Regions not budging on M&A, despite rivals’ megadeal
Two of its biggest rivals are merging to create the nation’s sixth-largest bank, but don’t expect Regions Financial to pursue a similar deal to try to keep pace.
Speaking at the company’s investor day in New York on Wednesday, Regions CEO John Turner said that his priorities are improving profitability and efficiency and that he believes the $126 billion-asset company can hit its targets without making an acquisition. Even if Birmingham, Ala.-based Regions had a stronger currency — its shares trade at a discount to its peers — Turner said that he wouldn’t actively be looking at buying another bank.
“We think market conditions are not right for us to be active” in mergers and acquisitions, Turner said during his opening remarks. “M&A is very disruptive, and we think that if we were involved in bank M&A that would take us off a very good plan.”
It’s not the first time Turner has stressed that point since he succeeded Grayson Hall as CEO last summer. Responding to a question at an investor conference late last year, he ruled out bank M&A at that time, saying that sellers’ asking prices are too high.
However, the pending merger between BB&T and SunTrust, the biggest bank deal in about 15 years, has set off fresh speculation that other regional banks will need to team up in order to remain competitive. The combined BB&T-SunTrust will have roughly $442 billion of assets and a top-three market share in eight of the 17 states where it will operate.
Turner, though, said he sees the deal as more of an opportunity for Regions than a threat.
“They’re both very good competitors today, so when they combine, two becomes one and we’ll have one less competitor,” he said.
Regions competes with BB&T and SunTrust in a number of major markets in the Southeast, and Turner said that he believes his bank will be well positioned to take advantage of any disruption caused by the merger.
“We hope to gain some customers and potentially some bankers,” he said. “We want to take advantage of opportunities when they present themselves.”
In presentations to investors, Regions executives highlighted the progress the bank has made in hitting some of its key financial targets.
For example, in 2015, Regions set a goal to increase noninterest revenue in its corporate bank from 22% to 28% of its total revenue, and it achieved that goal last year, said Ronnie Smith, the head of Regions’ corporate bank.
Regions has also shrunk its headcount and branch count while continuing to add low-cost deposits, a strength that Turner highlighted during his remarks. At the same time, the bank is strategically adding branches and bankers in high-growth markets like Atlanta and Orlando.
Company officials said that Regions is also inching closer to its goal of lowering its efficiency ratio to 55% and achieving a return on average tangible common equity of 18% to 20% by 2021.
Regions ended 2018 with an efficiency ratio of 59.3% and a return on average tangible common equity of 16.5%.