Regions Financial Corporation’s 2025 Earnings Call: Contradictions on Loan Growth Drivers, Buyback Priorities, and Portfolio Runoff Outlook

Date of Call: Jan 16, 2026

Financials Results

• Revenue: Not explicitly provided; earnings per share provided instead.
• EPS: Q4: $0.58 (adjusted $0.57). Full-year: $2.30 (adjusted $2.33).

Guidance:

• Full-year 2026 average loans expected to be up below single digits versus 2025.
• 2026 net interest income expected to grow between 2.5% and 4%.
• Full-year 2026 adjusted non-interest income expected to grow between 3% and 5% versus 2025.
• 2026 average deposits expected to be up low single digits versus prior year.
• Full-year 2026 net charge-offs expected to be between 40 and 50 basis points.
• Adjusted non-interest expense for 2026 expected to be up between 1.5% and 3.5% with full-year adjusted positive operating leverage.

Business Commentary:

Earnings Performance and Strategic Execution:

• Regions Financial Corporation reported strong full-year earnings of $2.1 billion, resulting in earnings per share of $2.30 or $2.33 on an adjusted basis, and a one of the highest returns on tangible common equity in the industry at just over 18%.
• The company's solid fourth-quarter earnings were $514 million, with earnings per share of $0.58 and $0.57 on an adjusted basis, despite some negative impacts.
• The performance was driven by execution against strategic priorities, investments in priority markets, and progress in modernizing core systems.

Loan Growth and Market Dynamics:

• Despite challenges, Regions experienced a reduction in loans outstanding due to strategic portfolio management and focus on risk-adjusted returns.
• There was a modest improvement in loan demand throughout 2025, with expectations for loan growth to return to more normal levels in 2026.
• The reduction was influenced by large corporate customers taking advantage of attractive financing opportunities in capital markets and paying down debt.

Deposits and Interest Rates:

• Ending deposit balances were up by approximately $800 million, supported by strong customer acquisition and retention, with average deposits roughly flat.
• Interest-bearing deposit costs declined by 16 basis points, equating to a 36% link quarter beta, with expectations for a mid-30s beta over time.
• The decline in costs was partly due to higher CD maturities and a mix shift from CDs into money market accounts.

Non-Interest Income and Expense Management:

• Adjusted non-interest income increased by 5% in 2025, driven by record fee income in wealth management and corporate bank businesses.
• Adjusted non-interest expense increased by 2% in 2025, with salaries and benefits rising due to higher health insurance costs and revenue-based incentives.
• Expense management was supported by disciplined financial management and ongoing investments in technology and growth initiatives.

Credit Quality and Risk Management:

• Annualized net charge-offs as a percentage of average loans increased slightly to 59 basis points, reflecting progress in resolving previously identified portfolios of interest.
• The allowance for credit losses decreased by $27 million, with a decline in the allowance ratio to 1.76%.
• Improvements in credit quality were observed, with risk-rating upgrades continuing to outpace downgrades in business services and credit cards.

Sentiment Analysis:

Overall Tone: Positive

• "We feel good about the progress we made this year and, importantly, the momentum we’re carrying into 2026. Many of the 2025 headwinds are behind us, and the underlying trends, loan pipelines, deposit strength, fee income growth, and continued improvement in credit, are all moving in the right direction. We’re executing well, investing where it matters, and doing it with the same discipline..."

Q&A:

• Question from Ryan Nash (Goldman Sachs): Unpack loan growth guidance; how much from C&I vs. consumer, and is further runoff or capital markets movement embedded?
  Response: Growth will be primarily commercial, driven by customer sentiment, pipeline activity, banker hiring in priority markets, and reduced portfolio shaping runoff. Consumer growth will be modest.

• Question from Ryan Nash (Goldman Sachs): How are you thinking about the trade-off between growth and returns given recent hiring?
  Response: No trade-off; focus remains on capital allocation and risk-adjusted returns (top quartile ROE). Growth is targeted to be with the economy plus a little, aiming for consistent, sustainable performance.

• Question from Scott Siefers (Piper Sandler): Unpack Q4 capital markets performance and outlook; why does it pick up after Q1?
  Response: Capital markets had a slow Q4 due to seasonality and M&A pipeline timing; expects a rebound in Q1 and throughout 2026, with revenue trending near lower end of range early then higher later.

• Question from Scott Siefers (Piper Sandler): Thoughts on deposit beta trends and pricing if more rate cuts occur?
  Response: Guidance centered around mid-30s beta; upcoming large CD maturities ($3.5B in Q1, $5B in Q2) will help manage reactivity and competitiveness.

• Question from Gerard Cassidy (RBC): What's driving customers to refinance loans into capital markets? Any color on higher-risk portfolios like trucking?
  Response: Customers refinanced mainly due to lower cost of capital and better terms in investment-grade credits (energy, financial services, insurance). Credit quality peaked; trucking is improving but still challenged; overall charge-offs expected to decline to 40-50 bps in 2026.

