Regions Beats Estimates in Q2

Key Points

• - Adjusted earnings per share (EPS) of $0.60 and revenue of $1.9 billion for Q2 2025 both exceeded analyst estimates, demonstrating solid earnings outperformance.

• - Net interest income and fee-based revenues posted notable gains in Q2 2025, with year-over-year growth in both core and non-interest income lines.

• - The quarterly dividend was raised 6% to $0.265 per share for the third quarter of 2025, with continued focus on capital strength and shareholder returns.

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Regions Financial (NYSE:RF), a regional banking leader serving the South, Midwest, and Texas, released its Q2 2025 results on July 18, 2025. The company reported non-GAAP earnings per share (EPS) of $0.60, beating the consensus non-GAAP EPS estimate of $0.56. Revenue came in at $1.9 billion, also above analysts’ forecast of $1.86 billion. Results reflect solid year-over-year earnings growth for Q2 2025 and healthy capital levels. The quarter was marked by higher expenses and slow loan growth in Q2 2025, but overall performance topped expectations across key profitability metrics.

Source: Analyst estimates for the quarter provided by FactSet.

Company Overview and Current Focus

Regions Financial (NYSE:RF) is a regional bank holding company providing consumer banking, corporate banking, wealth management, and mortgage services. The company operates more than 1,250 branch locations and 2,000 ATMs, serving customers primarily across the Southern and Midwestern United States and in Texas. It delivers a full suite of banking products including deposit accounts, commercial loans, mortgage loans, and investment management services.

The company’s recent efforts have centered on strengthening digital capabilities, risk controls, and product innovation. Key success factors include regulatory compliance, robust capital and liquidity positions, business diversification, and investments in technology and human capital. Disciplined cost controls and expanding fee-based income through services like treasury management and wealth management remain critical to performance.

Quarter in Review: Financial and Operational Developments

The quarter saw notable gains across several metrics. Non-GAAP EPS rose 13.2% compared to a year ago, exceeding consensus by $0.04. Total revenue increased 10.1% year over year, coming in $46 million above expectations. Both net interest income and non-interest income delivered healthy growth, reinforcing management’s strategic goals.

Net interest income, which measures earnings from lending minus funding costs, climbed 6.2% year over year. This improvement was driven by a positive funding mix and increased yields on securities and loans, aided by ongoing fixed-rate asset turnover and one additional day in the period. Total deposits ended Q2 2025 at $130.9 billion, up 3.4% from the prior year. Deposit mix continued to shift toward higher interest-bearing balances.

Non-interest income, which includes fees and service revenues outside core lending, expanded to $646 million, up 18.5% year over year. Fee-based businesses delivered strong results: wealth management income rose 9.0%, card and ATM fees climbed 4.2%, and mortgage income jumped 41.2%. The wealth management business -- a key source of recurring fee income -- set a new record for revenue.

Loan balances remained relatively stable at $96.7 billion as of Q2 2025, with a modest decline of 0.8% from the prior year. Commercial and industrial loan balances declined 1.3%, while average consumer loans were slightly down, with the corporate banking segment posting a 7.0% rise in average balances year over year.

Expenses trended higher, reflecting management’s continued investment in talent and technology, alongside a 5.1% increase in equipment and software costs. Non-interest expense (GAAP) increased 6.9% year over year, bringing the efficiency ratio -- the measure of costs relative to revenues -- down to 56.0%.

Capital and liquidity remained in focus. The company closed Q2 with a Common Equity Tier 1 (CET1) ratio of 10.7%, up from 10.4 % in the prior year, and a tangible common equity to tangible assets ratio (non-GAAP) of 7.52%. The company repurchased approximately 7 million shares for $144 million and paid out $224 million in common dividends -- declaring a quarterly dividend of $0.265 per share, representing a 6% increase over the second quarter.

Asset quality remained solid. Net charge-offs -- a measure of loans unlikely to be recovered -- fell to $113 million (0.47% of average loans). The allowance for credit losses stood at 1.80% of loans as of Q2 2025, slightly higher than a year ago. Non-performing loans as a percentage of total loans declined to 0.8%, down from 0.87 % the previous year, and management reported a reduction in criticized business loan balances.

Looking Ahead: Management Outlook and Key Watch Areas

Management expects net interest income to rise 3% to 5% for FY2025, and adjusted non-interest expenses to be up 1% to 2%. Positive operating leverage -- where revenue growth outpaces expense growth -- remains a target, aiming for margin expansion of 150 to 250 basis points for the full year.

With higher charge-offs in the first half moderating later in 2025, no material changes to capital plans or payout ratios were announced in the quarter, besides the noted dividend increase and share repurchases. Investors should continue monitoring the pace of loan growth, deposit mix, fee-based business performance, and expense containment efforts, along with any macroeconomic developments that could impact asset quality or capital requirements.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Regions Financial. The Motley Fool has a disclosure policy.