Regions Discusses Efforts to Boost Revenue

Regions Financial (RF) Birmingham, Ala., is hiring financial consultants and holding more 15-year mortgages in an effort to boost lackluster revenue.

Regions has added roughly 100 financial consultants in recent months to it branches, Grayson Hall, the $119 billion-asset company's chief executive, said during a conference call Tuesday to discuss quarterly results. The additions are surpassing management's expectations, and Hall said plans are in place to keep hiring.

The company also decided to hold $222 million of 15-year fixed-rate mortgages during the second quarter, David Turner, Regions' chief financial officer, said during the call. Holding those loans helped Regions maintain a "relatively stable" mortgage portfolio, he added.

Revenue growth has been a challenge for Regions. Revenue increased marginally in the second quarter compared to the first quarter, and slid 3% from a year earlier, to $1.3 billion. Net interest income fell 4% from a year earlier as consumer lending was flat and commercial lending edged up.

The net interest margin was steady, and management expressed optimism that higher short- and long-term rates would bolster future quarters. A 100-basis-point rise in short-term rates over the next 12 months could increase net interest income by $81 million, while a similar increase in long-term rates could add $132 million, Turner said.

Loan yields will be critical to net interest income going forward. "When you look at where deposit pricing is today, the opportunities to drive that number lower are diminishing," Hall warned during Tuesday's call. "But our portfolio yield should improve incrementally over time."

Overall, Regions' earnings fell 20% from the first quarter and 7% from a year earlier, to $260 million. In addition to stagnant revenue, the company reported higher expenses tied to the redemption of $350 million of 7.75% senior notes and the issuance of $750 million of new debt at a 2% rate.

The company also redeemed nearly $600 million in trust preferred stock and preferred securities during the second quarter. Management told analysts during Tuesday's call that they were working hard to keep full-year costs in check.

"We continue to expect that 2013 expenses will be lower than 2012 expenses, illustrating our commitment to prudent expense management," Turner said.