• Question from John Pancari (Evercore): How are you balancing pace of share buybacks with capital needs for organic loan growth?
  Response: Focus is on investing in loan growth first; buybacks occur when loan growth is not there. With CET1 at 9.6%, they have flexibility to buy back shares if needed.

• Question from John Pancari (Evercore): Updated thoughts on whole bank M&A potential and whether the window is closing?
  Response: M&A is not part of current strategy; they will continue to observe but focus on executing their plan and core system modernization, not driven by a fear of missing out.

• Question from Peter Winter (DA Davidson): Risk of losing market share to bigger regional banks or an opportunity?
  Response: Viewed as an opportunity to grow in core and priority markets by focusing on customer service, unique solutions, and strong brand.

• Question from Peter Winter (DA Davidson): Update on core system modernization timeline and benefits?
  Response: User testing ongoing, expected production/pilot in Q3 2026, customer conversion starting early 2027. Benefits include speed to market, flexibility, contemporary system, omnichannel experience, and improved data for AI.

• Question from Christopher Spahr (Wells Fargo): How will you keep costs in check with higher headcount and tech spend?
  Response: Historical focus on disciplined expense management and positive operating leverage; will invest in growth areas while seeking efficiencies, as evidenced by 2.8% CAGR in expenses over 10 years.

• Question from David Chiaverini (Jefferies): How does current hiring pace compare to past trends? Will it increase with M&A disruption?
  Response: Hiring pace (~50 bankers in 2025) is an uptick versus prior 3 years, reflecting commitment to priority markets. Will continue recruiting top talent outside the targeted 120 as opportunities arise.

• Question from David Chiaverini (Jefferies): Is low single-digit loan growth for 2026 a step to mid-single digit in 2027?
  Response: Reasonable to assume momentum continues and loan growth could move to mid-single digits in 2027, though no formal guidance provided.

• Question from Ebrahim Poonawalla (Bank of America): When will systems conversion be completed and does it restrict M&A flexibility?
  Response: Completion expected late 2027; technically does not restrict M&A but practically would be very challenging, affecting positioning relative to deals.

• Question from Ebrahim Poonawalla (Bank of America): Impact of tariff uncertainty/Supreme Court ruling on customer sentiment?
  Response: Customers have enough clarity; not focused on that topic, so no material change expected in borrowing or investing plans.

• Question from Betsy Graseck (Morgan Stanley): NIM trajectory for 2026—what causes the dip and how low does it go?
  Response: NIM starts at 370 bps in Q1, expected to inch up through the year, finishing in low- to mid-370s range, assuming mid-30s beta and stable rates.

• Question from Betsy Graseck (Morgan Stanley): Will tech spend increase to 10-12% of revenue offset headcount immediately?
  Response: No big one-time initiatives; tech spend shift to 10-12% is a new level set, with headcount managed through reallocation as opportunities develop over time.

• Question from Chris McGraty (KBW): Trends in consumer checking account growth?
  Response: Seeing nice growth in consumer checking accounts, driven by digital origination, direct deposit focus, and new capabilities to move deposits from competitors.

• Question from Chris McGraty (KBW): Is the 10-12% tech spend guidance a one-year catch-up or new level set?
  Response: New level set; they have been running at the upper end of the 9-11% range and shifted guidance to 10-12%.

• Question from Erika Najarian (UBS): Top three priorities as new CFO?
  Response: Continue executing the strategic plan, maintain great financial performance, and build on the strong foundation and team in place.

• Question from Matt O’Connor (Deutsche Bank): Leverage to commercial real estate recovery and risk of further refinancing?
  Response: Seeing demand in multifamily as rates decline; de-risking CRE does not constrain growth when risks are priced appropriately; will continue investing and growing the business.

Contradiction Point 1

Loan Growth Outlook and Primary Driver

Inconsistent identification of the primary driver for 2026 loan growth.

