RF Q3 Deep Dive: Deposit Growth, Portfolio Shaping, and Technology Modernization

Regional banking company Regions Financial (NYSE:RF) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 1.9% year on year to $1.92 billion. Its non-GAAP profit of $0.63 per share was 5.8% above analysts’ consensus estimates.

Is now the time to buy RF? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Regions Financial’s third quarter results were marked by steady deposit growth and resilience in core banking activities, drawing a positive market reaction. Management credited strong deposit acquisition and retention across consumer and commercial lines as key drivers, with John Turner, CEO, highlighting “top quartile deposit growth and above peer median change in market share.” The company also noted robust non-interest income from wealth management and capital markets, while portfolio shaping efforts—particularly the exit from higher risk lending categories—generated some headwinds for loan growth. Asset quality metrics remained stable, and credit performance exceeded expectations, with Turner emphasizing, “consumer credit quality remains strong, exceeding our expectations.”

Looking to the coming quarters, management expects stable loan growth as portfolio repositioning actions conclude and commercial pipelines strengthen. John Turner, CEO, pointed to technology modernization and banker expansion as critical initiatives for future competitiveness, stating the company will be “one of the first regional banks in the country on a truly modern core platform.” Ongoing investments in talent and digital infrastructure, along with further branch optimization, are expected to drive customer acquisition. At the same time, CFO David Turner cautioned that expense growth would remain controlled, but acknowledged “continued investments in technology and client-facing personnel” may impact margins. Management believes these strategies will position Regions Financial to capture growth opportunities in 2026.

Key Insights from Management’s Remarks

Management attributed third quarter performance to robust deposit growth, non-interest income momentum, and strategic portfolio adjustments that balanced risk and returns.

• Deposit growth momentum: Regions Financial cited strong deposit acquisition and retention as a major success, particularly in consumer checking, small business, and wealth management. Management attributed this to a well-established regional footprint and targeted investments in customer service and digital banking platforms.
• Portfolio shaping impacted loans: The company’s deliberate exit from higher-risk leverage lending and select non-core portfolios resulted in modest loan growth. CEO John Turner described this as part of a “long-standing focus on soundness and appropriate risk-adjusted returns,” noting portfolio reductions of about $900 million year to date.
• Capital markets and fee income: Non-interest income, led by wealth management and capital markets, reached record levels. Management highlighted increased M&A advisory, loan syndications, and debt underwriting, which offset some loan balance declines as more loans were refinanced off the balance sheet.
• Technology modernization initiatives: The company made progress upgrading its core technology platforms, including plans to pilot cloud-based deposit systems and upgrade commercial loan systems by 2026-2027. Management expects these investments to enhance operational efficiency and customer experience.
• Expense and efficiency management: While expense growth was driven by higher health insurance costs, incentive compensation, and new hires, CFO David Turner emphasized that overall expense management remained disciplined. The company continues to target positive operating leverage, balancing growth investments with cost control.

Drivers of Future Performance

Management’s outlook for the next year centers on finishing portfolio repositioning, leveraging technology upgrades, and expanding client relationships to drive stable growth.

• Loan growth after repositioning: Management expects loan growth to stabilize as the remaining $300 million in portfolio exits are completed. With commercial pipelines up nearly 100% year over year, John Turner anticipates stronger loan growth in 2026 as macroeconomic conditions improve and corporate clients increase line utilization.
• Technology and talent investments: Upgrading to cloud-based core banking platforms and expanding banker teams in priority markets are seen as critical to attracting new business and retaining existing clients. Management believes these technology upgrades will enable more efficient operations and enhanced customer service, supporting revenue growth.
• Expense discipline and risk management: Despite ongoing investments, CFO David Turner stated that expense increases will be contained, aiming for approximately 2% growth for the year. The company continues to prioritize positive operating leverage, while credit risk remains a focus through ongoing portfolio reviews and proactive exits from underperforming segments.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will watch (1) the completion of portfolio exits and the resulting shift in loan growth trends, (2) progress on the rollout and adoption of new cloud-based banking platforms, and (3) ongoing deposit growth and client acquisition in both core and priority markets. Additional attention will be given to expense containment and the impact of technology investments on operational efficiency.

Regions Financial currently trades at $23.80, up from $23.34 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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