Regions Financial Corporation · NYSE:RF
Regions Financial — Investor Presentation (November 2018)
63 slides from Regions Financial's investor presentation, Nov 7, 2018
Slide 1: Investor Information November - December, 2018
Exhibit 99.1 Investor Information November - December, 2018
Slide 2: Table of contents
Table of contents Topic Page # Profile 3-11 Net Interest Income and Asset Sensitivity 12-17 Fee Income and Efficiencies 18-22 Balance Sheet 23-29 Credit 30-33 Innovation and Technology 34-40 Capital and Liquidity 41-45 Long-term Targets and 2018 Expectations 46-49 Environmental, Social & Corporate G
Slide 3: Profile
PROFILE Ma REGIONS :
Slide 4: Our banking franchise
Our banking franchise Regions aims to be the premier regional financial institution in America Ranked 16th nationally in total deposits(2) Line of business coverage Branch locations by state (1) Alabama – 200 Louisiana – 96 Birmingham, Alabama Arkansas – 73 Mississippi – 117 • Corporate Banking • Bu
Slide 5: Strength of our markets
Strength of our markets (1) Market rank in core states High market share(1) in top markets ($ in billions) ($ in billions) Market #2 Top MSAs Deposits Rank #7 Birmingham, AL $10.8 1 #2 #1 #6 Nashville, TN $7.6 3 Memphis, TN $4.5 2 #5 Tampa, FL $4.2 4 St. Louis, MO $3.2 5 #7 New Orleans, LA $3.1 4 Ja
Slide 6: Strength of our markets (continued)
Strength of our markets (continued) Markets with top 5 market share • Top 5 or better market share in 70% of MSAs across 15-state footprint(1) • Investing in priority markets approaching a top 5 market share • Atlanta, GA • Orlando, FL • ~70% of deposits in markets without a significant money center
Slide 7: Footprint positioning
Footprint positioning Characterized by high growth markets(1) ($ in Billions) ($ in Billions) '19-'24 Population Growth '19-'24 Population Growth Top MSAs Deposits Top MSAs Deposits 6.8% 6.1% Nashville, TN $7.6 Pensacola, FL $1.1 6.8% 7.7% Tampa, FL $4.2 Dallas, TX $1.1 6.6% 6.7% Miami, FL $4.1 Fair
Slide 8: Strength of our markets - our state footprint
Strength of our markets - our 15 state footprint Of all new jobs Of all US port trade 43% created in the US 59% tonnage(4) traveling since 2009 were through ports in our (1) in our footprint footprint Of all US light 58% vehicle production Of non-durable goods is within our 50% manufacturing occurs
Slide 9: Regions receives top honors
Regions receives top honors 9
Slide 10: Strategic priorities
Strategic priorities Ma REGIONS »
Slide 11: Strategic financial initiatives supporting company priorities
Strategic financial initiatives supporting company priorities ® 11
Slide 12: Net Interest Income and Asset Sensitivity
NET INTEREST INCOME AND ASSET SENSITIVITY 12
Slide 13: Increasing net interest income and net interest margin
Increasing net interest income(1) and net interest margin Net interest income(1) and net interest margin 3Q18 results and outlook ($ in millions) $955 (1) $930 $938 13 • Net interest income (NII) (non-FTE) increased $920 $922 12 942 $16 million QoQ; net interest margin (NIM) +1 23 23 13 926 bps to 3
Slide 14: Interest rate sensitivity
Interest rate sensitivity (as of September 30, 2018) Portfolio compositions • Naturally asset sensitive balance sheet Assets Other Liabilities poised to benefit from rising interest 15% rates • 50% of loans are floating rate, Securities Deposits Borrowings (1) 19% $125B 85% $110B 13% including loan
Slide 15: Interest rate scenario assumptions
Interest rate scenario assumptions (as of September 30, 2018) Standard interest rate risk scenario assumptions +100 bps Standard Shock Scenario Baseline Scenario (over a forward 12-month horizon) +100bps parallel, instantaneous shock applied to Market Interest Rates Current implied forward rates cur
Slide 16: Deposit advantage
Deposit advantage Expected to continue Average deposits by customer type 3Q18 vs. 3Q15 change in interest bearing deposit costs(1) (Retail vs. Business) RF 27bps 3Q18, ($ in billions) Peer #1 28bps Institutional Private Peer #2 36bps (3) (3) Wealth Services Peer #3 37bps $7 $1 Peer #4 41bps Peer #5
Slide 17: Deposit composition and pricing
