Regions Expects Fourth-Quarter Margin Of About 3.70%, Assuming A December Fed Rate Hike
The bank also added $2.8 billion of swaps after quarter-end to blunt the capital hit from rising rates.
Regions Financial, the Birmingham, Alabama, bank holding company behind Regions Bank, expects fourth-quarter net interest income to rise 1% to 2% from the third quarter, with a net interest margin of about 3.70%. The outlook, in an investor presentation filed in an 8-K on Wednesday, assumes the Federal Reserve raises rates in December and long-term rates hold steady.
Margin outlook and its drivers
The third-quarter margin was 3.68%, according to the presentation, so the fourth-quarter target is a modest step up. Net interest income was $1,314 million on a fully taxable-equivalent basis in the third quarter, versus $1,291 million in the second.
The company names the main engine as $12 billion to $14 billion a year of fixed-rate loan production and securities reinvestment at higher yields than the assets that mature. New fixed-rate asset yields ran about 100 basis points (a full percentage point) above maturing yields in the third quarter, against 85 basis points in the second.
Regions also expects interest-bearing deposit costs to rise with a long-run beta, the share of Fed rate moves passed on to depositors, in the mid-to-high 30% range.
$2.8 billion in new swaps
After quarter-end, Regions added $2.8 billion of pay-fixed swaps on its available-for-sale securities, aimed at reducing swings in regulatory capital. The estimated capital loss from a 1-percentage-point rise in rates fell to about $595 million, or about 46 basis points of common equity Tier 1 capital, as of October 28. At September 30 it was about $680 million, or about 52 basis points.
Under the current framework, common equity Tier 1 capital was an estimated 10.8% at the end of the third quarter. The company's Basel III Endgame pro forma estimate is about 10%, which it says sits above its 9.25% to 9.75% operating range.
Clip Money and the investor tour
The deck says Regions is the first bank to launch a partnership with Clip Money, announced October 27, extending commercial cash deposits to more than 8,100 locations nationwide.
Regions, which at the end of 2025 ran 1,247 branches across the South, Midwest and Texas, will take the materials to institutional investor meetings in November and December.
The December Fed decision is the assumption underneath the 3.70% margin target.
Sources
- 8-K Filing — REGIONS FINANCIAL CORP (RF) — SEC EDGAR
- Exhibit a4q26investormeetingmate.htm — REGIONS FINANCIAL CORP 8-K exhibit — SEC EDGAR
