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RF

REGIONS FINANCIAL CORP (RF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025: Net income to common $465M and diluted EPS $0.51; adjusted EPS $0.54. Total revenue $1.784B (adjusted $1.809B); NIM fell 3 bps to 3.52% and adjusted efficiency ratio was 56.8% .
  • Deposits grew 3% QoQ to $131.0B (EOP) with average deposits up 1% QoQ; mix of non‑interest‑bearing remained in low 30% range. Average loans were stable; ending loans down ~1% QoQ to $95.7B .
  • Asset quality within expectations: NCOs 0.52% (annualized), NPLs 0.88% of loans; ACL/loans 1.81%. Criticized business services loans up, driven by transportation and multifamily .
  • Guidance trimmed: 2025 NII now +1–4% (from +2–5%), adjusted NIE flat to +~2% (from +1–3%), adjusted NIR +1–3%; NIM targeted to 3.60% by 4Q25. 2Q NII ~+3% QoQ. Capital markets near term ~$80–$90M/quarter .
  • Catalysts: EPS beat vs consensus and buyback ($242M) support; revenue below Street, softer capital markets, and front‑loaded credit losses may temper reaction. EPS consensus 0.509 vs actual 0.54; revenue consensus $1.835B vs actual $1.660B* [GetEstimates]*.

What Went Well and What Went Wrong

What Went Well

  • Relationship deposit franchise delivered: ending deposits +2.6% QoQ; management highlighted customer preference for liquidity and deepening relationships in priority markets .
  • Fee momentum in core categories: record treasury management (seasonal) and record wealth management; service charges +3.9% QoQ and +8.8% YoY; wealth +2.4% QoQ and +8.4% YoY .
  • Capital and liquidity solid: CET1 10.8%, Tier 1 12.2%; total liquidity ~$68B covering ~190% of uninsured deposits; tangible book per share up 8% QoQ and 18% YoY to $12.29 .

Quotes:

  • “First quarter deposit growth, driven in part by deepening relationships and account growth” — John Turner (CEO) .
  • “Linked‑quarter interest‑bearing deposit costs fell by 11 bps... beta of 32%” — David Turner (CFO) .
  • “Proactive hedging strategies position Regions for success in an array of economic conditions” — presentation .

What Went Wrong

  • NII down 3% QoQ (less than 1% ex nonrecurring and day count) with NIM −3 bps; lower loan balances and spread compression offset hedge benefits .
  • Capital markets softer: revenue $80M, −17% QoQ, −12% YoY on lower M&A, real estate and syndication; near‑term run rate guided to ~$80–$90M .
  • Credit costs edged higher: NCOs 0.52% vs 0.49% in Q4; criticized business services loans increased, notably transportation and multifamily portfolios of interest .

Financial Results

Core P&L and Margins

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Billions)$1.790 $1.815 $1.784
Adjusted Total Revenue ($USD Billions)$1.868 $1.845 $1.809
Net Interest Income ($USD Billions)$1.218 $1.230 $1.194
Non-Interest Income ($USD Billions)$0.572 $0.585 $0.590
Diluted EPS (GAAP)$0.49 $0.56 $0.51
Adjusted Diluted EPS (non‑GAAP)$0.57 $0.59 $0.54
NIM (FTE)3.54% 3.55% 3.52%
Efficiency Ratio (GAAP)59.3% 56.8% 57.9%
Adjusted Efficiency Ratio56.9% 55.4% 56.8%
Pre‑Tax Pre‑Provision Income ($USD Millions)$721 $777 $745
Adjusted PPI ($USD Millions)$799 $816 $774

Balance Sheet and Credit KPIs

MetricQ3 2024Q4 2024Q1 2025
Average Loans ($USD Billions)$97.040 $96.408 $96.122
Ending Loans ($USD Billions)$96.789 $96.727 $95.733
Average Deposits ($USD Billions)$125.950 $126.493 $127.687
Ending Deposits ($USD Billions)$126.376 $127.603 $130.971
CET1 Ratio10.6% 10.8% 10.8%
NCOs / Avg Loans (annualized)0.48% 0.49% 0.52%
NPLs / Loans0.85% 0.96% 0.88%
ACL / Loans1.79% 1.79% 1.81%
Liquidity to Uninsured Deposits~180% ~180% ~190%

