Regions Financial Corporation · NYSE:RF
Regions Financial — Q4 2017 Earnings Presentation
31 slides from Regions Financial's earnings presentation, Jan 19, 2018
Slide 1: 4th Quarter Earnings Conference Call
4th Quarter Earnings Conference Call January 19, 2018
Slide 2: 2017 results
2017 results Net income up 9% - EPS up 15% GROW AND DIVERSIFY DISCIPLINED EXPENSE OPTIMIZE AND EFFECTIVELY REVENUE MANAGEMENT DEPLOY CAPITAL • Reported total revenue (FTE) • Reported expenses relatively • Prudent loan management and +2%; adjusted total revenue unchanged; adjusted expenses improved c
Slide 3: Managing for long-term performance
Managing for long-term performance Opportunities to drive growth and efficiencies Asset Sensitivity Capital Return Significant funding advantage Capital sufficient for organic driven by low-cost deposit growth, strategic opportunities, base, accretive fixed-rate robust shareholder returns reinvestme
Slide 4: Impact of tax reform
Impact of tax reform Impact Area Impacted Driver $6M NII/NIM Reduction in leveraged lease interest income; resulted in a 2 basis point reduction in 4Q17 NIM Increased tax expense primarily attributable to revaluation $29M Tax Expense of net deferred income tax assets Increased tax expense from revis
Slide 5: Prudently managing loans
Prudently managing loans Transitioning to growth Average loans and leases Quarter-over-Quarter: ($ in billions) • Average Consumer lending increased $40 million $80.6 $80.2 $80.1 $79.6 $79.5 ◦ Excluding third-party indirect-vehicle run-off, average consumer loans 31.5 31.2 31.1 31.3 31.4 increased $
Slide 6: Optimizing deposit mix
Optimizing deposit mix Average deposits by type Quarter-over-Quarter: ($ in billions) Low-cost • Continued deliberate strategy to reduce higher cost deposits: deposits $98.5 $98.0 $97.5 $96.9 $97.1 ◦ Average Wealth Management deposits decreased $106 million; 7.5 7.2 7.0 7.0 7.0 Time deposits strateg
Slide 7: Deposit advantage
Deposit advantage Deposits by Customer Type(1) Non-Interest Bearing Deposits Interest Bearing Deposits (Retail vs. Business) by Customer Type(1) by Customer Type(1) 4Q17 ($ in billions) ($ in billions) ($ in billions) Private Institutional $37 $37 $62 $62 Services* $36 $36 $36 $61 $60 $60 Wealth* $1
Slide 8: Increasing net interest income and net interest margin
Increasing net interest income(1) and net interest margin Quarter-over-Quarter: Net interest income(1) and net interest margin • Reported net interest income (FTE)(1)(NII) increased $3 million; net ($ in millions) interest margin (NIM) increased 1 basis point to 3.37%; adjusted NII(1) (2) (FTE) incr
Slide 9: Well-positioned for non-interest income growth
Well-positioned for non-interest income growth Quarter-over-Quarter: Non-interest income • Non-interest income increased $40 million or 8%; adjusted non- interest income(1) increased $36 million or 7% ($ in millions) ◦ Record quarter for capital markets up 60%, driven by higher M&A fees, loan syndic
Slide 10: Disciplined expense management
Disciplined expense management Quarter-over-Quarter: Non-interest expense • Non-interest expense increased $66 million or 7%; adjusted non- ($ in millions) interest expense(1) increased $21 million or 2% $952 $899 $909 51 ◦ Salaries and benefits increased $13 million or 3% primarily $877 $886 22 10
Slide 11: Improving asset quality
Improving asset quality Net charge-offs and ratio NPLs and coverage ratio(1) ($ in millions) ($ in millions) $100 $995 $1,004 $83 87 684 694 $823 $760 $76 69 $68 $63 556 $650 48 163% 513 198% 50 138% 135% 180% 430 47 0.51% 144% 0.41% 127% 137% 0.34% 0.38% 110% 106% 0.31% 311 310 18 28 16 267 247 220
Slide 12: Industry leading capital and liquidity ratios
Industry leading capital and liquidity ratios Tier 1 capital ratio(1) • Repurchased $500 million or 31.1 million shares of common stock in 4Q17, and declared $103 million in 12.1% 12.3% 12.1% dividends to common shareholders 12.0% 11.7% • Basel III common equity tier 1 ratio estimated at 10.9%(1); F
Slide 13: Long-term targets and 2018 expectations
Long-term targets and 2018 expectations 2018 Expectations • Adjusted ROATCE of 14 to 16%(1)(2) • Full-year average loans are expected to grow in the low single digits, excluding impact of third- party indirect-vehicle portfolio • Full-year average deposits are expected to grow in the low single digi
Slide 14: Appendix
Appendix Ar REGIONS 14
Slide 15: Selected items impacting earnings
Selected items impacting earnings • Incurred $9 million of expenses associated primarily with previously announced branch Quarter Ended closures ($ amounts in millions, except per share data) 12/31/2017 9/30/2017 12/31/2016 Pre-tax adjusted items: • Recognized $13 million in securities gains primari
Slide 16: Pre-tax pre-provision income
(1) Pre-tax pre-provision income Quarter-over-Quarter: • Pre-tax pre-provision income(1) decreased Adjusted pre-tax pre-provision income (1) $23 million or 4%; adjusted pre-tax pre- (5) provision income(1) increased $24 million $548 or 5%, reflecting highest level since 3Q08 $524 $488 $497 $502 (3)
