of range. evolving think You were David, is over declining as the full expected the year. year out When little cycle, see of I course couple a where bit it just rate margin over the interest of

David Turner

Yes.

So you're that going pressure quarter second think in I in margin quarter. little see and the the to a slightly first bit

The second some $X the received that call bit negative bit in quarter. have us a has first the billion hurts will quarter swaps that in start quarter. first beginning effective that then of a change And will another, it, become fixed carry to things

So literally, the after like first month.

things the of sell talked most have levels, of very lower on X%. that's we back low going really you'll we the movement the whole purpose think see movement of to quarter rebound where I for start [ can at ] because finish was in deposit a ] first everybody. X.XX% then costs down X.XX% [ down. in about and more We is So and [ as think range, to predicated little year think the X.XX% we strategy our had second. tiny hedging in a a And I rates a That we'll bit bit a ] the

going margin, synthetically. we If to protect have to do we're our it

some the so manage swaps $XX and any billion range. we derivatives fixed to us X.XX% the received ] interest of in And X% in net about [ margin given year help to other have

a things range. got middle think up in over of in year We've be you're that's to with rates And to costs are. get But kind exit of probably [ So the time likely possibility deposit that the to to have out. that X.XX% where the can ] back time we we settle that. tie in

Operator

of Evercore with question Pancari Our comes from line John the ISI. next

John Pancari

likelihood the a of front, negative that On view on on you operating leverage the leverage in look your XXXX. you operating quarterly when basis. combined more guidance the there your revenue And could with your assumptions positive implies you as a you do expect I mean, how unsurprisingly trajectory achieving XXXX. But expectations, operating into leverage your side, positive at expense break do trajectory for

David Turner

generate of which a have tendency you're above to at of So X outperformance annual quarters primarily way leverage we margin, we 'XX, basis. is I in because operating in positive where the were on above an everybody. look it 'XX, right, having most our first can't And X%

income as can start out as growth deposit to and And from start so the like. We stronger at a been acknowledged And of mentioned, in marketplace. operating think we I to bottoming with half the we see trending leverage, towards exit the a margin pressure and the the we the terms we'll We'll second and what way. generate go I can And think bit. positive 'XX then the and there. of us like. quarter, think [ on looks think back in looks get loan I can see We'll ] little just we that's do year there see up -- we other margin. grow net back betas economy in start what picks to that interest

a positive operating towards half back the possibility. is So leverage I think

John Turner

And definitely XXXX for ]. [

David Turner

for to going XXXX. there we're get And

John Pancari

Great. secondly, That's Okay. helpful. credit. And around then

about the book you add downgrade [ whether from sectors. Or I continue bit risk a -- that of ] the flagged can there higher loan increase, scrub a was color multiple any built there rating downgrades of you What's little the the a you outlook I the that completed concentrated multiple is reserve? Was know it you just one -- the us risk can and the to sector? I downgrades? you've episodic you of bit here. Maybe more it just here? separately, NPA the and some guess, the in to Regarding talk then, it led know as give broader you

John Turner

quarters portfolios the that was called What housing, for senior number been quarter some we out of I'd from and a have stress increase some transportation, just now. in in with the office John, to discretionary warehousing, under additionally, manufacturing specifically in and nonperforming, of items. classified NPLs, transportation consumer to then migration and criticized we've saw specifically respect say, in

our So expectation. was that

large moved will believe that we in through. and something quarter. we credit we X have third technology that can We manage is is That the episodic, believe,

So when the at of you XXX to look are we which out, nonperforming is basis and between as XXX migration, we sort levels somewhere historical points. traditional more pointed XX to loans, of back moving

David maybe the average from 'XX think 'XX. said I was XXX or XXX, and XXX

to guided for the which we've in think basis over in charge-offs, of And our we with loss points XX to XX is line potential expectations portfolio time.

we're think I the would historically credits I into of rates, an increasing as housing, discretionary. all why, specifically we to those So have have that now operating labor, good things consumer impact transportation, on had the industries out we say costs, cost, interest managing called increasing of office, senior feel insight burden cost the that we've

we changes the we in process through over that time, portfolio, in think go have portfolio to we provided in the potential -- in unless follow in losses we some a or we I respect and quarter. the with And obviously, in for outstandings the conditions. allowance, portfolio every the portfolio or believe, paydowns economic we've growth believe experienced Now currently

the change the changes. appropriate economy and change not our of You unless will allowance likely is that it can won't assume trajectory

