Regionals aren’t rushing to repurchase shares

While some banks have started repurchasing shares again after the Federal Reserve gave the industry the green light at the end of last year, others are proceeding with caution.

Comerica, an $85.3 billion-asset company in Dallas, is “optimistic” about resuming buybacks as the U.S. economy rebounds from the pandemic, Chief Financial Officer Jim Herzog said Tuesday during a virtual conference hosted by RBC Capital Markets.

“We want to make sure we do so in a cautious manner to make sure that we're not in a position to not cover our customers when they go to borrow and we see the economy start to take off in the second half of the year, hopefully,” Herzog said.

Fed officials said in December that banks could repurchase stock again starting this quarter so long as the purchases are less than their average net income over the four previous quarters. The Fed had frozen buybacks and restricted dividends in the final half of 2020 so banks could stockpile reserves against potential loan losses stemming from the pandemic recession.

Stock buybacks are not an immediate priority for Regions Financial in Birmingham, Ala., Chief Financial Officer David Turner said during the same conference Tuesday.

The $147 billion-asset Regions would first seek to pay a dividend that’s “sustainable” and “based on a reasonable percentage of income,” he said. The company would also use some of its capital to expand its business.

“When we can’t use our capital because we don’t have the loan growth and we don’t have those other things like dividends and nonbank transactions, then we’ll buy it back,” Turner said. “We don’t want our capital to be too high or too low.”

In January, the board of directors at KeyCorp approved a share repurchase program of up to $900 million through Sept. 30. But so far the Cleveland company has not made any moves.

Still, buybacks remain a potential option in its three-pronged capital management strategy that includes dividend payments and growth opportunities, Chairman and CEO Chris Gorman said Tuesday during the conference.

"We have been and will continue to be very disciplined in the way we manage and deploy our capital, focusing both on the return on and the return of capital," Gorman said Tuesday.

Wall Street banks like JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanleyannounced plans to repurchase shares in the first quarter quickly after the Fed announced its decision in December. The board of Truist Financial, a large regional which has $509 billion in assets, also cleared a plan to repurchase $2 billion in stock.

Herzog at Comerica said the pace of the company’s share repurchases will be clearer once the uncertainty about the direction of the recovery melts away.

“Once we start the share buyback, then we will be appropriately assertive in terms of the buyback,” Herzog said.