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| 8-K - 8-K - REGIONS FINANCIAL CORP | rf2017-12x04ir.htm |
Goldman Sachs
U.S. Financial
Services Conference
December 5, 2017
Exhibit 99.1
• Net income(2) increased 7% YTD and diluted EPS(2) increased 13% YTD
• Net interest income and other financing income (FTE) increased 4% YTD
• Net interest margin increased 18 bps YTD to 3.31%
• Non-interest expenses decreased 2% YTD; and the efficiency ratio improved 135bps
• Disciplined approach to credit continues to deliver positive results as we have experienced improvement in most
credit metrics
2017 YTD Results(1)
Results reflect continued execution of our strategic plan
2
Profitability
(1) Through September 30, 2017
(2) From Continuing Operations Available to Common
Balance Sheet and Capital Optimization
• Remain committed to prudently growing loans while improving risk-adjusted returns
• Continue to benefit from asset sensitive balance sheet and strong deposit franchise
• Returned over $1 billion to shareholders YTD through dividends and share repurchases
Focus on the Fundamentals
• Grew checking accounts, households, credit cards, wealth management relationships, assets under management
and consumer loans
• Remain committed to offering superior service, as well as financial advice, guidance and education to help
customers reach their financial goals
• Received recognition from JD Power, Temkin and Greenwich along with the "Great Workplace" award from Gallup
Economic outlook for 2018
U.S. and Regions Footprint
3
Real GDP
growth ~ 2.4%
Improving global
economic growth
Improving labor
market conditions
• 2018 assumptions based on November 20,
2017 market forward interest rates
• ~ Two Fed Funds increases through 2018
and an average 10-year UST rate of ~2.50%
U.S. Economy Regions Footprint
• Job and income growth should remain in line with
U.S. averages; look for gradual reductions in the
unemployment rate across the footprint
• Florida, Texas, Georgia, the Carolinas, and
Tennessee experiencing faster growth
◦ Growth opportunities in larger, more
economically diverse metros such as
Atlanta, Austin, Charlotte, Dallas, Miami,
Nashville, and Tampa
Loan Outlook - Consumer Portfolio
Continued steady growth
Macro -Downside
Regions - Upside
4
Industry Outlook
Regions Strategy
Regions 2018 Outlook
• Health of the consumer remains strong
• Low unemployment
• Increasing household wealth
• Home price appreciation
• Debt service remains manageable
• Mortgage growth slowed with increasing interest
rates; new home purchases impacted by housing
supply constraints
• Continue to diversify portfolio by increasing non-
real estate loans
• Continued growth and expansion of point-of-sale
loans
• Continue to grow credit card balances
• Create a fully digital loan experience
• Opportunistic portfolio purchases
• Excluding indirect vehicle, 2017 growth
outperformed industry averages across most
consumer categories - expect that to continue in
2018
• Historically outperform Mortgage Bankers
Association (MBA) outlook on loan growth due to
favorable purchase vs. refinance mix
• Consumer credit card growth aided by recent
launch of secured cards
• Indirect point-of-sale lending through GreenSky
expected to continue; opportunities for
additional partnerships
• Unsecured direct lending growth expected
through Avant partnering at Regions.com and
pre-approved offers through online banking
• Indirect vehicle lending will continue to benefit
from growth in our dealer financial services,
offset by continued run-off in the third party
portfolio
Loan Outlook - Business Portfolio
Focused on prudent growth
Macro -Downside
Regions - Upside
5
Industry Outlook
Regions Strategy
Regions 2018 Outlook
• Tax reform could provide relief to businesses
waiting for clarity
• Competition on pricing and terms as well as
excess liquidity in the marketplace impede
growth
• Low capitalization rates driving real estate sales
activity; Certain real estate lending categories
bear watching for over development
• Focus on client selectivity and risk-adjusted
returns paying off
• Have the right team in place; simplifying
processes
• Sustainable and predictable financial
performance through appropriate capital
allocation and returns and sound credit quality
• Expected losses from originations (2014 -
current) are significantly better than historical
levels
• Momentum into 2018 as production and
pipelines improved 2H17
• Specialized lending groups expected to drive
growth
• Reductions in energy and multi-family slowing;
selectively adding new loans
• Shared national credit recycling efforts nearing
completion; improving returns
• Term investor real estate product gaining traction
• Elevated loan payoffs and pay downs
experienced in 3Q17 have eased
• Expanded digital platform team supporting small
business