David Turner

provisioning release change, ratings That And the only up impacts down. if that your also reserves. or John, that then other risk thing, or the be on would

or point X that John X mentioned. add with that the I So

John Pancari

add And we last if it sorry, given just assumed this rating where regarding David, in assume migration part negatively your I I'm the if outlook, point, now risk is just are as -- downturn. could that of

David Turner

right. that's Yes,

going at have about credits that are you look way, and other any reasonable changes, go can period if the that so not think your You to and provide forecast more. the where to cause to

provide the think reserves have need is things we you we Generally, of driver have. you that a you then the then don't worse, loan get better, those and reserves. having get can more. we add If to up to release put If need you growth to to things provided also So provision. what

the other going quarter that then release are better the in up got can a set the loans you them for to have third. your had need conditions related a reserves fourth you you don't Economic the little that. If so than way,

think that So go, we where are reserves at and we have the that a there. positive. that's life to the of was for to we're But losses look net-net, going appropriate continuing loan and

Operator

comes line of Rochester Our Point. next Dave with question from the Compass

David Rochester

the range On Slide so was know maybe change change don't we I NII cuts those, guide, you're X I for how those just get you in to neutral year. wondering factoring mentioned if you're wouldn't the much. might this

that of figured some Just beta might change flow some and maybe assumptions here and in the deposit stuff. other

David Turner

Yes.

to So put we tried that in.

is. at of that box, look lower say lower the question end you to on that, the If your we stable, was trying address what exactly

of the kind extent to are. where we we're So that

David Rochester

range. this all was within That

David Turner

That's right. right. That's

David Rochester

end? the But lower

David Turner

Yes.

David Rochester

know then the I for you rate loan of today on securities categories you've investment securities producing. and you're billion production, and got investment and breakdown loans on was in and $XX securities you. And what mentioned that just to yields you're I the production loans on was curious average? what different and just and new many year. $XX for loan both the fixed putting the Got billion per

David Turner

total, in points think of XXX the book I So of those between kind about XXX, the pickup. back is X front book basis

$XX X/X basis That book XXX book front book or of, securities. million it, XXX is to that book, ], look pieces to loans range. probably back as on in of the front about back million call If points XXX $XX going to in you [ related that at

David Rochester

want how thinking the CETX quarter unadjusted. that quarters for is be And Okay. kick good mean Great. one next you just are for buybacks CETX it the fourth And your the as then just maybe? targeting here? about over that Is you've on the as What that X% capital, comments given to you got does time pace relates XX% is to on here, forward few where regs a your ratio, of then going pace over adjusted which new in?

David Turner

be. to what one, don't new Well, going know are we the rules

loaded a impact our be to the to with than bit. come standpoint, fully We the absolute pretty happens, you big good where with just a this quarter. assuming a move down all it to By the shape stress in minimum. [ time come AOCI rules doesn't AOCI need in show was. in peers it we XX see rates -- a different is that, we capital XX what is today, that saw all think From We're So of spot number right our the buffer, continue there. that capital out. to We is going ]

Unknown Executive

Buyback pace.

David Turner

The buyback pace.

used So our XX% range. us in Tier again, mechanism equity common that our the as X last buyback to help keep we

And pace nature, the out so with of favorite either take the be rest is rights going things buying or growth. earnings use your dividend, mortgage repurchases. share single-digit that a low is And bit to and that servicing toggle expectation, of loan then with then the we

they So want up comment to stay guidance. end whether I on the getting don't because on pace we a trick. earnings your That's

Operator

of with from Our question next the line Gerard Cassidy comes RBC.

Gerard Cassidy

all most a And not in quite many the where us holding that the quarter back the details used look was up pointed you with good year quality those credit as Credit recession Could word give at XX National how I call of fourth were you it portfolio your Slides Shared was portfolio, are the you often we and think that earnings the hearing credit-wise? ago, out already you calls, this XX or being nonperforming those weak. sectors portfolio can increase you of you've in on guys and way, us another have that share good on when the and nearly detail us leveraged to the given identified we're David, on John, to for banks. portfolios loan we on calls, remember

what portfolios up from these have have ago? thought held a So better than would year you

