Christopher Spahr

Christopher Spahr questioned Regions Financial's ability to manage expenses, specifically how they plan to control costs amidst inflation and increased headcount, given competitive expansion by other large regional banks. He also asked about the timeline and feasibility of managing headcount lower through attrition as a result of technology initiatives and increased tech spending.

Answer

CFO Anil Chadha explained that expense management has been a 10-year focus, with a compound annual growth rate of 2.8% for expenses. He emphasized the company's commitment to making strategic investments in areas like risk management, security, and banker hiring, while simultaneously finding ways to fund these investments. He stated that this disciplined approach is reflected in their expense guidance and commitment to achieving positive operating leverage, indicating a continuous effort to balance investments with cost control.

Christopher Spahr questioned Regions Financial's expense outlook, specifically how the bank plans to manage costs amidst headcount increases, competition, and inflation. He also asked about the ability and timeline to manage headcount lower through attrition as a result of technology investments, particularly with the increase in tech spend.

Answer

CFO Anil Chadha explained that Regions Financial has a decade-long focus on expense management, balancing necessary investments in risk management, security, and banker growth with finding ways to fund these initiatives. He highlighted the company's 2.8% compound annual growth rate for expenses over the past 10 years and commitment to positive operating leverage. Anil Chadha affirmed that managing headcount lower through attrition due to tech investments is an ongoing process, not a one-time initiative, and will be managed over time as opportunities develop.

Christopher Spahr from Wells Fargo sought clarification on the lowered fee income guidance, asking if it was driven solely by capital markets weakness or if other factors were involved. He also requested more detail on actions being taken in the bank's core growth markets.

Answer

Executive David Turner confirmed the primary driver for the lower fee guidance is weakness in capital markets, particularly M&A, real estate, and loan syndications. Executive John Turner explained the core market strategy involves deploying specialized bankers and using a team-based approach to capitalize on opportunities in small business, commercial, and wealth management within those markets.

Christopher Spahr asked what the bank's organic loan and deposit growth rate should be in a normal environment, given its strong footprint. He also requested more specific details on the technology project timeline and its expected benefits.

Answer

Executive John Turner stated that in a normal environment, Regions should grow with the economy plus a little extra in its core markets. He reiterated the tech timeline: the new loan system converts in 2025, and the deposit system will be implemented in 2027 after a 2026 pilot. He highlighted benefits such as faster product launches, bundling capabilities, and easier upgrades from the new cloud-based system.

Christopher Spahr questioned M&T Bank's rationale for being price-sensitive on share buybacks despite accumulating capital and anticipated regulatory relief. He also asked for the bank's outlook on deposit growth over the next year, given the expectation of five rate cuts.

Answer

Daryl Bible, SEVP and CFO, explained that M&T uses a grid for buybacks, adjusting amounts based on tangible book value and stock trading levels, viewing it as an investment. He projected deposit growth for the next year to be in line with economic growth, around 2-3%, with specific guidance to be provided in January.

Christopher Spahr asked about the outlook for long-term debt levels, the long-term loan-to-deposit ratio, and flexibility in the expense guidance, seeking examples of simplification efforts.

Answer

Daryl Bible (executive) stated the focus is on reducing wholesale funding, with long-term debt issued as needed. On expenses, he noted flexibility to slow strategic projects if a recession occurs and mentioned a focus on back-office efficiency through realignment and automation as potential levers.

Christopher Spahr questioned how M&T is achieving measured expense growth despite significant investments, asking for the sources of cost savings and if the office headcount is expected to change.

Answer

CFO Daryl Bible credited the company's entrepreneurial business leaders for driving efficiencies and automation within their own groups. He highlighted the company-wide adoption of agile work methods as a key driver of continuous improvement. He noted that while office headcount is relatively stable, the focus is on managing the overall expense base, not specific FTE counts.

Christopher Spahr sought clarity on the Q4 loan growth outlook, asking if there was upside potential if CRE runoff stabilizes, and questioned the timing and impact of potential rate cuts on criticized CRE loans.

Answer

CFO Daryl Bible projected that CRE runoff would likely continue for another couple of quarters, with growth not expected until mid-2025 as pipelines rebuild. He clarified that while lower rates help, the bank will not 'wipe out' its criticized loan book, as working with clients through stress is part of its DNA and builds loyalty. He reiterated a positive downward trajectory for criticized balances into 2025.

Christopher Spahr asked if the increase in energy loan growth was related to post-election optimism and what other areas might see growth. He also asked CEO Harris Simmons about other potential areas of regulatory relief for banks of Zions' size.

Answer

President and COO Scott McLean attributed the energy loan growth to favorable pricing and structure as competitors exit, noting a general sense of optimism among small and medium-sized business owners post-election. CEO Harris Simmons commented that relief from numerous CFPB rules and climate disclosure pressures would be beneficial. He expressed optimism that the new administration's focus on facilitating growth will create a more conducive environment.