Regions Financial Corporation · NYSE:RF
Regions Financial — Q4 2019 Earnings Presentation
29 slides from Regions Financial's earnings presentation, Jan 17, 2020
Slide 1: 4th Quarter Earnings Conference Call
4th Quarter Earnings Conference Call January 17, 2020
Slide 2: 2019 highlights
2019 highlights Net Income(1) Adj. Revenue(2) Adj. Expenses(2) $1.5B $5.9B $3.4B Stable YoY + 2% YoY Flat YoY EPS(1) of $1.50 up 10% YoY NII stable; adjusted NIR(2) Adjusted expenses remain up 6% YoY well controlled Adj. PPI(2) Adj. positive Adj. efficiency operating leverage(2) ratio(2) + 5% YoY 58
Slide 3: Delivering consistent performance
Delivering consistent performance Interest Rate Proactive strategic hedging Sensitivity program Credit Risk Balance sheet de-risking & Framework optimization Capital Allocation Focused on risk-adjusted returns Improving Simplify and Grow, technology, Efficiency priority markets, and efficiency 3
Slide 4: Balance sheet continues to reflect de-risking and optimization activities
Balance sheet continues to reflect de- risking and optimization activities Adjusted average loans and leases Average deposits by segment ($ in billions) ($ in billions) $93.2 $94.1 $94.5 $79.0 $80.7 $80.4 1.5 1.4 0.6 7.9 8.0 7.8 28.4 28.2 28.4 26.3 25.7 26.6 50.6 52.5 52.0 57.4 59.2 59.4 4Q18 3Q19 4
Slide 5: Net interest income and net interest margin
Net interest income and net interest margin NII(1) and NIM NIM drivers ($ in millions) NIM Driver $971 $950 $931 3.44% 3Q19 (0.06)% Lower market interest rates 3.52% 0.02% Loan balances / mix 3.44% 0.01% Higher low cost deposit balances 3.39% (0.02)% Miscellaneous 3.39% 4Q19 4Q18 3Q19 4Q19 NII(1) NI
Slide 6: Growing non-interest income & disciplined expense management
Growing non-interest income & disciplined expense management (1) (1) Adjusted non-interest income Adjusted ($ in millions) non-interest expense ($ in millions) $557 $564 $481 $843 $865 $869 58.1% 57.4% 58.1% 4Q18 3Q19 4Q19 4Q18 3Q19 4Q19 (1) Adjusted non-interest expense Adjusted efficiency ratio(1)
Slide 7: Asset quality performing as expected
Asset quality performing as expected Criticized business loans NPLs and coverage ratio ($ in millions) ($ in millions) $2,319 $2,251 $496 $507 $1,922 $462 840 889 939 169% 188% 171% 1,479 1,362 983 53 4Q18 3Q19 4Q19 4Q18 3Q19 4Q19 Classified Special mention NPLs - excluding LHFS Coverage ratio Net c
Slide 8: Strong capital and liquidity position
Strong capital and liquidity position Tier 1 capital ratio(1) • Repurchased $132M or 7.8M shares of common stock and declared $149M in dividends to common shareholders in 4Q19 10.7% 10.8% 10.8% • CET1 ratio of 9.6% in line with target of 9.5% 4Q18 3Q19 4Q19 Common equity Tier 1 ratio(1) Loan-to-depo
Slide 9: 2019 results and 2020 expectations
2019 results and 2020 expectations 2019 Scorecard 2020 Expectations FY 2019 FY 2019 Category Category FY 2020 Expectations Expectations Results Net charge-offs / 40-50 bps 43 bps Net charge-offs / average loans 45-55 bps average loans Adjusted average loan Low to mid-single growth(1) digits 4.1% Adj
Slide 10: Appendix
> GENERATING Long-term Performance Appendix \ Consistent Sustainable Ma REGIONS 10
Slide 11: Proactive hedging strategy reduces sensitivity over time
Proactive hedging strategy reduces sensitivity over time • Comprehensive hedging strategy intended to Notional cash flow derivatives designated for protect NII and promote earnings stability short-term rate hedging at 12/31/19(1) ($ in billions) • Majority of hedges active in 1Q20 $19.50 $19.50 $18.
