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Regions Financial pulls back on auto, real estate but energy runoff moderates

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Regions Financial pulls back on auto, real estate but energy runoff moderates

Regions Financial Corp. executives said Jan. 20 that the bank's clients are reporting optimism about the state of the economy but that it has not yet translated to loan growth. By industry, Regions said they have pulled back on indirect auto lending and certain commercial real estate while declines in energy lending might be nearing an end.

Speaking during the bank's earnings call to discuss 2016 fourth-quarter and year-end results, CEO O.B. Grayson Hall Jr. said business owners have expressed an increase in optimism since the November 2016 election of Donald Trump as president. However, the enthusiasm did not mean greater loan growth as management reported credit line utilization actually declined by 90 basis points in the 2016 fourth quarter.

"Absolutely, we're seeing, anecdotally in our conversations with our customers, a lot more confidence and a lot more optimism about what the future would hold. And we continue to believe that, at some point, that turns into more business activity than we've seen thus far. But that being said, we're still not seeing that enthusiasm turn into actual lending activity," Hall said.

The bank's loan growth has been tempered by deliberate pullbacks in certain areas. The company reported a decrease of $17 million in indirect auto loans during the quarter, and management said the bank has slowed its production of commercial real estate construction loans, particularly in multifamily where concerns of a bubble have recently escalated. Average multifamily loans at the bank decreased 12% year over year, and the company also reported a big drop in energy loans, shrinking 19% year over year. However, bank executives said the decline in energy lending might be nearing an end as the bank closed two loans to exploration-and-production energy companies in 2016, one near year-end. Overall, management said they are projecting loan growth of 2% to 4% this year.

On the deal front, the bank's recent "satisfactory" Community Reinvestment Act rating allows it to consider bank acquisitions. Executives said the price of whole-bank acquisitions is starting to make the economics "challenging" but said they would consider deals. Hall said the bank was active in nonbank "bolt-on" acquisitions last year and will continue to monitor that market but that the company's primary focus remains organic growth.