Deposit composition and pricing (as of September 30, 2018) Interest-bearing deposit betas(1) Deposit funding composition(1)(2) 50% Peer 9 ) 8 1 45% 100% Q 91% 92% 3 87% 87% 87% 88% 88% 88% 89% - 86% 86% 90% 83% 5 40% 81% 82% 1 79% 80% Peer median = 87% Q Peer 11 3 Peer 6 ( 35% a 70% t e Peer 2 Peer
Slide 18: Fee Income and Efficiencies
FEE INCOME AND EFFICIENCIES 18
Slide 19: Well-positioned for non-interest income growth
Well-positioned for non-interest income growth Non-interest income 3Q18 results and outlook ($ in millions) • Non-interest income increased $7 million or 1% $516 $507 $512 $519 QoQ; adjusted non-interest income(1) increased $4 $482 4 10 4 1 million or 1% impacted by: 9 Mortgage • Increased service c
Slide 20: Diversified fee income
Diversified fee income 3Q18 fee revenue by segment(1) Consumer ($ in millions) • Consumer fee income categories are an important and stable component of fee revenue and are expected to contribute to overall growth • Service charges are expected to increase consistent with growth in checking accounts
Slide 21: Disciplined expense management
Disciplined expense management Non-interest expense 3Q18 results and outlook ($ in millions) $920 $911 $922 • Non-interest expense increased $11M or $884 69 $853 51 35 1% QoQ driven primarily by a $60M 22 contribution to Regions Financial 6 Corporation Foundation (1) 60.8% 60.5% 60.5% 60.4% • Adjust
Slide 22: Pre-tax pre-provision income
(1) Pre-tax pre-provision income 3Q18 results and outlook Adjusted pre-tax pre-provision income(1) $604 • Pre-tax pre-provision income(1) ($ in millions) $561 increased $12M or 2% QoQ; $544 $550 65 $523 34 adjusted pre-tax pre-provision 47 18 income(1) increased $43M or (3) 8%, reflecting highest le
Slide 23: Balance Sheet
BALANCE SHEET Ma REGIONS «=
Slide 24: Prudently managing loans
Prudently managing loans Average loans and leases 3Q18 results and outlook ($ in billions) $79.6 $79.5 $79.9 $80.0 $81.0 • Average loans grew 1% QoQ and 2% YoY; (1) 1.7 1.5 1.2 1.0 0.8 adjusted average loans grew 2% QoQ and Adjusted total loans (1) 3% YoY 77.9 78.0 78.7 79.0 80.2 Adjustments • Broad
Slide 25: Average loan composition
Average loan composition Average consumer loans(1) Average business loans(1) ($ in billions) ($ in billions) Mortgage $14.2 CRE Mortgage - OO Indirect-Vehicles $6.0 $2.4 CRE Construction - $31.4B Indirect-Vehicles Commercial and $49.6B OO $0.3 Third-Party $0.8 IRE - Mortgage $4.1 Other $1.2 Industri
Slide 26: Optimizing deposit mix
Optimizing deposit mix Average deposits by type 3Q18 results and outlook ($ in billions) Low-cost deposits • Remain focused on growing low-cost $96.9 $97.1 $95.4 $95.3 $93.9 consumer and business service relationship 7.0 7.0 6.8 6.7 6.6 Time deposits + Other deposits • QoQ decline driven primarily b
Slide 27: Securities portfolio
Securities portfolio • Portfolio is managed within the construct of (1) the overall balance sheet and risk Securities portfolio composition management process • Expected to perform well in a variety of economic environments Corporate Bonds 5% Agency/UST 1% • Supportive of both regulatory and market
Slide 28: Balance sheet optimization
Balance sheet optimization Historical debt profile • Regions' wholesale funding footprint ($ in billions) positions it well to utilize available funding sources to protect the deposit base 11.64% • In 3Q18, Regions issued $1.0B of senior 9.11% unsecured Bank notes and $500M of $14.50 7.05% 6.97% sen
Slide 29: Regions unsecured debt and credit ratings profile
Regions unsecured debt and credit ratings profile Debt maturity profile Select credit ratings ($ in millions) $3,000 Moody's S&P Fitch 1,900 Regions Financial Corporation $1,000 Senior Unsecured Debt Baa2 BBB+ BBB+ $800 $500 500 Subordinated Debt Baa2 BBB BBB 1,100 1,000 500 $100 $150 Regions Bank 3
Slide 30: Credit
CREDIT Ma REGIONS «
Slide 31: Asset quality remains benign
Asset quality remains benign Criticized business loans NPLs and coverage ratio ($ in millions) ($ in millions) 53 53 $2,962 $760 $650 $2,456 941 $601 $595 $2,223 $539 $2,029 $1,908 1,007 925 156% 857 1,048 144% 137% 140% 141% 2,021 1,449 1,298 1,051 981 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3
