2023-04-21 08:04:11 ET
Regions Financial ( NYSE: RF ) trimmed its outlook for 2023 net interest income growth, reflecting the expectation that the Federal Reserve is almost done with raising interest rates, the company disclosed in its Q1 earnings slides .
"As fed funds nears a peak, NII and NIM (net interest margin) will see modest declines from deposit cost normalization, offset by asset turnover at higher rates and modest loan growth," Regions ( RF ).
For the year, NII is expected to increase 12%-14%, down from its previous guidance of 13%-15%.
For Q2 2023, NII is expected to drop 1.5%-3.5%.
The bank expects deposits to decline during the first half of 2023, trending towards the higher end of $3B-$5B decline. Deposits are then expected to be stable or show modest growth in the second half of the year.
For the year, ending loan balances are expected to increase ~4% from 2022, the same as its guidance issued in January.
Regions ( RF ) guided to noninterest expense increase of 4.5%-5.5% in 2023, unchanged from the prior guidance, but it now sees adusted operating leverage of ~2%, down from its prior view of ~4%.
In the wake of three banks failing in March, the company pointed out in its Q1 slides that its "liquidity position is strong and stable." Available total primary liquidity was ~$41.8B as of March 31, 2023, from readily usable sources, it said. In addition, it doesn't need to sell securities or loans to generate cash and has reliable capacity at the Federal Home Loan Bank or through the Fed's new Bank Term Lending Facility in addition to its cash already on hand.
Q1 GAAP EPS of $0.62 , missing the $0.65 consensus, fell from $0.70 in the previous quarter and increased from $0.55 in the year-ago period.
Q1 net interest income (taxable equivalent basis) rose to $1.43B from $1.41B in Q4 2022 and from $1.03B in Q1 2022. Net interest margin of 4.22% rose from 3.99% in the prior quarter and from 2.85% in the year-ago period.
Provision for credit losses of $135M increased from $112M in Q4 2022 and compared with a benefit of $36M in Q1 2022.
Net loans charged-off as a percentage of average loans, annualized, was 0.35%, up from 0.29% in the prior quarter and from 0.21% in the year-ago period.
Total deposits of $128.5B at March 31, 2023 dropped 2.5% from $131.7B at Dec. 31, 2022.
Average total loan balances rose to $97.3B from $95.8B in the prior quarter, primarily driven by growth in commercial and industrial lending, investor real estate, residential first mortgages and EnerBank.
Q1 adjusted noninterest expense of $1.03B increased 1.3% from $1.01B in Q4 2022 and rose 10% from $932M in Q1 2022.
Conference call at 10:00 AM ET.
Earlier, Regions Financial ( RF ) GAAP EPS of $0.62 misses by $0.3, revenue of $1.95B misses by $10M
In March, SA contributor Mike Zaccardi said he sees technical risks emerging at Regions ( RF ), but valuation and yield are compelling.
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Regions Financial slightly lowers NII growth guidance as fed funds rate nears peak