Regions Financial (RF) Q3 FY26 earnings call: guidance and Q&A

How does Regions balance deposit growth to support the balance sheet while maintaining its peer-leading NIM, especially given the low 1 bp increase in deposit costs this quarter?

Management emphasizes growing noninterest-bearing deposits through retail and small business platforms, leveraging a lower loan-to-deposit ratio and debt footprint. They also noted $16 billion in off-balance sheet funds that could be attracted back with higher rates if needed, and past success in growing interest-bearing deposits with a 44% beta during rising rates.

“The most important thing to protect the margin is to make sure we continue to grow noninterest-bearing deposits.”

asked by Ryan Nash · answered by John Turner

How will Regions manage capital given current levels (below target without Basel III) and the impact of AOCI, especially with Basel III Endgame expectations?

Regions' current CET1 is 10.8%, which is robust. Pro forma for Basel III Endgame, it's ~10%, still above the 9.25%-9.75% target. The company generates 50 bps of capital quarterly and expects AOCI to burn down, accreting capital. They are well-positioned for investments and share buybacks.

“importantly, under the current capital framework, our capital level is 10.8%. So very robust capital levels.”

asked by Ryan Nash · answered by John Turner

What is driving the reported pickup in loan demand towards the end of the quarter, and will higher rates eventually impact demand more materially?

Production was up $4 billion year-over-year, a 60% increase, with customers actively managing balance sheets and positive economic views. Investor real estate (IRE) is seeing slowing new activity due to rising costs, which may impact future loan growth, but overall business sentiment remains good.

“Production was up year-over-year about $4 billion. We saw a 60% increase in production.”

asked by Scott Siefers · answered by John Turner

How should investors think about the NIM path from the Q4 guide of 3.70% into 2027, considering potential Fed rate hikes?

While not giving 2027 guidance, management expects structural tailwinds like fixed asset repricing (100-125 bps advantage in Q4) and balance sheet growth to continue. Maintaining noninterest-bearing deposits and a mid-to-high 30s deposit beta will support NII and NIM expansion in 2027.

“Some of the structural tailwinds that we have will continue into '27. So fixed asset repricing will continue.”

asked by L. Erika Penala · answered by Anil Chadha

What strategies are driving lower-cost core deposit growth and new customer acquisition, particularly on the consumer side amidst competitive dynamics?

Focus on acquiring new consumer and small business checking households through "feet on the street" bankers, enabled by technology. Small business operating accounts are up over 100 bps YTD. They are also growing mass affluent customers (up 8% YoY, 85% from existing base) by converting younger customers.

“We're using feet on the street to do that, by and large. And we think we're in really great markets.”

asked by Ebrahim Poonawala · answered by John Turner

Given current credit trends, are there any early signs of erosion, and is the ACL ratio expected to remain stable or compress incrementally?

Management expects stable credit from here, with full-year net charge-offs at the lower end of the 40-50 bps range. Some weakness in multifamily (Texas) and continued monitoring of office and transportation portfolios. The ACL ratio is expected to remain stable, with potential for reduction if fully reserved credits charge off, or if the origination profile continues to favor investment-grade credits.

“No, we think stable from here, John, based on what we know. We think the net charge-off range based on the composition of our portfolio is somewhere between 40 and 50 basis points.”

asked by John Pancari · answered by John Turner