• Piloting predictive analytics tools to improve
effectiveness and efficiency
$57
$8
$28
$3
3Q17 vs. 3Q15 Change in Deposit Costs(2)
Other
Segment
Deposit advantage
Deposits by Customer Type(1)
(Retail vs. Business)
• Retail deposits consist of consumer and private wealth
accounts and represent 67% of total deposits
• Business deposits consist of corporate, institutional and
other accounts and represent 33% of total deposits
• 38% of total average 3Q17 deposits are non-interest
bearing deposits
• Approximately 43% of our consumer low-cost deposit
dollars have been customers for over 10 years
• Deposit MSA stratification
◦ ~50% of deposits <1M people
◦ ~35% of deposits <500K people
• Cumulative deposit beta of 11% from 3Q15 to 3Q17
• Low loan-to-deposit ratio of 81% at 3Q17
6
Consumer
Segment
Private
Wealth*
Corporate
Segment
Institutional
Trust*
$1
* Private Wealth and Institutional Trust deposits are combined into the Wealth Management Segment.
(1) Average Balances
(2) Source: SNL Financial
3Q17, ($ in billions)
Expected to continue
Peer #1
Peer #2
Peer #3
Peer #4
RF
Peer #5
Peer #6
Peer #7
Peer #8
Peer #9
Peer #10
Peer #11
Peer #12
Peer #13
Peer #14
1bps
3bps
6bps
6bps
9bps
10bps
11bps
13bps
13bps
14bps
18bps
19bps
20bps
24bps
0bps
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Making it easier for customers to do
business with us
Why:
• Industry undergoing a transformational change
• Meeting customers' growing demand for an
easier, faster, and more convenient way to
conduct financial business
How:
• Remove internal silos and reduce friction
• Simplify tasks that don't contribute to excellent
customer experiences
• Giving us the financial flexibility and capacity to
invest in areas for growth
Goal:
• Achieve sustainable, long-term growth
• Become more efficient and effective in our
service delivery model as well as the products we
offer
• Appeal to the next generation of customer
• Become easier to do business with, faster and
more efficient
Customer Journeys
• Digitization
• Loan process
• Account opening
• Streamline credit
process; more
digital; faster
response
• Making Banking
Easier
Revenue Growth
• Faster launch of
new initiatives
• Advanced
analytics to drive
next best
customer offers
• Channel
optimization
• Digitization
Organization
Simplification
• Spans and layers
review
• Organizational
structure review
• Streamline
committees and
decision making
Efficiency
Improvements
• Robotics and
artificial
intelligence
• Shared services
• Branch and other
facility
consolidations
• Outsourcing
Simplify and Grow the Bank
A three year journey
8
Engaged
McKinsey &
Company
Initial efficiency
and revenue
review underway
Details to be
provided as they
become known
Revenue and expense initiatives
Leveraging 2017 successes to boost 2018 efficiency
Non-Interest Income Initiatives
Continue core account growth; 2017 YoY growth includes:
– 1.2% YoY checking growth
– 5% YoY Now banking account growth
– 7.2% YoY active credit card growth
– 13.9% YoY Wealth Management relationships
Investments in Innovation
– Wealth Management Platform
– iTreasury Platform
– Enhanced Mobile App with card controls (Lock-itSM) and facial
recognition log-in
– Fully digital consumer loan experience
– Zelle roll out 2Q18
Continued enhancement of capital markets
– Further integration of BlackArch Partners (M&A advisory
services)
– Continued growth of core capital markets product and services
Contribution from First Sterling
– Low-income housing tax credit syndicator; tax reform clarity
should provide incremental revenue contribution
Non-Interest Expense Initiatives
Retail Network Strategy
– ~10% decline of branches last two years
– 4.5% YoY decline of square footage
– Refinement of branch staffing model
– Future branch consolidations planned
Simplify and Grow the Bank
– Optimized digital account openings
– Universal digital loan applications
– Imaging capabilities
– Implementation of Agile methodology
– Artificial intelligence / Robotics
– eSignature
– System consolidations
9
On target to meet long-term goals
Remain
on track
10
2016-2018
2018 expectations
• Full-year average loans are expected to grow low single digits, excluding
impact of third-party indirect-vehicle portfolio
• Full-year average deposits are expected to grow low single digits, excluding
collateralized wealth management deposits
• Adjusted operating leverage of 3% - 5%*
– Net interest income and other financing income growth of 3% - 5%
– Adjusted non-interest income growth of 3% - 6%*
– Adjusted non-interest expenses relatively stable*
• Full-year adjusted efficiency ratio of <60%*
• Effective income tax rate of 30% - 32%**
• Net charge-offs of 35 - 50 bps
11 * The reconciliation with respect to these forward-looking non-GAAP measures is expected to be consistent with actual
non-GAAP reconciliations included in our SEC filings.
