Regions Financial CFO says challenge for NII will be managing deposit costs

Regions Financial CFO David Turner said while presenting at the Bank of America Financial Services Conference: “Well, I think that there hasn’t been a ton of change in terms of our customer base and our expectations for what this year was going to look like even from a rate standpoint. Our markets are still quite robust. We have a lot of migration into the Southeast from other parts of the country. So we’re beneficiaries of that. We said credit is going to normalize, which means losses higher this year than last. We have an outlook of 40 to 50 basis points for the year. You could see that’s not necessarily in any given quarter, we could be lower than that or higher than that in any given quarter, but 40 to 50 is kind of the right mark for us. Now we do see some stress in certain loan areas. We’ve talked about office commercial real estate, in particular, transportation, senior housing… So we haven’t had a lot of loan growth expectations that was baked into our guidance, and it was slower in the first half of the year picking up in the back half. That has not changed for us… So we didn’t believe the market, six cuts at the beginning of the year. We didn’t factor that in, we had four cuts baked into our guidance and that, we think, starts May, June time frame. So maybe you can get the benefit of a couple of those. The rest of them happen so late not much benefit. We’re relatively neutral on short rates. And we think with the expectation of rates coming down, that has slowed deposit cost increases and so our beta, we think caps out at about 45%. And we’re prepared for rates to go the other way. We’re starting to do that right now. So our — the real challenge for us this year relative to NII (net interest income) is going to be how well we manage our deposit costs.”