Regions accelerates plan to refresh its branch network

• Key insight: Regions Financial plans to open 135 to 150 new branches as part of a strategy that will include closing existing locations.
  
• What's at stake: Regions does business across the Southeast, an increasingly competitive market. Its steady presence and strong brand in longtime markets has been a competitive advantage against other banks, according to Chairman and CEO John Turner.
  
• Supporting data: Regions currently operates about 1,250 branches across 15 states. That number should remain fairly steady throughout the branch refresh initiative, executives said.

Regions Financial , which operates in many competitive Southeast U.S. markets, has accelerated the timeline for updating its branch network by two years.

After internally planning on a refresh initiative that would happen over seven years, Regions now expects it to be finished within five, and possibly four if the conditions are right. The speedier game plan is part of an effort to capture more market share in the Southeast, where several large and regional banks are expanding organically or through mergers and acquisitions.

Birmingham, Alabama-based Regions plans to open 135 to 150 branches in cities such as Atlanta, Miami and Nashville, John Turner, its chairman and CEO, said last week at an industry conference. At the same time, it will close or consolidate about the same number of existing branches in areas where the population has shifted and there are opportunities to combine offices, he said.

The strategy comes amid competition that's "definitely intensifying" across the bank's footprint, Turner said at RBC Capital Markets' financial institutions conference. The two-day event was the first time that Regions executives had publicly discussed the new branch strategy.

"We know who's opening what branches, when and where," Turner said. "We're able to look at our customer base and know whether or not our customer has an ancillary relationship with that bank. … We know to target our focus on that customer because we believe that's who [the competing bank is] going to try to win … [and] we're countering that activity with outreach."

The heat has turned up in the past 12 months.

Fifth Third Bancorp and Huntington Bancshares, two regional banks headquartered in Ohio, accelerated their Southeast expansion plans by making acquisitions. Truist Financial in Charlotte, North Carolina, announced plans to open 100 branches and renovate 300 existing locations in high-growth markets, mostly in the Southeast. JPMorganChase, the largest U.S. bank by assets, said it would triple its branch network in Regions' home state of Alabama, continuing a yearslong strategy to build a larger physical footprint.

The $158.1 billion-asset Regions has the opportunity to defend its position as a dominant bank in the Southeast, Turner told analysts in January. For starters, the Regions brand is strong, and its bankers are well known in their markets, he argued.

There's also room to grow. The bank has about 30% market share, even in its best markets, which leaves plenty of opportunities to capture a chunk of the remaining 70%, Turner said.

"We believe … that 70% of customers who are not banking with us, but with someone else, are at as much risk or more of leaving the institution they bank with as our customers leaving us," Turner said. "So I feel good about what we're doing. Clearly, more competition in our markets makes us up our game and get better at what we do, and we like the challenge."

Regions currently operates about 1,250 branches in 15 states, including more than 900 in Alabama, Florida, Georgia, Texas, Tennessee and Mississippi, Federal Deposit Insurance Corp. data shows. It's the No. 1 deposit holder in Alabama, with about 22% market share.

In addition to Atlanta, Miami and Nashville, the greatest level of branch-building activity will take place in Houston and Memphis, a Regions spokesperson said Monday in an email. The bank has not yet disclosed the specific number of new offices that it expects to open in each market.

The five-year timeline could shrink to four years if Regions "can acquire properties faster," Turner said at the conference.

The bank has not provided the estimated net cost of its branch plans. Last year, however, Regions Chief Financial Officer David Turner said a new branch cost around $5 million to open.

When asked Monday if the branch changes will result in layoffs, the Regions spokesperson said the bank does not "anticipate any major changes," given that the revamp will take place over several years.

While some of Regions' peers have, in recent months, turned to mergers and acquisitions to gain scale, CEO Turner said he remains comfortable sticking with organic growth for now.

Plus, Turner said, it's expensive to open in a new market.

"What we found is [that] branching in existing markets, where we have a presence already, is highly profitable," he said at the conference. "Where you have a presence, you're known in a market. … You got a big tailwind, and it helps a lot."