Slide 12: Leveraged portfolio
Leveraged portfolio (outstanding balances as of December 31, 2019) Leveraged Balances by Industry Regions Leveraged Lending Definition - $6.2B in balances • Commitments greater than $10M • Leverage exceeds 3x senior debt; 4x total debt 15% • Purpose test secondary to leverage test 26% • Includes inv
Slide 13: SNC portfolio
SNC portfolio (outstanding balances as of December 31, 2019) Shared National Credit Balances by Industry 11% Portfolio Characteristics 9% • Diverse industry mix 51% $20.0B 8% 7% • 40% of balances are investment grade 7% • 24% of balances are leveraged 7% • 25% of balances are sponsor backed • 4% of
Slide 14: Energy lending
Energy lending As of 12/31/19 • Leader in the Energy lending business for over 50 years Total Outstanding • In 2019, growth in Energy commitments and ($ in millions) Commitments Balances % Utilization $ Criticized % Criticized outstandings have been essentially flat Oilfield services and $591 $412 7
Slide 15: Restaurant lending
Restaurant lending • Team of bankers in place with specialization in this As of 12/31/19 53 industry % of ($ in Total Outstanding Outstanding millions) # of Clients* Commitments Balances % Utilization $ Criticized Criticized • Consumer spending will continue to support this Quick 2,795 $1,424 $1,161
Slide 16: Commercial retail lending
Commercial retail lending • Approximately $348 million of outstanding balances across the REIT and IRE portfolios relate to shopping malls and outlet centers, comprised of ~$197 million Class A and ~$151 million Class B/C As of 12/31/19 • Portfolio exposure to REITs specializing in enclosed malls co
Slide 17: Other portfolios
Other portfolios Manufacturing - Consumer Balances by Industry Transportation Balances by Industry As of 12/31/19 As of 12/31/19 Total Outstanding Total Outstanding ($ in millions) Commitments Balances % Utilization $ Criticized % Criticized ($ in millions) Commitments Balances % Utilization $ Criti
Slide 18: Consumer lending portfolio statistics
Consumer lending portfolio statistics Residential Mortgage Home Equity • Avg. origination FICO 750 • Avg. origination FICO 757 • Current LTV 59% • Current LTV 46% • 96% owner occupied • Only $409M of resets through 2021 • 66% of portfolio is 1st lien • Avg. loan size $40,085 Consumer Credit Card Ind
Slide 19: LIBOR transition
LIBOR transition Four pillars of execution ◦ Regions completed a comprehensive LIBOR Impact Assessment in 1H 2019 ◦ Regions has begun enterprise-wide efforts to transition to alternative rates consistent with industry timelines. Core Products & Financial Strategy & Contracts Communications Integrati
Slide 20: Non-GAAP information
Non-GAAP information Management uses pre-tax pre-provision income (non-GAAP) and adjusted pre-tax pre-provision income (non-GAAP), as well as the adjusted efficiency ratio (non-GAAP) and the adjusted fee income ratio (non- GAAP) to monitor performance and believes these measures provide meaningful i
Slide 21: Non-GAAP items impacting earnings
Non-GAAP items impacting earnings Adjusted Items Quarter Ended • 4Q19 items include charges associated 12/31/2019 9/30/2019 12/31/2018 with ongoing efficiency efforts, (amounts in millions, except per share data) including $12 million of net expenses Non-GAAP adjusted items impacting earnings from c
Slide 22: Non-GAAP reconciliation: adjusted average loans
Non-GAAP reconciliation: adjusted average loans Average Balances ($ amounts in millions) 4Q19 3Q19 4Q18 4Q19 vs. 3Q19 4Q19 vs. 4Q18 Commercial and industrial $ 39,743 $ 40,200 $ 38,111 $ (457) (1.1)% $ 1,632 4.3 % Add: Purchasing card balances (1) — — 252 — NM (252) (100.0)% Adjusted commercial and
Slide 23: Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio
Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio Quarter Ended ($ amounts in millions) 12/31/2019 9/30/2019 12/31/2018 4Q19 vs. 3Q19 4Q19 vs. 4Q18 Non-interest expense (GAAP) A $ 897 $ 871 $ 853 $ 26 3.0 % $ 44 5.2 % Adjustments: Branch consolidation
Slide 24: Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio (continued)
Non-GAAP reconciliation: NII, non-interest income/expense, operating leverage and efficiency ratio (continued) Year Ended December 31 ($ amounts in millions) 2019 2018 2019 vs. 2018 Non-interest expense (GAAP) K $ 3,489 $ 3,570 $ (81) (2.3)% Adjustments: Contribution to the Regions Financial Corpora
Slide 25: Non-GAAP reconciliation: Pre-tax pre-provision income (PPI)
Non-GAAP reconciliation: Pre-tax pre-provision income (PPI) Quarter Ended ($ amounts in millions) 12/31/2019 9/30/2019 12/31/2018 4Q19 vs. 3Q19 4Q19 vs. 4Q18 Net income from continuing operations available to common shareholders (GAAP) $ 366 $ 385 $ 390 $ (19) (4.9)% $ (24) (6.2)% Preferred dividend
Slide 26: 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 27: Forward-looking statements (continued)
Forward-looking statements (continued) • Our ability to comply with stress testing and capital planning requirements (as part of the CCAR process or otherwise) may continue to require a significant investment of our managerial resources due to the importance of such tests and requirements. • Our abi
Slide 28: Forward-looking statements (continued)
Forward-looking statements (continued) • Our ability to realize our adjusted efficiency ratio target as part of our expense management initiatives. • Possible cessation or market replacement of LIBOR and the related effect on our LIBOR-based financial products and contracts, including, but not limit
Slide 29: Regions
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