Segment/Category Breakdown

Average Loans by Category ($USD Millions):

CategoryQ3 2024Q4 2024Q1 2025
Commercial & Industrial49,847 49,357 49,209
Investor Real Estate (mortgage + construction)8,759 8,656 8,751
Residential First Mortgage20,147 20,107 20,037
Home Equity5,530 5,527 5,509
Consumer Credit Card1,359 1,398 1,394
Other Consumer6,173 6,151 6,042

End‑of‑Period Deposits by Segment ($USD Millions):

SegmentQ3 2024Q4 2024Q1 2025
Consumer Bank78,858 78,637 80,627
Corporate Bank36,955 38,361 39,696
Wealth Management7,520 7,736 7,798
Other3,043 2,869 2,850
Total EOP Deposits126,376 127,603 130,971

Additional KPIs:

KPIQ3 2024Q4 2024Q1 2025
IB Deposit Costs2.34% 2.13% 2.02%
Total Deposit Costs1.60% 1.47% 1.40%
Non‑Interest‑Bearing Mix (EOP)31.4% 30.7% 30.9%
Tangible Book Value/Share$12.26 $11.42 $12.29
ROATCE (reported / adjusted)16.87% / 19.68% 19.19% / 20.30% 17.72% / 18.58%

Estimates vs Actuals (S&P Global)

MetricQ3 2024 EstimateQ3 2024 ActualQ4 2024 EstimateQ4 2024 ActualQ1 2025 EstimateQ1 2025 Actual
Primary EPS Consensus Mean0.53394*0.57*0.55485*0.59*0.50868*0.54*
Revenue Consensus Mean ($USD Billions)1.805*1.677*1.862*1.695*1.835*1.660*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
Net Interest Income growth (YoY)FY 2025+2% to +5% +1% to +4% Lowered
NIM (FTE) target4Q 2025“margin to push up” into mid‑3.60s path ~3.60% by 4Q25 Clarified target
Adjusted Non‑Interest IncomeFY 2025+2% to +4% +1% to +3% Lowered
Adjusted Non‑Interest ExpenseFY 2025+1% to +3% Flat to +~2% Lowered
Average LoansFY 2025~+1% Relatively stable vs 2024 Lowered
Average DepositsFY 2025Relatively stable vs 2024 Stable to modestly higher Raised
Net Charge‑Offs / Avg LoansFY 202540–50 bps, toward upper end 40–50 bps, toward upper end; 1H > 2H Maintained (timing clarified)
Effective Tax RateFY 2025~20–21% (implied) 20–21% Maintained
2Q NII QoQ2Q 2025Not specified~+3% vs 1Q New
Capital Markets revenueNear‑term~$80–$90M ~$80–$90M Maintained
CET1 inclusive of AOCI (operating range)Near‑termManage to 9.25–9.75% Manage closer to lower end 9.25–9.75% Maintained (stance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Loan demand/utilizationC&I pipelines soft; utilization low; 2025 ~+1% loans Customers delaying investments amid tariff uncertainty; average loans stable Flat to cautious
Deposits/costsIB costs peaked; falling betas; average/EOP deposits modest up IB costs −11 bps QoQ; average +1%, EOP +3%; NIB low‑30% Improving costs; growth
Capital markets~$80–$90M near‑term; episodic M&A $80M; lower M&A/real estate/syndication; guide $80–$90M Softer near‑term
Tariffs/macro uncertaintyExpect clarity to catalyze activity 2H 2025 “Wait‑and‑see”; stability needed 90–180 days Heightened uncertainty
Technology modernizationNew loan system 2Q/3Q 2025; deposit system pilot 2H 2026 Continued investments; cloud systems; no near‑term expense roll‑off Ongoing
AI/analyticsNoted investments in capabilities Personalization powered by AI; CashFlowIQ/Advisor, SmallBusinessIQ, Mortgage Analytics Pro Expanding initiatives
Regulatory/capital (Basel III Endgame)Add AFS→HTM; manage CET1 incl. AOCI 9.25–9.75% HTM mix ~17% at 3/31; plan to ~20% in early April; AOCI burn‑down outlined Active positioning
Credit portfolios of interestOffice, senior housing; transportation; NCOs toward upper end Office NPLs 13.3%, ACL 7.9%; trucking NPLs 8.0% Elevated watch