Slide 32: Asset quality remains benign (continued)
Asset quality remains benign (continued) Net charge-offs and ratio Accruing 90+ days past due ($ in millions) ($ in millions) $167 $84 $82 $76 $151 6 5 30 26 $138 $137 29 9 $129 $63 $62 6 6 5 10 0.42% 18 0.38% 0.40% 0.31% 0.32% 161 0.40% 142 132 124 131 53 53 52 47 44 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4
Slide 33: Enhanced risk management led to significant improvement in asset quality
Enhanced risk management led to significant improvement in asset quality (1) Net charge-offs and NPLs have YoY improvement in NPLs(1)(2) to total loans significantly improved ($ in millions) Peer #1 43bps Peer #2 41bps $3,160 Peer #3 39bps $682 RF 30bps Peer #4 12bps Peer #5 11bps Peer #6 8bps Peer
Slide 34: Innovation & Technology
INNOVATION & TECHNOLOGY AM REGIONS «
Slide 35: Simplify and Grow: making it easier for customers and associates
Simplify and Grow: making it easier for customers and associates Goal: • Achieve sustainable, long-term growth • Deliver a great customer experience at every touch point: digital and in-person • Become more efficient and effective across the enterprise • Appeal to the next generation of customer Why
Slide 36: Simplify and Grow: a continuous journey
Simplify and Grow A continuous journey Making banking easier Organization simplification • Digitization • Organizational structure review • Loan process • Spans and layers review • Account opening • Streamline committees and decision • Streamline credit process; more making digital; faster response
Slide 37: Simplify and Grow: progress update
Simplify and Grow: progress update A continuous journey Initial efficiency and revenue review ~ 45 initiatives underway aimed at.... Through the initial review making banking easier 30% opportunities identified represent ~70% expense growing revenue 70% savings and ~30% revenue improving efficiencie
Slide 38: Simplify and Grow: investing for growth
Simplify and Grow: investing for growth A continuous journey • Investing in talent and growth markets ◦ Hiring new bankers ◦ Adding talent in capital markets and digital banking ◦ Adding branches in targeted growth markets • Streamlining processes ◦ Accelerated commercial response time ~70% ◦ Digiti
Slide 39: Making banking easier for our customers through digitization
Making banking easier for our customers through digitization Seamless interactions across all ZELLE® (expanded P2P solution) channels Partnering with Digital Eco System Mobile-friendly applications for deposit accounts and credit cards Strategic partnerships with FinTech Pre-approved digital loan of
Slide 40: All efforts focused on customer journeys
All efforts focused on CUSTOMER JOURNEYS Modern execution approach with 45% IT in Agile and DevOps Automation Artificial intelligence • Rolled out pre-approved consumer • Cognitive capabilities in the loan offers within online banking contact center improving as well as eSignature capabilities custo
Slide 41: Capital & Liquidity
CAPITAL & LIQUIDITY Ma REGIONS «
Slide 42: Solid liquidity
Solid liquidity Loan-to-deposit ratio(1) • Regions has a strong, core funded balance sheet 88% • Future debt maturities are 84% 81% 83% 82% manageable and allow for efficient re- financing • Regions’ liquidity policy requires the holding company maintain at least 18 months coverage of maturities, de
Slide 43: Strong capital levels
Strong capital levels Common equity Tier 1 ratio – Capital priorities Fully phased-in pro-forma(1)(2) 11.2% 11.0% 11.0% 10.9% 10.1% 3Q17 4Q17 1Q18 2Q18 3Q18 (1) Current quarter ratios are estimated (2) Non-GAAP; see appendix for reconciliation 43
Slide 44: Robust capital returns
Robust capital returns Capital returned to shareholders • Sufficient capital to support organic ($ in millions) growth, strategic investments, and a robust return to shareholders $2,101 • No objection to CCAR capital plans; up to $2.031B in common share $1,645 repurchases and 56% increase in quarter
Slide 45: Solid total shareholder returns
