Regions Financial is in early talks about yet another potential nonbank acquisition, continuing a strategy that has helped diversify its revenues and is expected to make up for lost overdraft fees.
The Birmingham, Alabama, company announced Wednesday that it will eliminate both nonsufficient funds fees and charges incurred when overdrafts are covered by transfers from a linked account. The bank is also capping daily overdrafts at three, providing early access to direct deposits and offering small-dollar lines of credit.
The changes, which go into effect in the coming months, are expected to result in between $50 million and $70 million of lost revenue this year, bank executives told analysts Thursday. Once the changes are put in place for a full year, Regions’ service charges on deposit accounts will come in 20% to 30% lower than the $729 million collected in 2019, the bank estimates.
But Regions Chief Financial Officer David Turner said the bank has plans to compensate for the lost revenue. “We’ll make it up,” he said in an interview.
The $163 billion-asset company has recently made a series of nonbank deals that have boosted fees and revenue from new lending channels, and it's open to more of them, according to Turner.
Regions
Last summer, Regions
“We’ve had changes in policy that affect the revenue stream, and you just have to adapt and overcome,” Turner said. “We’re constantly looking for ways to make banking easier for our customers.”
Turner said the bank is currently looking at opportunities in wealth management and corporate banking, and also considering adding some consumer products where there are gaps.
In reference to another potential nonbank acquisition, Turner said, “We have one in part we’re working on,” though he would not identify the target company’s line of business.
As far as how creative the regional bank would get in other areas, Turner said the bank is still hesitant on cryptocurrencies.
“Until we get more regulatory and policy clarity around cryptocurrencies, it’s probably not something for us to do at this point in time, but it’s something we should study,” he said.
Regions reported fourth-quarter net income of $438 million, down 28% from the same period a year ago, in large part because $145 million had to be set aside in reserves for potential losses on EnerBank’s loans.
In addition to the continued benefits from the bank’s recent acquisitions, Regions is forecasting four 25-basis-point increases to the Federal Reserve’s main borrowing rate, which are expected to help boost the company’s interest income.