John Turner

say, those National markets so leverage Shared relationship-based diversify would we our risk Shared needs. same close in to And then think naturally been products is and rates elevated revenue softness an some size of that of true that, credit Credit expand and as for portfolio, those close book. need that had tall had [ I yes, began throughout there There performed that customer could some well. a The those Credit I Gerard. The to began rates. relationships that be grow this substantial. -- that's you as Those services. to them we're more was our and to capital we is fairly technology the enjoy, serve name are we customers business imagine, National the And risk that period mentioned risk, free while we banking have build we've with and portfolio a may we single help customers earlier, and business. it's ] but largely That's NPL. rose, We I comes can book us of meet to credit some to

visibility from has enjoyed That is capital we it's Credit still relationships, that But National just have expanding based would I that of very upon growing that an customers. overall, exposure good. deposits, example good say, those revenue management risk into. the treasury reflection enjoy nonperforming the of of we and/or with markets loan. on We performance We've been Shared but book, think loss as limited a

been with think And book. book the performance the Shared leverage pleased we've of the so I Credit National and both

Gerard Cassidy

Very greater your good. careers, shadow competition David, in for it loan loans, the talked and coming our I back think, low industry to into single-digit we've the to credit loans banks, private you. banking that you XXXX. then in of balance demand you're have any time, side about today, comments, what continued soft equity I but against a yours seems guys same customers there's markets. years, know getting credit the during you of the looking private are competing remains has how at coverage for are And seen relationship that of the against its growth customer of you more against private those And than lending lenders, competing average in

John Turner

who very to, base. modest turn, lending to customer exposure we're -- into have We our equity is not then private in equity private lend

customer And that very credit. be a think Separately, the base. Ronnie Smith see the we private private So modest a don't necessarily within he we day I would market if asked if we we could exposure, to can't any middle there. of equity lost competitor as name customer one. our core have question other it

middle in. competitor not by Shared it's investment-grade doesn't mean But given credit business it we're that a -- the National private the markets core and we're Credit Now our and type in some occurring market we're just not as of large, exposure, on not focus seeing today.

On we the a that wholesale with. compete seeing of ways, improvement side on now lots competitors in home different including mortgage of are there the side we're consumer variety and that

Gerard Cassidy

depositories? nontraditional are Which

John Turner

That's right. Yes.

Operator

the Christopher from comes Spahr, is of live. next with Fargo. Our Wells Spahr your question line line Christopher

of comes question line with Truist. next Our from Brandon the King

Brandon King

there. and XXXX? appreciate for you're just expense to related some of in is further a if baking on ] in I part I project did expense delaying other on technology expenses update [ modernization have control question that project of in on And the savings and expenses So that what kind an the maybe guidance the years. But of

David Turner

Brandon. Yes,

you operational guide the flat after from our expense essentially losses be to past given out we've So you overall carve year.

in ], transformation We RX and compliance, it our consumer of bank areas offset which business. call in the continue investment We is a that to project of looking management, don't and make investments elsewhere. of revenue along lot depending our risk [ come to has well. we're change to on costs. [ our very technology the project terms X% term. materially anywhere short spent that the of XX% year, in We ] in expect to We RX cyber

technology our we and continue better have I lot think can improve to evaluate solution manual a business take continue processes continue upside and We too. have we in leverage a steps, to to to technology manual to that and potential of leverage to out how

thing as platform the have investment we is us well. be going deposit a core think for in do. advantage modern not-too-distant to in technology So we the right and think competitive to a future, which our will we're

So anyway, that's for to kind you of revenue. range, X% will, a spending if XX%

Brandon King

just the that. Okay. of timing in no delays And

John Turner

and No. your project answer on that delays. on specifically, no To Yes. time budget, is question Yes.

Brandon King

follow-up And housing. particularly and then in just senior credit, had on a

]. far credit your exposure a as details space from get as ultimate what there? And loss to more wanted as content Just [ are far in you sufficient loss as thinking

John Turner

Yes. time. Today, -- in We we're in got nonperforming those the loans I'm carrying nonperforming. We're credits we've improving space, reserves in in occupancy credits have of $XX notwithstanding million fact we generally million are senior million as -- against over sorry, $XXX seeing about couple housing the $XX of a and improvement rates that X.X%. about

Slide again up I on with more little people your that become communal think So pick are seeing rates information provided we comfortable But maybe group. XX occupancy in X senior a we've improvement amongst living and housing as in deck.

Operator

Our line Najarian question from comes with the next of Erika UBS.