Solid total shareholder returns (1) 1 Year 3 Year(1) 5 Year(1) RF 12.0 Peer #1 93.7 Peer #1 107.9 Peer #1 7.5 RF 90.8 Peer #2 105.7 Peer #2 6.5 Peer #2 69.7 RF 102.1 Peer #3 6.1 Peer #3 63.1 Peer #3 99.9 Peer #4 5.7 Peer #4 54.6 Peer #4 86.2 Peer #5 3.3 Peer #5 53.6 Peer #5 78.9 Peer #6 2.4 Peer #6
Slide 46: Long-term Targets & 2018 Expectations
LONG-TERM TARGETS & 2018 EXPECTATIONS 46
Slide 47: 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 loyal and low-cost growth, strategic investments, & deposit base; accretive fixed- robust shareholder returns rate
Slide 48: 2018 full-year expectations
2018 full-year expectations • Adjusted ROATCE of approximately 16%(1)(2) • Full-year adjusted average loans are expected to grow in the low single digits(1) • Full-year average deposits are expected to remain relatively stable, excluding brokered and Wealth Institutional Services deposits(3) • Adjus
Slide 49: Long-term financial targets
Long-term financial targets Strategic financial initiatives 2016 - 2018 long-term financial targets Adjusted EPS growth of 12-15% (CAGR)(1) Adjusted efficiency ratio of <60%(1) Adjusted ROATCE ~16%(1)(2) (1) Non-GAAP; the reconciliation with respect to forward-looking non-GAAP measures is expected t
Slide 50: Environmental, Social & Corporate Governance
ENVIRONMENTAL, SOCIAL & CORPORATE GOVERNANCE 50
Slide 51: Corporate governance
Corporate governance Engagement The Company understands that good governance is the • We take a long-term view of how we create value, and we foundation of sustainable business and good decision making is take a similar approach to corporate governance necessary for creating shareholder value over t
Slide 52: Environmental & social highlights
Environmental & social highlights(1) Communities Associates • Commitment to community development • Invest in our associates Invested $2.96 billion Increased entry-level wage to $15 per hour • Assist our communities • Engage our associates $100 million Foundation supports economic and Received Gallu
Slide 53: Non-GAAP & Forward Looking Statements
NON-GAAP & FORWARD LOOKING STATEMENTS 53
Slide 54: Selected items impacting earnings
Selected items impacting earnings Quarter Ended Adjusted Items ($ amounts in millions, except per share data) 9/30/2018 6/30/2018 9/30/2017 • Contributed $60 million to Pre-tax adjusted items: Regions Financial Corporation Branch consolidation, property and equipment charges $ (4) $ (1) $ (5) Founda
Slide 55: 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 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 divided
Slide 56: Non-GAAP reconciliation: NII/NIM ... - continued
Non-GAAP reconciliation: NII/NIM, non-interest income/ expense, operating leverage and efficiency ratio - continued Nine Months Ended September 30 ($ amounts in millions) 2018 2017 2018 vs. 2017 Non-interest expense (GAAP) M $ 2,717 $ 2,571 $ 146 5.7 % Adjustments: Contribution to Regions' charitabl
Slide 57: Non-GAAP reconciliation: pre-tax pre-provision income
Non-GAAP reconciliation: pre-tax pre-provision income The Pre-Tax Pre-Provision Income (PPI) 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 certa
Slide 58: Non-GAAP reconciliation: adjusted average loans
Non-GAAP reconciliation: adjusted average loans Regions believes adjusting total average loans for the impact of the first quarter 2018 residential first mortgage loan sale and the indirect vehicles third-party exit portfolio, provides a meaningful calculation of loan growth rates and presents them
Slide 59: Non-GAAP reconciliation: Adjusted net charge-off ratio
Non-GAAP reconciliation: Adjusted net charge-off ratio Select calculations for annualized net charge-offs as a percentage of average loans (GAAP) are presented in the table below. During the first quarter of 2018, Regions made the strategic decision to sell certain primarily performing troubled debt
Slide 60: Non-GAAP reconciliation: Basel III common equity tier ratio
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 61: 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 62: 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 risks and uncertainties related to our acquisition or divestiture of busi
Slide 63: A REGIONS
A REGIONS Ma REGIONS «
Regions Financial — Investor Presentation (November 2018) on 6ix