REGIONS FINANCIAL CORP (RF)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered solid results: net income to common of $534M and diluted EPS of $0.59; adjusted EPS $0.60, with total revenue of $1.905B and pre-tax pre-provision income (PPI) of $832M .
• EPS beat Wall Street consensus; Primary EPS consensus was $0.558, and company reported $0.59 (adjusted $0.60). Revenue consensus was $1.861B vs company-reported $1.905B, implying a revenue beat of ~$44M.
• Net interest margin (FTE) expanded 13 bps to 3.65% QoQ, aided by fixed-rate asset turnover and deposit cost management; management raised FY25 NII growth guidance from 1–4% to 3–5% and expects NIM in low-to-mid 3.60s in 2H25 .
• Credit trends improved: NCOs fell to 47 bps (annualized), NPL ratio down to 0.80%, ACL/NPL coverage rose to 225%; CET1 remained strong at 10.7%, with adjusted CET1 (incl. AOCI) at ~9.2% .
• Capital return remains a visible catalyst: 7M shares repurchased ($144M) and the Board declared a 6% quarterly dividend increase to $0.265 per share .

What Went Well and What Went Wrong

What Went Well

• Net interest income grew 5% QoQ and NIM rose to 3.65% on asset turnover and funding-cost benefits .
• Fee revenue strength: wealth management posted another record quarter (+3% QoQ), mortgage income rose 20% on a favorable MSR valuation adjustment (+$13M), and capital markets increased on higher M&A and real estate activity .
• Management upgraded FY25 guidance (NII growth 3–5%; NIM low-to-mid 3.60s in 2H25; adjusted non-interest income +2.5–3.5%; adjusted NIE +1–2%), signaling confidence into 2H25 and beyond .
• CEO tone: “continued momentum across our franchise” driven by investments in talent, technology, and capabilities .

What Went Wrong

• Service charges declined 6% QoQ due to seasonal Treasury Management dynamics, partially offsetting fee gains .
• Salaries and benefits rose 5% QoQ on one extra work day, full-quarter merit, revenue-based incentives, and HR asset valuation offsets; efficiency ratio at 56.0% .
• Loans were stable on average and only modestly up at quarter-end (~1%); business loan growth was concentrated in structured products and manufacturing, while consumer was relatively flat .
• Analyst concerns remain over portfolios of interest (office, trucking); management expects FY25 NCOs near the upper end of 40–50 bps before improving into 4Q .

Financial Results

Estimates comparison (S&P Global):

• EPS: Consensus $0.558 → Actual $0.59 (adjusted $0.60)*.
• Revenue: Consensus $1.861B → Company-reported $1.905B (beat ~$44M)*.
  Values retrieved from S&P Global.

Segment and Balance Highlights (End of Period):

Key KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “continued momentum across our franchise and the benefits of the strategic investments we've made in talent, technology, and capabilities” .
• CFO on NIM drivers: front-book/back-book yield pickup (~140 bps on ~$3B production), deposit cost control, some nonrecurring items in Q2; expects NII stable to modestly higher in Q3 .
• Strategy: No interest in depository M&A near term; focus on organic growth and completing core modernization; open to non-bank opportunities .
• Capital & liquidity: CET1 10.7%; total available liquidity ~$65B; uninsured deposits coverage ~185% (ex intercompany/secured) .
• Dividend: Quarterly dividend increased 6% to $0.265; long-term dividend CAGR just over 10% across the peer group .

Q&A Highlights

• Deposit mix sustainability: Management cited ~4.5M consumer checking accounts (avg ~$5.5k) and ~400k small business operating accounts (avg ~$15k), supporting stable low-30% NIB mix .
• Margin outlook: Some Q2 positives won’t repeat (e.g., ~$10M items), but asset turnover and deposit repricing provide multi-year tailwinds; NIM growth resumes with a more normal yield curve .
• Loan growth cadence: Pipelines and production improving, with targeted exits (~$400–$500M remaining in 2025) in leveraged/enterprise value lending to optimize risk-adjusted returns .
• Policy/macro: Bonus depreciation viewed as supportive for equipment-related demand; clearer tariff policy helping confidence; cautious consumer spend noted .
• Stablecoin/payments: Regions expects industry consortium approach, similar to Zelle and RTP participation .

Estimates Context

• EPS beat: Company reported $0.59 (adj $0.60) vs S&P Global consensus $0.558*, reflecting stronger NII and fee performance.
• Revenue beat: Company-reported total revenue $1.905B vs S&P Global consensus $1.861B*, aided by NIM expansion and non-interest income strength.
• Implication: Consensus likely needs upward revision for NII and fee lines given raised FY25 guidance, especially NIM trajectory and capital markets revenue range .
  Values retrieved from S&P Global.

Key Takeaways for Investors

• NIM/KPI traction: 13 bps NIM expansion and raised NII guidance suggest multi-quarter earnings momentum driven by fixed-rate asset turnover and deposit cost discipline .
• Quality improving: NPL and NCO trends are favorable with higher ACL/NPL coverage (225%); FY loss cadence front-loaded, easing by 4Q .
• Fee diversification: Record wealth management and stronger capital markets (Q3 guide $85–$95M) provide offset to spread volatility .
• Capital deployment: Dividend increased 6% and ongoing buybacks demonstrate capital flexibility while managing adjusted CET1 near lower end of 9.25–9.75% range .
• Execution focus: No depository M&A; continued investment in cloud-native core platforms and mobile app enhancements to drive efficiency and growth .
• Deposit advantage: Strong NIB base and pricing discipline continue to underpin funding costs and margin resilience vs peers .
• Near-term setup: Q3 NII stable to modestly higher; watch for capital markets performance, deposit cost trajectory, and resolution progress in office/trucking exposures .

Footnotes:
*Values retrieved from S&P Global.