L. Erika Penala

Good Dave. morning. question, One follow-up

I exit to investors margin line rate very the for ] net of quarter. lot said Ryan's in think focused notable what the interest that the fourth are A questioning, X now of exit on you [ rate. X,

So wondering or ask sort you if are rather. the pieces could of just what I I'm is component

changed I on notional adding it a $X.X So -- rolling the guy. you've anything in fourth of billion unless of guess swaps, have in like the you seems do off terms good it's quarter.

that a that's is the You for down what and the rig you sort beta, assumption difference. quarters. XX% a especially then that really terminated look cut, X if speed assuming to of for wondering going forward like said notably, of in in what said I'm you you're XQ think 'XX first I it's the your gain was have you had could make that you on think more a deposit obviously, May. guys also block that mentioned unequivocally XX-Q, Wondering but be

David Turner

Yes.

think a amortization kind terminated drivers X have I that then in big deposit starting We rate the swap Those we're billion the run there the huge costs. all first notional in, $X drivers. of aren't in quarter are headwind and do controlling swaps the are in So of the already. the the

come with rates our almost start I the like I on then, index commercial deposits think after we get said, is associated side. beta our of down, XX% to headwind and if

finish So of beginning helps repricing, All you you the and stronger to bit then in the loan than maturity have end the the that growth fixed much year. start of quarter basis you you headwind towards And start the loan they'll having you points back repricing, XXX and overwhelms to come year XXX, propel back of the security at down. adding a that get fourth the that a little end.

So is XX% you what get it's we cost, an that one I that and as you through the controlling rates to the of think change, XX%, managing done beta at index. deposit and do the really like thing I if looked big have said,

market little jerky mentioned, to that money of herky because, The decisioning other is quickly. that can as be pretty a have we And change we make. gets I some that's to

And month, going we as that today, to forward, other and come prepared than be renew months. take that The were CDs longer to down. looking locked this month it's in X advantage our as costs to so deposit we're rather next things reduce rates shorter are

L. Erika Penala

coming deposits. a mentioned that, these to rate XX% you commercial And XX% follow-up of indexed to that down from

us growth that downside, the sense soft peers you're of loan index? a much either of this as I contracted remained contractual it yesterday. sounds give especially that made One your is differentiation to of guess you that just and really, way, how confident And like said, can versus indexed some but between control And you year.

David Turner

Yes.

no day ] about contractual number There's just a it a in based SOFR say [ it's funds through automatically. Fed mean, Fed a we a changes, [ there's to not the funds talking the ]. like like when we're changes changes so index, -- effectively it's So that's day. loan -- it's tied loan is locked when that CD on SOFR I rate contract,

And talking when index what we're that's we so about deposits. say

Operator

Our line final question Bank. O'Connor comes Matt with of Deutsche from the

Matthew O'Connor

updated fees debit entertain overdraft Any free about to cost or potential thinking all and the card thoughts potential changes on that. to regulatory

David Turner

impact put that This place, I original will be was to adjust a revisit kicking through to associated Starting, the to so us. going discussion negative Well, get interchange. down. going that in, with law in to written the the debit does June. debit had that a that and think into they in interchange extent have costs was To

XXXX date million comes think any about risk about changes, us half mentioned, where based I our wire. to long we the that a a item that's way that we're So on are there Relative a if it's year. from just to knowing hit the And out, and that in numbers, overdrafts, our NIR. $XX

disappointed do fee we're a in really to that, fee. liquidity I think important. to in that there's for our of discussion customer for is lot really, a paying that somebody charging be on of we but We charge going think base a provision item we're an because

return going the extent to was that item is to used, or that to we a fee. wherever entity And written charge

so base. customer helpful not be it -- liquidity to not our doesn't able provide And to it's to

it we're OD would there's I we that down be to get to premature until on so be And hoping point. road. of think the And the going further about discussion further talk impact really

Matthew O'Connor

you're address fraud just down then elevated but guess, you implies and of you're any the confident outlook kind they changes you it made whether just check came just see past expected well. then to up good that Okay. the And showed And in meaningful this also to I to as separately, wanted reconfirm and expenses were that that. issue.

John Turner

been forward, in which those in we include talent just rate technology, the and say expenses that for our are in would million quarter losses the effective. run going associated with to countermeasures embedded $XX and be all operating our the million projection believe have I we put XXXX. rate expenses run process for that place, in $XX And changes, will countermeasures

David Turner

We like got be continue we to vigilant to cyber. with to regards this, with just are

attacking feel as and institution, even us we are today. of have we place, put push good get to ourselves people and have not sitting challenge ahead are So continue we We're what than continuing to but it. bad every in about we stay does we idle. financial better to to We

John Turner

end Okay. Operator, is of that the call? the

Operator

like to comments. closing now the would for I floor Yes. over you to turn back

John Turner

our very Have you much. good participation thank everybody's Well, today company. weekend. interest in and a appreciate Okay. I

Operator

today's teleconference. concludes This

time. at disconnect may your this You lines

Regions Financial (RF) 19 Jan 242023 Q4 Earnings call transcript