** Excluding any tax reform
Managing for long-term performance
Execution of Strategic
Initiatives
• Grow and diversify revenue
• Disciplined expense management
• Optimize and effectively deploy
regulatory capital
Asset Sensitivity
Significant low-cost deposit
funding base, accretive fixed-
rate reinvestments
Stable Asset Quality
Broad-based credit metric
improvements, ample reserves for
hurricane and energy losses
Capital Return
Capital sufficient for organic
growth, strategic opportunities,
robust shareholder returns
Efficiency Opportunities
Identify and execute additional
opportunities to reduce expenses
through our Simplify and Grow the
Bank initiative
12
Leverage Innovation
Support execution of our strategic
initiatives through implementation
of new capabilities
Opportunities to drive growth and efficiencies
Appendix
13
Forward-looking statements
14
This presentation may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The terms “Regions,” the “Company,” “we,” “us” and “our” mean Regions Financial
Corporation, a Delaware corporation, and its subsidiaries when or where appropriate. The words “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “targets,” “projects,” “outlook,” “forecast,”
“will,” “may,” “could,” “should,” “can,” and similar expressions often signify forward-looking statements. Forward-looking statements are not based on historical information, but rather are related to future operations,
strategies, financial results or other developments. Forward-looking statements are based on management’s current expectations as well as certain assumptions and estimates made by, and information available
to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future they are likewise subject to
inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. Therefore, we caution you against relying on any of
these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those described below:
• Current and future economic and market conditions in the United States generally or in the communities we serve, including the effects of declines in property values, unemployment rates and potential
reductions of economic growth, which may adversely affect our lending and other businesses and our financial results and conditions.
• Possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, which could have a material adverse effect
on our earnings.
• The effects of a possible downgrade in the U.S. government’s sovereign credit rating or outlook, which could result in risks to us and general economic conditions that we are not able to predict.
• Possible changes in market interest rates or capital markets could adversely affect our revenue and expense, the value of assets and obligations, and the availability and cost of capital and liquidity.
• Any impairment of our goodwill or other intangibles, any repricing of assets, or any adjustment of valuation allowances on our deferred tax assets due to adverse changes in the economic environment,
declining operations of the reporting unit, adverse consequences related to tax reform, or other factors.
• Possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and leases, including operating leases.
• Changes in the speed of loan prepayments, loan origination and sale volumes, charge-offs, loan loss provisions or actual loan losses where our allowance for loan losses may not be adequate to cover our
eventual losses.
• Possible acceleration of prepayments on mortgage-backed securities due to low interest rates, and the related acceleration of premium amortization on those securities.
• Our ability to effectively compete with other financial services companies, some of whom possess greater financial resources than we do and are subject to different regulatory standards than we are.
• Loss of customer checking and savings account deposits as customers pursue other, higher-yield investments, which could increase our funding costs.
• Our inability to develop and gain acceptance from current and prospective customers for new products and services in a timely manner could have a negative impact on our revenue.
• The effects of any developments, changes or actions relating to any litigation or regulatory proceedings brought against us or any of our subsidiaries.
• Changes in laws and regulations affecting our businesses, such as the Dodd-Frank Act and other legislation and regulations relating to bank products and services, as well as changes in the enforcement
and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our
revenue, impose additional costs on us, or otherwise negatively affect our businesses.
