Regions Financial Corp., the 10th-largest U.S. bank by deposits, reported third-quarter profit that beat analysts’ estimates as net charge-offs and loan-loss provisions declined.
Net income was $155 million, or 12 cents a share, compared with a net loss of $155 million, or 13 cents, a year earlier, the Birmingham, Alabama-based bank said today in a statement. The average estimate of 26 analysts surveyed by Bloomberg was 4 cents. Regions has posted four consecutive quarters of profit.
Regions, led by Chief Executive Officer Grayson Hall, 54, is among banks facing investor concern that a stagnant economy and low interest rates will hurt loan growth and net interest margins. One of Regions’ biggest holders, Fairholme Capital Management LLC, sold more than half its stock in the bank as shares fell 46 percent in the quarter.
“The pace of economic recovery of the markets we’re operating in is going to drive the recovery of our customers,” Hall said today on a conference call after results were announced, citing Georgia and Florida. “We would love to see a faster pace and are taking actions to accelerate that on our own balance sheet, but in the absence of real economic recovery, this is going slower than we had anticipated.”
Regions set aside $355 million to cover bad debts in the third quarter, a 53 percent drop from the year-earlier period, according to the statement. Net charge-offs declined 33 percent to $511 million.
Net Interest Income
Adjusted total revenue fell to $1.61 billion from $1.62 billion in the year-earlier period. Total loans declined 5.9 percent to $79.4 billion from $84.4 billion.
Net interest income decreased to $858 million from $868 million last year. Non-interest income also declined, falling to $745 million from $750 million. Non-interest expense dropped 8.3 percent to $1.07 billion. The decline was partly driven by a $32 million reduction in salaries and benefits expense, Regions said in the statement.
Regions’ net interest margin, the difference between what a bank pays in deposits and charges for loans, widened to 3.02 percent from 2.96 percent in the year-earlier period. The lender’s Tier 1 common ratio increased to 8.2 percent from 7.6 percent.
Regions’ headcount, which totaled 27,829 as of Dec. 31, is down 1,000 year-to-date and there will be more reductions by the end of the year, Hall said on the call.
Regions said last month it’s shifting emphasis from debit cards to credit cards to counter a drop in revenue from so-called swipe fees. The Federal Reserve capped debit-card fees at 21 cents from an average of about 44 cents.
The bank said an increase in “active debit-card usage” led to an 11 percent climb in total transactions year-to-date from the year-earlier period, resulting in a 13 percent rise in interchange income during the same period. Regions has started to mitigate lost interchange revenue through account structure changes, new fees and new products and services, the lender said in the statement.
Regions hasn’t repaid $3.5 billion it received under the Troubled Asset Relief Program. The bank hasn’t changed its strategy of being “patient and prudent” on repaying the bailout funds, Hall said today on the conference call.
Morgan Keegan Talks
As part of a plan to boost capital and pay back the bailout, Regions is in talks with two competing groups of private-equity firms seeking to buy its Morgan Keegan brokerage, said people with knowledge of the matter, who spoke on condition of anonymity because the talks are private.
A deal valued at more than $1 billion may be reached within weeks, the people said. Regions is offering $200 million to help finance the sale of Memphis, Tennessee-based Morgan Keegan, the people said. Evelyn Mitchell, a spokeswoman for Regions, declined to comment.
Morgan Keegan posted profit of $26 million, up from $22 million in the third quarter last year and a decrease from $60 million in the second quarter.
Regions fell 19 cents to $3.71 in New York trading. The shares have lost 47 percent this year.