Regions Financial Eyes 150 New Branches as Deposit Strength Supports Growth

Key Points

• Regions Financial plans to add 130–150 branches over the next three to four years as it responds to rising competition, recruits bankers and seeks to retain customers. Deposit trends remain favorable, particularly in consumer and small-business noninterest-bearing accounts.
• The bank maintained its guidance, expecting third-quarter net interest income to rise 2% sequentially and full-year growth of 2.5% to 4%, although loan growth has moderated. Growth is concentrated in investment-grade commercial lending, including opportunities tied to energy, infrastructure and data centers.
• Regions is advancing a multiyear cloud-based deposit-system conversion while investing in technology and artificial intelligence. Credit quality continues to improve, and management is prioritizing organic growth over depository acquisitions while remaining open to targeted bolt-on deals.

Regions Financial NYSE: RF said customer activity and credit trends remain constructive across its 15-state footprint, while the bank continues to invest in branches, bankers, technology and deposit infrastructure amid heightened competition in the Southeast, Texas and Midwest.

Chairman, President and CEO John Turner said customers are continuing to invest and consumers remain optimistic. He cited an 8% increase in credit-card spending and a 7% increase in debit-card spending, while saying deposit balances remain “really good.”

“Customers are mindful of all the things that are going on around the world and across the country, but focused on their businesses and their particular balance sheets,” Turner said. “I think it’s very constructive.”

Competition, expansion and customer retention

Turner acknowledged that competition has increased as banks enter Regions’ markets and larger institutions seek additional growth. Regions plans to respond by retaining existing customers, recruiting bankers, investing in technology and expanding its physical presence.

The company expects to build between 130 and 150 branches over the next three to four years. Turner also said Regions has added bankers across its footprint and relies on customer data and analytics to support retention and relationship growth.

CFO Anil Chadha said the company’s deposit data has helped it manage both noninterest-bearing and interest-bearing deposits through changing rate environments. He said Regions’ noninterest-bearing deposit base has been particularly valuable in protecting deposit costs amid competition.

Turner said market disruption from other banks’ consolidations has created opportunities for Regions to recruit talent and win customers. The company has added roughly 75 to 80 bankers across commercial banking, wealth banking and treasury management teams, he said.

Guidance maintained as loan growth moderates

Chadha said results are tracking in line with Regions’ prior guidance, with no updates to its outlook. The company continues to expect a 2% quarter-over-quarter increase in net interest income for the third quarter and full-year net interest income growth of 2.5% to 4%.

Loan growth has moderated from the pace seen in the first half, as Regions had expected. Growth has been strongest in commercial and industrial lending and commercial real estate, while consumer lending has seen limited growth in the areas where the company participates.

Chadha said much of the recent growth has been in investment-grade credits, a deliberate strategy reflecting the risk-adjusted returns available in that business. Turner identified energy, financial services, power and utilities, health care, defense and technology-related spending as areas of loan growth.

Regions also sees opportunities related to data-center development, power utilities and infrastructure spending connected to artificial intelligence investment. Chadha said the company is pursuing those opportunities while monitoring potential concentration risks.

For the third quarter, Chadha said net interest income will benefit from an additional day in the quarter, fixed-asset repricing and a swap-related benefit. He said the company expects fourth-quarter net interest margin to move toward the 3.70% range previously discussed, though tight credit spreads and the mix of new investment-grade lending have weighed on margin expectations.

Deposit trends, fees and operating investments

Regions expects overall deposits to be roughly flat in the third quarter due to seasonal trends. However, Chadha said the bank has experienced strong growth in consumer and small-business noninterest-bearing deposits, adding that third-party data indicates those categories are growing faster than peers.

The company expects third-quarter interest-bearing deposit costs to remain relatively flat. Chadha said Regions assumes deposit repricing beta in the mid-30% range for the remainder of the year, based on its rate assumptions.

On fee income, Chadha said wealth management, service charges and treasury management had a strong start to the year. Capital markets started more slowly but is tracking toward a quarterly range of $90 million to $105 million during the second half, he said. Mortgage activity has remained pressured by elevated rates.

Regions continues to target positive operating leverage over time while funding investments in people, technology, cybersecurity and artificial intelligence. Chadha said the company has deployed GitHub Copilot to about 80% of its developer population and has seen an approximately 30% lift in code development. The bank is also using AI in document processing and customer-product analysis, while taking what Chadha described as a deliberate approach rather than pursuing a broad “big bang” deployment.

Deposit-system conversion and capital priorities

Chadha said Regions has reached the testing phase of its multiyear deposit-systems transformation. A friends-and-family pilot involving about 100 participants is expected to begin the following month and run through year-end. If successful, the company plans a first-quarter customer pilot involving 8,000 to 10,000 customers before transitioning customers incrementally to the new cloud-based platform.

The new system is expected to improve product-development speed, data insights, cybersecurity capabilities and flexibility, including potential flexibility for future depository acquisitions.

Still, Turner said Regions is not currently interested in depository M&A, citing the company’s organic-growth plan and the need to complete the systems conversion without distraction. The company remains interested in smaller bolt-on acquisitions that diversify revenue streams and add scale to targeted businesses. Chadha pointed to the July acquisition of Frazer Lanier as an opportunity to expand Regions’ government and institutional banking capabilities across its footprint.

Credit quality has continued to improve, according to Chadha, with criticized and classified loans, nonaccruals and charge-offs declining. He said portfolios previously identified for closer attention, including office and transportation, have improved, and management does not currently see particular areas of concern.

Turner said the company remains focused on “soundness first, profitability second, and then growth.” Regions reported a 20% return on tangible common equity in the second quarter, while management reiterated its longer-term expectation of generating returns in a 16% to 18% range through varying economic conditions.

About Regions Financial (NYSE:RF)

Regions Financial Corporation NYSE: RF is a financial services company headquartered in Birmingham, Alabama. Through its principal subsidiary, Regions Bank, the company provides banking and related financial services to consumer, commercial and institutional customers.

Regions Bank offers checking and savings accounts, consumer loans, credit cards, mortgages, home equity products and other personal banking services. Its commercial and corporate offerings include business loans, treasury management, equipment financing, capital markets services and other solutions for companies, municipalities and institutions.

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