Many of Regions Financial Corp.'s business customers are taking a "wait-and-see approach" to making additional investments, but the Birmingham, Ala.-based bank's loan pipeline has remained steady, President and CEO John Turner said Oct. 22.
Although companies are generally optimistic about their businesses, they have become more cautious about the economic outlook due to market volatility and persistent uncertainty on trade policy, Turner told analysts following the bank's third-quarter earnings release.
Overall, he added, Regions' loan pipelines are "good but not great."
Regions' adjusted average loans and leases fell to $80.7 billion during the third quarter from a second-quarter figure of $81.3 billion. Consumer loans ticked up, but a slight decline in business lending drove the lower figure. CFO David Jackson Turner attributed the latter development partly to existing clients tapping less into their credit lines and paying off their balances at larger amounts.
The bank will continue to "trade off some growth for quality" and ensure it is choosing clients that do not pose significant credit risks, the bank's CEO said. That strategy will ensure it is able to "deliver consistent and sustainable performance" even if the economy takes a turn, he added.
"We are not going to grow just to grow," the CEO said.
Regions expects average loan growth in the low-to-mid single digits for all of 2019. Its net interest margin, which declined to 3.44% in the third quarter from 3.45% in the prior period, will likely dip below 3.40% in the fourth quarter but return above that mark in early 2020 as its strategy to hedge against lower interest rates kicks in.
Lower loan yields and the Federal Reserve's two interest rate decreases this year have put pressure on regional bank NIMs in recent months and squeezed their net interest income. Regions' NII fell to $950 million in the third quarter, down from $956 million in the prior quarter, though executives said they have taken steps to reduce their exposure to longer-term interest rates and mortgage-backed securities.
Meanwhile, the bank's adjusted noninterest income jumped to $557 million in the third quarter, up from $513 million in the prior quarter, driven by growth in service charges on deposit accounts, wealth management income and mortgage income.