Regions Financial Corporation · NYSE:RF
Regions Financial — Q2 2019 Earnings Presentation
24 slides from Regions Financial's earnings presentation, Jul 19, 2019
Slide 1: 2nd Quarter Earnings Conference Call
2nd Quarter Earnings Conference Call July 19, 2019
Slide 2: Second quarter & YTD 2019 highlights
Second quarter & YTD 2019 highlights Net Income(1) Adj. Revenue(2) Adj. Expenses(2) $374M $1.5B $857M + 3% YoY + 1% YoY - 2% YoY 2Q19 EPS(1) of $0.37 up NII up 2%; adjusted NIR(2) Adjusted expenses remain 16% YoY up modestly YoY well controlled Adj. PPI(2) Adj. positive Adj. avg loans(2) + 7% YoY op
Slide 3: Continued balance sheet optimization: loans and securities
Continued balance sheet optimization Loans and securities Average loans and leases Ending securities(2) ($ in billions) ($ in billions) $80.8 $81.3 $76.9 $24.5 $25.3 $24.1 28.3 28.2 27.9 49.0 52.5 53.1 06/30/18 03/31/19 06/30/19 2Q18 1Q19 2Q19 Adjusted business loans (1) Adjusted consumer loans (1)
Slide 4: Continued balance sheet optimization: deposits and funding
Continued balance sheet optimization Deposits and funding Average deposits by segment Average secured borrowing(3) ($ in billions) ($ in billions) $95.3 $94.2 $94.9 1.4 1.4 1.5 8.5 7.9 7.9 $7.6 $6.8 27.2 26.9 26.2 Consumer Bank $4.9 Corporate Bank Wealth Mgt (1) 58.2 58.0 59.3 Other (2) 2Q18 1Q19 2Q
Slide 5: Net interest income and net interest margin
(1) Net interest income and net interest margin NII(1) and NIM NIM drivers ($ in millions) NIM Driver $938 $961 $956 3.53% 1Q19 (0.04)% Higher deposit costs 3.53% 3.49% (0.02)% Lower market interest rates* 3.45% (0.02)% One additional day 3.45% 2Q19 * 1mo LIBOR -6bps, 10yr UST -31bps 2Q18 1Q19 2Q19
Slide 6: Proactive hedging strategy reduces sensitivity over time
Proactive hedging strategy reduces sensitivity over time Notional cash flow derivatives designated for • Comprehensive hedging strategy hedging(1) commenced ~18 months ago; program ($ in billions) $19.50 -3.0% $18.25 $18.50 now largely complete $16.50 $15.00 • Forward starting hedges begin 3Q19 -2.0
Slide 7: Growing non-interest income
Growing non-interest income Adjusted non-interest income(1) • Seasonality, account growth, and higher ($ in millions) transaction activity drove increases in service charges and card & ATM fees QoQ(2) • Seasonal increase in mortgage production led $511 $513 to higher mortgage income QoQ $501 • Wealt
Slide 8: Disciplined expense management continues
Disciplined expense management continues • Salaries and benefits decreased QoQ; 291 fewer full-time equivalent positions, favorable Non-interest expense adjustments to benefits expense ($ in millions) • Furniture and equipment increased QoQ; $911 beneficial property tax adj. in 1Q19 and new $860 $86
Slide 9: Asset quality performing in-line with expectations
Asset quality performing in-line with expectations Criticized business loans NPLs and coverage ratio ($ in millions) ($ in millions) $595 $523 $533 $1,908 $2,119 $2,124 857 1,063 1,158 141% 163% 160% 1,051 1,056 53 966 2Q18 1Q19 2Q19 2Q18 1Q19 2Q19 Classified Special mention NPLs - excluding LHFS Co
Slide 10: Strong capital and liquidity position
Strong capital and liquidity position • Repurchased $190M or 12.8M shares of common stock Tier 1 capital ratio(1) and declared $141M in dividends to common shareholders in 2Q19 11.8% • Expect to reach CET1 ratio target of ~9.5% in 3Q19 and 11.1% maintain at that approx. level; capital plan includes
Slide 11: Evolving near-term expectations
Evolving near-term expectations 2019 Expectations Category FY 2019 Expectations Adjusted average loan growth Low to mid-single digits (from adjusted 2018 of $77,667 million)(1) Adjusted total revenue growth Lower end of 2% - 4% (from adjusted 2018 of $5,745 million)(1)(2) Adjusted non-interest expen
Slide 12: Appendix
> GENERATING Long-term Performance Appendix \ Consistent Sustainable Ma REGIONS 12
