Regions not interested in bank M&A, CEO says

Regions Financial is actively pursuing acquisitions, executives said Wednesday — just not the splashy kinds of bank deals that some of its rivals have announced lately.

The Birmingham, Ala., company has preferred a series of quieter moves, like its acquisition of the equipment-financing company Ascentium Capital last year. Regions says it has used some of Ascentium’s back-end technology in other parts of the company that could facilitate lending.

Investments in Regions’ capital markets unit and acquisition of more mortgage servicing rights have been a boost to noninterest income without the headaches of a full-scale merger, CEO John Turner said Wednesday during a virtual conference hosted by Credit Suisse.

“We remain very interested in bolt-on acquisitions, nonbank opportunities,” Turner said. Bank deals are “disruptive” and “often times not successful.”

He didn’t say exactly which types of nonbanks are on Regions’s radar.

The comments come after the $143 billion-asset M&T Bank in Buffalo, N.Y., this week agreed to buy the $63 billion-asset People’s United Financial in Bridgeport, Conn. And late last year PNC Financial Services Group in Pittsburgh agreed to buy BBVA’s U.S. operation in Houston, while Huntington Bancshares in Columbus, Ohio, announced it would merge with TCF Financial in Detroit.

Turner said the $147.3 billion-asset Regions already has been able to hire employees and take on clients from rival firms amid the dealmaking that has picked up across the industry.

“We think we’re growing faster than our peers are,” Turner said.

Meanwhile, Regions may soon consider reducing its common equity Tier 1 capital ratio after a fresh round of voluntary stress tests this year, Chief Financial Officer David Turner said during the conference.

Regions is not required to take part in the Federal Reserve’s Comprehensive Capital Analysis and Review stress test this year, but the company has received the economic scenarios that the Fed will use. Almost all of the Fed’s scenarios to battle-test a bank’s balance sheet seem brighter this year than in 2020, except for an assumption of further deterioration in commercial real estate, which the bank has avoided taking large risks in, David Turner said.

Regions reported a common equity Tier 1 capital ratio ratio in the fourth quarter, according to its financial filings.

“We are leaning toward participating and running the scenarios through,” David Turner said. “We could change our range here in the not too distant future.”

Reducing this hit would be a boost to its bottom line, especially as executives are expecting “some moderating” in mortgage activity in 2021 and weak loan growth until at least the back half of the year, John Turner said.

“We don’t see that changing until the economy expands at a little bit more of a rapid rate,” the CEO said.