Regions' plan to boost lending in 2020

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The loan book at Regions Financial shrunk last year, but executives say they have a plan to expand it slightly in 2020 with special efforts on both the consumer and commercial sides.

Part of that plan involves its changing mix of consumer loans. The $126.2 billion-asset Regions said Friday it is planning to buy more loans from the online lender Social Finance, which struck a partnership with the Birmingham, Ala., bank in November 2017.

That move follows a slimming down in other areas. Regions said in early 2019 it would be exiting the business of making auto loans through car dealers, citing poor returns. And when the bank announced in the spring that it would be ending its agreement with another fintech company, GreenSky, which makes point-of-sale loans mostly for home improvement purchases, the bank’s executives said they wanted to be involved in more direct lending instead.

"We shifted our exposure from the GreenSky relationship to increasing our exposure through SoFi,” Regions CEO John Turner said on a quarterly earnings call with analysts Friday. “That is largely a result of the fact that SoFi is originating loans directly to consumers versus indirectly, which was the GreenSky model. We like [direct lending] better.”

Turner added that Regions is learning more about SoFi and its portfolio of mostly student loans the bank buys from the online lender.

“You can expect us to continue to explore other ways to grow consumer loans over the year,” Turner said.

Regions’ total consumer loans declined 3% year over year to $30.5 billion at Dec. 31, driven by the runoff in indirect auto lending of more than 40%, according to Regions’ fourth-quarter report.

To be sure, the bank’s book of indirect consumer loans — which included the GreenSky loans — increased by more than 38% year over year and 12.5% in the fourth quarter alone to $3.2 billion total. That is in part because the bank’s contract with GreenSky did not expire till November. It's unlikely that momentum can be sustained. “So you shouldn’t see that continue to grow at the same pace you saw in the fourth quarter or throughout the year," Regions Chief Financial Officer David Turner said on the call.

Regions plans to do more mortgage and credit card business to boost overall consumer lending, but it will rely mostly on commercial and industrial credits to lift total loan balances, executives said Friday. The bank forecasts total loan growth to be in the “low single digits” for 2020 after declining slightly in 2019, according its fourth-quarter presentation for analysts.

The bank is going to focus on lower-middle-market businesses to expand its loan book on the C&I side and is relying on its new crop of commercial relationship managers hired last year in Atlanta, Houston, Orlando, Fla., and St. Louis, David Turner said in an interview. The managers will use a tool the bank developed with the help of a consultant to help predict which financing or other product their customer could use next.

“We were trying to target investments in markets that were gonna grow disproportionately faster than the average market in our footprint,” David Turner said.

Regions' fourth-quarter net income fell 4% from a year earlier to $389 million.

Total revenue increased 2.8% year over year to $1.4 billion for the quarter. Regions relied on a 16.8% year-over-year increase in noninterest income to $562 million.

Noninterest expense climbed 5.1% from the same quarter one year earlier to $897 million for the quarter. Executives told analysts on the call Friday that expenses are expected to be “relatively stable” for 2020.

Laura Alix contributed to this article.

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