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Revenue Diversification: A Key Priority for Regions Financial

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Buybacks and dividends

During 1Q15, Regions Financial (RF) repurchased $102 million of common stock—completing its $350 million 2014 repurchase program. It intends to repurchase an additional $875 million of outstanding shares over the next five quarters. The bank increased its quarterly dividend by $0.01 to $0.06 per share.

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Open to inorganic growth options

Regions Financial intends to deploy its excess capital in loan growth. If it still has a surplus, it will deploy it in acquisitions. Acquisitions could be bank or non-bank, but Regions would prefer to use its excess cash rather than stock it for the acquisitions.

4%–6% expected loan growth

For 2015, Regions expects total loan growth to be 4%–6%—driven by commercial and industrial loans. The bank expects to enter into new partnerships in auto lending later in 2015. It also expects its focus on increasing penetration rates to drive credit card balance growth in the near term.

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1%–2% expected deposit growth

Regions Financial expects its full-year average deposit growth to be 1%–2%. A significant portion of the bank’s deposits are consumer deposits. They’re generally smaller in size. According to the bank, they should be more stable and less sensitive to rates in a rising rate environment.

Based on its assumptions of loan growth and an interest rate hike later in 2015, the bank expects its net interest income and margin to grow through the remainder of 2015.

Strategic priorities

Regions Financial expects to benefit from revenue initiatives in its mortgage, capital markets, and wealth management businesses, while managing its expenses. It’s looking to grow various revenue streams because the interest rate environment continues to be challenging.

The bank’s strategic priorities include diversifying revenue, generating positive operating leverage, and deploying capital effectively. The above chart shows the bank’s expectations for the economy and its loans, deposits, and operating leverage in 2015.

You can invest in regional banks—like Regions Financial, BB&T (BBT), SunTrust Banks (STI), and First Horizon National (FHN)—through ETFs like the SPDR S&P Regional Banking ETF (KRE).

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