Slide 13: Select portfolios
Select portfolios (outstanding balances as of June 30, 2019) Leveraged(1) balances by industry SNC balances by industry Information 18% Financial Manufacturing Services 10% 14% Energy 10% Professional 10% 18% Services 12% 23% Manufacturing 10% 9% Restaurant & Accommodations Wholesale 7% 6% $5.8B (2)
Slide 14: Asset sensitivity profile inclusive of forward starting hedges
Asset sensitivity profile inclusive of forward starting hedges NII sensitivity in parallel instantaneous shock 3.8% 2.9% 0.6% 0.1% (2.0)% (3.3)% (4.6)% (7.5)% (2) -200 -100 +100 +200 Current sensitivity profile(1) - estimated 2Q19 sensitivity disclosures, including spot starting and forward starting
Slide 15: Non-GAAP information
Non-GAAP information This document contains non-GAAP financial measures, which exclude certain items management does not consider indicative of the Company’s on-going financial performance. Management believes that the exclusion of these items provides a meaningful base for period- to-period compari
Slide 16: Non-GAAP items impacting earnings
Non-GAAP items impacting earnings Adjusted Items • 2Q19 items include charges associated with ongoing efficiency Quarter Ended efforts, including refinements to (amounts in millions, except per share data) 6/30/2019 3/31/2019 6/30/2018 corporate real estate and branch Non-GAAP adjusted items impacti
Slide 17: Non-GAAP reconciliation: adjusted average loans
Non-GAAP reconciliation: adjusted average loans Average Balances ($ amounts in millions) 2Q19 1Q19 2Q18 2Q19 vs. 1Q19 2Q19 vs. 2Q18 Commercial and industrial $ 40,707 $ 39,999 $ 36,874 $ 708 1.8 % $ 3,833 10.4 % Add: Purchasing card balances (1) — — 228 — NM (228) (100.0)% Adjusted commercial and in
Slide 18: Non-GAAP reconciliation: adjusted average loans (continued)
Non-GAAP reconciliation: adjusted average loans (continued) Average Balances Full-Year Quarters 2018 4Q18 3Q18 2Q18 1Q18 ($ amounts in millions) Total Loans $ 80,692 $ 81,873 $ 81,022 $ 79,957 $ 79,891 (1) Less: Balances of residential first mortgage loans sold 40 — — — 164 Less: Indirect-vehicles 3
Slide 19: Non-GAAP reconciliation: NII/NIM, non-interest income/expense, operating leverage and efficiency ratio
Non-GAAP reconciliation: NII/NIM, non- interest income/expense, operating leverage and efficiency ratio Quarter Ended ($ amounts in millions) 6/30/2019 3/31/2019 6/30/2018 2Q19 vs. 1Q19 2Q19 vs. 2Q18 Non-interest expense (GAAP) A $ 861 $ 860 $ 911 $ 1 0.1 % $ (50) (5.5)% Adjustments: Branch consolid
Slide 20: Non-GAAP reconciliation: NII/NIM, non-interest income/expense (continued)
Non-GAAP reconciliation: NII/NIM, non- interest income/expense, operating leverage and efficiency ratio (continued) Six Months Ended June 30 ($ amounts in millions) 2019 2018 2019 vs. 2018 Non-interest expense (GAAP) K $ 1,721 $ 1,795 $ (74) (4.1)% Adjustments: Branch consolidation, property and equ
Slide 21: Non-GAAP reconciliation: Pre-tax pre-provision income (PPI)
Non-GAAP reconciliation: Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 6/30/2019 3/31/2019 6/30/2018 2Q19 vs. 1Q19 2Q19 vs. 2Q18 Net income from continuing operations available to common shareholders (GAAP) $ 374 $ 378 $ 362 $ (4) (1.1)% $ 12 3.3 % Preferred dividends (GAA
Slide 22: Forward-looking statements
Forward-looking statements Forward-Looking Statements This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, f
Slide 23: Forward-looking statements (continued)
Forward-looking statements (continued) • The success of our marketing efforts in attracting and retaining customers. • Our ability to recruit and retain talented and experienced personnel to assist in the development, management and operation of our products and services may be affected by changes i
Slide 24: Regions
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