Regions Financial (RF) Morgan Stanley US Financials, Payments & CRE Conference 2024 summary

Net interest income and deposit strategy

• Net interest income guidance remains unchanged, with performance likely at the lower end of the range due to stable deposit costs and normalization trends.

• Deposit costs have stabilized, performing in line or slightly better than expectations, with non-interest-bearing deposits expected to settle in the low 30% range.

• Securities repositioning may provide incremental benefit, but no change to overall guidance.

• Deposit base is granular and consumer-focused, allowing control over deposit costs and supporting relationship banking.

• Loan-to-deposit ratio is not a target metric; focus remains on growing low-cost deposits to avoid margin pressure.

Hedging, rate outlook, and NII durability

• Balance sheet is positioned neutral to short rates for the next 1-2 years, with attention shifting to longer-term hedging for 2026-2028.

• Hedging strategy aims to reduce NII volatility, especially in low-rate environments, with recent rate increases providing attractive hedging opportunities.

• Expectation for Fed rate cuts has shifted later in the year, with modest NII growth anticipated in the second half and into 2025.

Loan portfolio trends and growth opportunities

• C&I loans comprise about half the loan book; customers are cautiously optimistic, with low line utilization and some paydowns offsetting growth.

• Ascentium acquisition has been successfully integrated, driving small business lending with strong technology and branch referrals.

• Private credit is increasingly competitive, especially for leveraged and longer-term loans, but current risk appetite remains conservative.

• Residential mortgage growth is strong, driven by branch referrals, in-migration, and a focus on lending to homeowners.