Slide 17: Commercial retail lending overview
Commercial retail lending overview Total retail • Approximately $200 million of outstanding balances across the REIT and IRE portfolios relate to shopping malls • Portfolio exposure to REITs specializing in enclosed malls consists of three investment grade clients; however, the risk ratings on two c
Slide 18: Energy lending overview
Energy lending overview As of 12/31/17 As of 9/30/17 Total energy Total Total Commitments Commitments Loan / Including Loan / Including • Total outstandings and Lease Outstanding % $ % Lease Outstanding % $ % commitments declined primarily ($ in millions) Balances Balances Utilization Criticized Cri
Slide 19: Energy lending - oil field services and exploration & production detail
Energy lending - oil field services and exploration & production detail Type As of 12/31/17 # of Clients* Commentary OFS Portfolio ($ in millions) Marine $323 7 Sector remains under stress and recovery is not • 32% shared national credit (SNC) loans forecast during 2018. Contract coverage continues
Slide 20: Loan balances by select states
Loan balances by select states Texas Louisiana Consumer Non-Real Estate Commercial - Energy Secured, $1,035 Commercial - Energy Consumer Non-Real Estate (Direct), $933 Secured, $296 (Direct), $397 Consumer Real Consumer Real Estate Estate Secured, Secured, $1,210 $1,153 $8.4B $4.3B Investor Real Est
Slide 21: Loan balances by select states (continued)
Loan balances by select states (continued) Alabama Mississippi Commercial- Energy Commercial - Consumer Non-Real Estate (Direct), $20 Energy (Direct), Consumer Non-Real Estate Secured, $805 $26 Secured, $365 Commercial - Consumer Real Estate Secured, $9.7B Commercial - Non- Energy, $5,035 Consumer R
Slide 22: Loan balances by select states (continued)
Loan balances by select states (continued) Florida Investor Real Estate Commercial- Energy (Direct), $0 ($ in millions) Consumer Non-Real Estate Multi- Single Secured, $1,307 Office Retail Other Total Family Family Commercial - Non- Miami-Fort Lauderdale Energy, $5,614 CBSA/Key West $32 $155 $109 $2
Slide 23: Non-GAAP reconciliation: non-interest income, non-interest expense, operating leverage and efficiency ratio
Non-GAAP reconciliation: non-interest income, non- interest expense, operating leverage and efficiency ratio The table below and on the following page present computations of the net interest margin; efficiency ratio, which is a measure of productivity, generally calculated as non-interest expense d
Slide 24: Non-GAAP reconciliation continued: non-interest income, non-interest expense, operating leverage and efficiency ratio
Non-GAAP reconciliation continued: non-interest income, non-interest expense, operating leverage and efficiency ratio Year Ended December 31 ($ amounts in millions) 2017 2016 2017 vs. 2016 Non-interest expense (GAAP) I $ 3,624 $ 3,617 $ 7 0.2 % Adjustments: Contribution to Regions' charitable founda
Slide 25: Non-GAAP reconciliation: pre-tax pre-provision income
Non-GAAP reconciliation: pre-tax pre-provision income The Pre-Tax Pre-Provision Income tables below present computations of pre-tax pre-provision income from continuing operations excluding certain adjustments (non-GAAP). Regions believes that the presentation of PPI and the exclusion of certain ite
Slide 26: Non-GAAP reconciliation continued: pre-tax pre-provision income
Non-GAAP reconciliation continued: pre-tax pre- provision income Year Ended ($ amounts in millions) 12/31/2017 12/31/2016 2017 vs. 2016 Net income from continuing operations available to common shareholders (GAAP) $ 1,193 $ 1,094 $ 99 9.0 % Preferred dividends (GAAP) 64 64 — —% Income tax expense (G
Slide 27: Non-GAAP reconciliation: adjusted allowance for loan losses to non-performing loans
Non-GAAP reconciliation: adjusted allowance for loan losses to non-performing loans, excluding loans held for sale The table below presents computations of the adjusted allowance for loan losses to non-performing loans, excluding loans held for sale ratio (non-GAAP), generally calculated as adjusted
Slide 28: Non-GAAP reconciliation: Basel III common equity tier 1 ratio – fully phased-in pro-forma
Non-GAAP reconciliation: Basel III common equity tier 1 ratio – fully phased-in pro-forma The calculation of the fully phased-in pro-forma "Common equity Tier 1" (CET1) is based on Regions’ understanding of the Final Basel III requirements. For Regions, the Basel III framework became effective on a
Slide 29: 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, which reflect Regions’ current views with respect to future events and financial performance. Forward-looking statements are n
Slide 30: Forward-looking statements (continued)
Forward-looking statements (continued) • Our ability to execute on our strategic and operational plans, including our ability to fully realize the financial and non-financial benefits relating to our strategic initiatives. • The success of our marketing efforts in attracting and retaining customers.
Slide 31: Regions
A REGIONS