Regions Financial (RF) Q2 FY26 earnings call: guidance and Q&A

Asked about the operating leverage outlook given first-half fee trends and the dynamics of loan demand and spreads.

Anil Chadha reiterated full-year guidance for NII (2.5-4%), noninterest revenue (3-5%, low end), and noninterest expense (1.5-3.5%), expecting positive operating leverage. John Turner noted a constructive environment with broad-based loan demand and strong pipelines (up 15% YoY). Anil added that loan yields were relatively flat, with half of growth in investment-grade credits and the market remaining competitive but rational.

“The market is competitive, but our competition is remaining rational. We're staying disciplined to good returns on what we're putting on our balance sheet.”

asked by Unknown Analyst (for Ken Usdin) · answered by Anil Chadha

Inquired about the medium-term NIM outlook given fixed-rate asset repricing and historical targets, and expectations for future share buybacks after a slower quarter.

Anil Chadha expects NIM to be flat to slightly up in Q3, driven by fixed asset turnover (75-100 bps pickup on $3B), a 7 bps hedge rate increase, and an additional day in the quarter, targeting 3.7% by year-end. He confirmed buybacks are expected to pick up in Q3, given the CET1 ratio (inclusive of AOCI) of 9.5% is at the midpoint of their target range.

“Given where we are at 9.5% in terms of the Basel III common equity 1 ratio, we would expect share buybacks in the third quarter to pick up a bit given we're kind of at the midpoint of our range.”

asked by Ryan Nash · answered by Anil Chadha

Asked about competitive deposit pricing in the Southeast and any new signs of stress in the credit portfolio, particularly after improvements in NCOs.

Anil Chadha stated competitive pressure has existed for 12-18 months, but Regions has defended its deposit base, with interest-bearing deposit costs down 3 bps to 1.69%. John Turner confirmed continued credit improvement, with significant reductions in problematic portfolios (business office down 35%, trucking 25%, communications 50% YoY). He noted slight softness in multifamily in a couple of markets but no broad concerns.

“This is a phenomenal asset that we have, which is our deposit base. We spent a lot of time making sure that we're making the right investments in terms of having the right products and services for our customers.”

asked by John Pancari · answered by Anil Chadha

Questioned the funding strategy if loan growth outpaces deposit growth, and how deposit pricing/betas would behave with a potential rate hike, given competitive dynamics.

Anil Chadha stated the long-term strategy is for loans and deposits to grow commensurately. In the short term, FHLB advances or unsecured debt (like the $1.5B issued at Treasuries + $68M) would be used. He reiterated confidence in maintaining a mid-30s beta for interest-bearing deposits even with Fed rate increases, attributing it to targeted promotional pricing and a strong loan-to-deposit ratio (76%).

“Our business model is not built around using high-cost deposits as a funding source.”

asked by L. Erika Penala · answered by Anil Chadha

Asked about the timeline and capacity of the new deposit system conversion, and how Regions monitors potential risks from the AI industry's rapid growth.

John Turner explained the deposit system conversion will start with a pilot in Q3/Q4 2026, with customer migration beginning Q1 2027 and completion by mid-to-Q3 2027. It's a phased approach, not a "big bang," and will provide tremendous capacity and faster product delivery. Regarding AI, he stated they conduct routine stress analyses and concentration risk management to understand interconnectedness and potential weaknesses across sectors.

“We're trying to have discussions on a routine basis just in terms of understanding what's in our portfolio, what the connectivity is and doing some just different kinds of analysis stressed analysis to say if this particular sector has some weakness, how does that affect us?”

asked by Gerard Cassidy · answered by John Turner

Inquired about the sustainability of consumer and corporate service charge growth, particularly overdraft fees, and the long-term ambitions for Capital Markets, including the impact of the Frazer Lanier acquisition.

John Turner attributed corporate service charge growth to improved treasury management penetration (57% to 66% over 5 years) and product offerings, expecting it to continue. Consumer activity, including debit/credit spending up 8%, drove consumer fees, with overdraft fees up modestly and monitored for risk. He stated the Frazer Lanier acquisition would have a modest initial impact but a meaningful long-term contribution to Capital Markets, which aims to grow from $360M-$380M in 2026 to $400M over time.

“We have a stated objective to continue to grow the percentage of noninterest revenue as a percentage of total. And one of the ways we do that is to invest in expanding our capital markets capabilities and business.”

asked by Matthew O'Connor · answered by John Turner