Capital markets, credit quality were bright spots for Regions in 1Q

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Higher capital markets income, growth in interest income and improving credit quality carried the day for Regions Financial, which reported double-digit earnings growth in the first quarter.

Net income for the $123 billion-asset Regions grew 37% from the year-ago period to $414 million. Earnings per share were 35 cents, beating by 4 cents the mean estimate of analysts polled by FactSet Research Systems.

The Birmingham, Ala., bank's "financial performance demonstrates our focus on sustainable growth is producing results,” Chairman and CEO Grayson Hall said in a news release Friday.

The company also made progress on its Simplify and Grow streamlining initiative and with recently announced organizational changes, he said.

As part of that initiative, announced last fall, Regions reshuffled some of its top executives and also created a corporate responsibility and philanthropy division. Regions also recently announced it would sell its insurance business to the $221.6 billion-asset BB&T in Winston-Salem, N.C.

Net interest income rose 6% to $909 million, and the net interest margin widened by 21 basis points to 3.46%.

Average loans and leases declined 0.4% to $79.9 billion from the year-ago period. Average balances in the company’s business lending portfolio declined by $325 million, or 1%, partly because of elevated payoffs in that portfolio and partly because the company chose to de-risk certain business lines. Regions also noted heightened competition for commercial real estate and soft loan demand from small businesses and the middle market.

At $31.3 billion, consumer lending remained fairly flat on a year-over-year basis. Home equity and indirect third-party vehicle lending fell, but the bank’s other consumer lines grew, including a 63% increase in other indirect consumer loans.

Total deposits fell 2.6% to $95.4 billion.

Noninterest income grew 7% to $507 million and was mainly driven by capital markets fee income and other service charges.

Noninterest expenses increased 5% to $884 million and included $15 million of severance expenses, as well as $3 million associated with plans to close 30 to 40 branches this year.

Total net charge-offs declined 9 basis points to 0.42% of total loans, and nonperforming loans fell 40% to $601 million.

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