• Our ability to obtain a regulatory non-objection (as part of the CCAR process or otherwise) to take certain capital actions, including paying dividends and any plans to increase common stock dividends,
repurchase common stock under current or future programs, or redeem preferred stock or other regulatory capital instruments, may impact our ability to return capital to stockholders and market
perceptions of us.
• 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 and intensity of such tests and requirements.
• Our ability to comply with applicable capital and liquidity requirements (including, among other things, the Basel III capital standards and the LCR rule), including our ability to generate capital internally
or raise capital on favorable terms, and if we fail to meet requirements, our financial condition could be negatively impacted.
• The Basel III framework calls for additional risk-based capital surcharges for globally systemically important banks. Although we are not subject to such surcharges, it is possible that in the future we may
become subject to similar surcharges.
• The costs, including possibly incurring fines, penalties, or other negative effects (including reputational harm) of any adverse judicial, administrative, or arbitral rulings or proceedings, regulatory enforcement
actions, or other legal actions to which we or any of our subsidiaries are a party, and which may adversely affect our results.
• Our ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support our business.
• 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.
• Possible changes in consumer and business spending and saving habits and the related effect on our ability to increase assets and to attract deposits, which could adversely affect our net income.
• 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 in laws and
regulations in effect from time to time.
• Fraud or misconduct by our customers, employees or business partners.
• Any inaccurate or incomplete information provided to us by our customers or counterparties.
• The risks and uncertainties related to our acquisition and integration of other companies.
• Inability of our framework to manage risks associated with our business such as credit risk and operational risk, including third-party vendors and other service providers, which could, among other
things, result in a breach of operating or security systems as a result of a cyber attack or similar act.
• The inability of our internal disclosure controls and procedures to prevent, detect or mitigate any material errors or fraudulent acts.
• The effects of geopolitical instability, including wars, conflicts and terrorist attacks and the potential impact, directly or indirectly, on our businesses.
• The effects of man-made and natural disasters, including fires, floods, droughts, tornadoes, hurricanes, and environmental damage, which may negatively affect our operations and/or our loan
portfolios and increase our cost of conducting business.
• Changes in commodity market prices and conditions could adversely affect the cash flows of our borrowers operating in industries that are impacted by changes in commodity prices (including
businesses indirectly impacted by commodities prices such as businesses that transport commodities or manufacture equipment used in the production of commodities), which could impair their
ability to service any loans outstanding to them and/or reduce demand for loans in those industries.
• Our inability to keep pace with technological changes could result in losing business to competitors.
• Our ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, malware, “hacking” and identity theft, a failure of which could disrupt our
business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information; disruption or damage to our systems; increased costs; losses; or adverse effects
to our reputation.
• Our ability to realize our adjusted efficiency ratio target as part of our expense management initiatives.
• Significant disruption of, or loss of public confidence in, the Internet and services and devices used to access the Internet could affect the ability of our customers to access their accounts and conduct
banking transactions.
• Possible downgrades in our credit ratings or outlook could increase the costs of funding from capital markets.
• The effects of problems encountered by other financial institutions that adversely affect us or the banking industry generally could require us to change certain business practices, reduce our revenue,
impose additional costs on us, or otherwise negatively affect our businesses.
• The effects of the failure of any component of our business infrastructure provided by a third party could disrupt our businesses; result in the disclosure of and/or misuse of confidential information
or proprietary information; increase our costs; negatively affect our reputation; and cause losses.
• Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends to stockholders.
• Changes in accounting policies or procedures as may be required by the FASB or other regulatory agencies could materially affect how we report our financial results.
• Other risks identified from time to time in reports that we file with the SEC.
• The effects of any damage to our reputation resulting from developments related to any of the items identified above.
The foregoing list of factors is not exhaustive. For discussion of these and other factors that may cause actual results to differ from expectations, look under the captions “Forward-Looking Statements”
and “Risk Factors” of Regions’ Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC. Regions’ Investor Relations contact is Dana Nolan at (205) 264-7040; Regions’ Media
contact is Evelyn Mitchell at (205) 264-4551.
Forward-looking statements continued
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