Management Commentary

  • “We believe our de‑risking efforts and best‑in‑class hedging program… position us well to perform across a wide array of economic conditions” — John Turner (CEO) .
  • “Net interest income declined 3% linked quarter, but less than 1% excluding nonrecurring items and day count” — David Turner (CFO) .
  • “We expect 2Q25 NII to increase ~3% vs 1Q25… 2025 NII expected to grow between 1–4%; NIM increase to 3.60% by 4Q25” — Company presentation .
  • “In the near term, we expect to manage CET1 inclusive of AOCI closer to the lower end of our 9.25–9.75% operating range” — Company presentation .
  • “We continue to believe capital markets can consistently generate ~$100M over time… expect ~$80–$90M near term” — David Turner (CFO) .

Q&A Highlights

  • Deposit pricing/betas: IB deposit costs −11 bps QoQ; full cycle falling‑rate beta ~32%; promotional pricing in select markets; multiple levers to reduce costs further .
  • Buybacks: Repurchased $242M in Q1; pace tied to loan demand; confident capital supports continued buybacks while maintaining CET1 targets .
  • Loan outlook: Pipelines mixed; upper end middle market soft; bond market paydowns (~$800M); line utilization flat; cautious sentiment until tariff clarity (90–180 days) .
  • Credit provisioning: Front‑loaded charge‑offs 1H; provision ~NCOs, with macro changes causing general reserve increases; expect ACL ratio to drift down over time if economy stabilizes .
  • Capital markets drivers: Lower M&A, real estate and syndication suppressed revenue; near‑term guide ~$80–$90M; pathway to ~$100M over time .

Estimates Context

  • EPS: RF’s adjusted EPS of $0.54 exceeded S&P Global consensus of $0.509 for Q1 2025; prior two quarters also above consensus (actuals $0.57 and $0.59 vs estimates ~$0.534 and ~$0.555)* [GetEstimates]*.
  • Revenue: Reported S&P “Revenue actual” ($1.660B) was below S&P consensus ($1.835B) for Q1 2025; similar shortfalls in Q4 and Q3 2024. Note differing basis vs company’s total revenue ($1.784B) disclosure may explain gap* [GetEstimates] *.
  • Implication: Street may trim NII trajectory given lower growth range (+1–4%) and soft near‑term capital markets; deposit cost relief and hedge program support margin resilience .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Deposit advantage intact: deposit growth and falling IB costs (beta ~32%) underpin margin protection even as rates fall; NIM path to ~3.60% by 4Q25 .
  • Earnings durability: Adjusted PPI +21% YoY and ROATCE ~18.6% reflect resilient core; expect positive operating leverage for FY25 (50–150 bps) despite trimmed revenue/expense guides .
  • Near‑term headwinds: NII −3% QoQ on balances/spreads; capital markets softness persists; front‑loaded credit losses in portfolios of interest (office, trucking) .
  • Capital deployment: With CET1 10.8% and flexible stance on CET1 incl. AOCI, ongoing buybacks and dividend ($0.25/sh declared) likely continue, paced by loan demand .
  • Watch for 2Q acceleration: NII guided ~+3% QoQ, removal of nonrecurring items/day count, and fixed‑rate turnover bolster H2 upside if tariff uncertainty eases .
  • Strategic tech/AI investments: Cloud core upgrades and AI‑enabled tools (CashFlowIQ/Advisor) target fee growth and small‑business penetration in priority markets .
  • Trading lens: EPS beat vs consensus, deposit‑cost tailwinds, and buybacks are supportive; sustained revenue normalization and capital markets re‑acceleration are key triggers, while credit headlines from office/transportation remain a risk monitor [GetEstimates] .

Other Q1 2025 Press Releases

  • Declared quarterly dividends: $0.25 common dividend payable July 1; preferred dividends across series C/D/E/F payable in May/June .
  • Q1 2025 earnings press release and financial supplement published April 17 (summary metrics above) .