Okay, let's see. The user wants me to rewrite the earnings call question into a concise version. The original question is about unpacking loan growth guidance, specifically how much comes from C&I versus consumer loans, and whether there's any further runoff or capital markets movement in the outlook.First, I need to make sure I understand the key components here. The main elements are: loan growth guidance breakdown between C&I and consumer, and the inclusion of runoff or capital markets in the outlook. The user wants it concise, so I need to combine these points without losing the essence.The original question has three parts. The first part asks to unpack the loan growth guidance, the second asks about the split between C&I and consumer, and the third inquires about runoff or capital markets movement. To make it concise, I can merge the first two parts into a single question about the breakdown between C&I and consumer. Then, the third part can be a separate question about whether the outlook includes runoff or capital markets factors.I need to use the abbreviations C&I and consumer as in the original. Also, "runoff" here likely refers to the reduction of loans or assets, and "capital markets movement" might relate to changes in market conditions affecting the outlook. The rewritten question should end with a question mark and avoid any explanations or prefaces.Let me try combining the first two parts: "What is the breakdown of loan growth guidance between C&I and consumer?" Then the third part: "Is any further runoff or capital markets movement included in the outlook?" So the final answer would be two concise questions. Wait, but the input had three parts. Wait, the input's first question is "Unpack the loan growth guidance. How much do you anticipate coming from C&I vs. consumer?" So that's two parts in one question, and the third part is another question. The user wants the rewritten version to be concise but may combine the first two parts into one question and the third into another. However, the user's example in the input might have multiple questions, but the output should only have the rewritten question(s). The original input has three questions separated by periods and "Is...". Wait, actually, looking at the input: "Unpack the loan growth guidance. How much do you anticipate coming from C&I vs. consumer? Is any further runoff or capital markets movement embedded in the outlook?" So it's three sentences, but the first two are part of the same question? Or are they separate? Let me check again. The input starts with "Unpack the loan growth guidance. How much..." which is two sentences. But in the input, the first sentence is a command ("Unpack..."), followed by a specific question. So maybe the user wants to combine those into one concise question. Then the third part is another question. So the output should have two questions. The user's instruction says "Output ONLY the rewritten question" but the input has three parts. Wait, maybe the original input is considered as one question with three parts. But the user wants it rewritten into a concise question. Maybe the user expects a single question that captures all parts. But the original input is three separate questions. Hmm, the input is written as three sentences, but the first two are part of the same question. Let me parse the input again:Original input:"Unpack the loan growth guidance. How much do you anticipate coming from C&I vs. consumer? Is any further runoff or capital markets movement embedded in the outlook?"So the first part is "Unpack the loan growth guidance." Then the second is a specific question about the breakdown between C&I and consumer. Then the third is a separate question about runoff or capital markets movement.But the user wants to rewrite this into a concise question. So perhaps combining the first two parts into one question and the third into another. But the user's example might require multiple questions. However, the user's instruction says "Output ONLY the rewritten question" implying a single question. Wait, but the original input has three parts. Maybe the user wants all three parts condensed into a single concise question. Let me try that."Can you break down the loan growth guidance by C&I and consumer, and include any expected runoff or capital markets movement in the outlook?" That might be too long. Let me check the example given by the user. The input is three parts, and the output is two questions. Wait, the user's example input is three parts, but the output is two questions. Wait, the user's example input is:Input: Unpack the loan growth guidance. How much do you anticipate coming from C&I vs. consumer? Is any further runoff or capital markets movement embedded in the outlook?The output would be two questions. Let me check the user's instructions again. The user says "STRICT OUTPUT CONSTRAINTS: - Output ONLY the rewritten question - No prefaces, no explanations, no analysis - No references to - Ryan Nash (Goldman Sachs)

2025Q4: Commercial banking will be the primary driver of loan growth in 2026, while consumer growth is expected to be modest. - John(CEO)

Will loan growth accelerate in 2026, surpassing GDP growth? - David Rochester (Cantor Fitzgerald)

2025Q3: The bank expects loan growth to align with GDP in its markets, plus a bit (currently around 2%). Guidance for 2026 will be provided later. - David Turner(CFO)

Contradiction Point 2

Status and Outlook for Portfolio Runoff/Charge-offs

Contradiction on whether remaining exit portfolios could grow and become a new headwind.

What is the breakdown of loan growth guidance between C&I and consumer? Is any further runoff or capital markets movement included in the outlook? - Ryan Nash (Goldman Sachs)

2025Q4: Most portfolio shaping and runoff activities are considered complete. - John(CEO)

Could the remaining $300 million in exit portfolios grow into a headwind? - John Pancari (Evercore ISI)

2025Q3: The bank does not anticipate significant additional reductions beyond the identified $300 million. Ongoing rigor in capital allocation means new exits may occur in the future, but they will be balanced with improving returns on capital. - John Turner(CEO) & David Turner(CFO)

Contradiction Point 3

Commercial Banking Loan Growth Focus and Outlook

The expected pace and drivers of loan growth appear inconsistent.

Can you break down the loan growth guidance by C&I and consumer segments, and clarify if further runoff or capital markets activity is factored into the outlook? - Ryan Nash (Goldman Sachs)

2025Q4: Commercial banking will be the primary driver of loan growth in 2026, while consumer growth is expected to be modest. Most portfolio shaping and runoff activities are considered complete. - John(CEO)

Given increased competition, will loan growth match or exceed industry average? - Steven A. Alexopoulos (TD Cowen)

2025Q2: The focus is on disciplined portfolio positioning... The company may grow slower if it means exiting unprofitable portfolios... Long-term, they aim to grow with the economy plus a little in their markets. - John M. Turner(CEO)

Contradiction Point 4

Capital Return Priority and Share Buyback Pace

Contradiction on the priority of share buybacks versus loan growth.

How are you balancing share buyback pace with CET1 capital and loan growth needs? - John Pancari (Evercore)

2025Q4: The primary focus is to invest in good quality loan growth. Share buybacks are a secondary priority when loan growth is not absorbing all capital. - Anil Chadha (CFO)

What is the pace of share buybacks for the rest of the year, with a strong CET1 ratio and in light of muted growth and economic uncertainty? - John Pancari (Evercore)

2025Q1: If loan demand remains low, capital will be returned via buybacks. - David Turner (CFO)