Making loans to high-risk borrowers, engaging in risk or faulty investments, and otherwise managing money in a sloppy way is a surefire way to get derision from regulatory bodies and/or the public. The figures for the competition bear out that remaining in proper fiscal shape in banking operations is possible even during these uncertain times and there is no reason why Regions Bank cannot do the same.
Over the next twelve quarters, customer service initiatives to drive and retain recurring business are important as this is the best thing Regions Bank can do to get some breathing room. Attracting high-quality borrowers that are willing to borrow money during uncertain times is also important and at a premium nowadays. A barrier to both of these ideas is that people often become paralyzed and are hesitant to make major fiscal decisions in the midst of economic uncertainty. The potential loss of a job and/or concerns about the fiscal safety of one's money is an omnipresent matter to many people. Banking customers of Regions Bank should be reminded that Regions Bank is in sound fiscal shape and even if the worst happens with Regions Bank, the FDIC will insure any deposits made.
An overall increase in business, despite how it is garnered, will boost income (interest income in particular as well as the fees that Regions Bank's customers incur) and these extra funds can be used to start to loosen up credit standards to people excluded prior but that are still rather low risk based on their career and borrowing histories. As long as the right being are being lent to, Region Banks' overall risk profile should remain positive.
Projections bear out that non-performing loans were at an apex from 2009 to the beginning of 2011 but the possibility of significant growth in those bad loans is below 3.6% after being in excess of four percent. A fall of nearly one percent over the last 2-3 years is no small thing and should be taken advantage of. Despite the current economic challenges, much of the economic fallout to bear has already revealed itself and things are starting to settle down, even if economic growth patterns are uneven. The current state of affairs seems to be based more on people being hesitant and tepid rather than a clear and present danger being in play. The failure rate of banks has dropped significantly. All of these factors should be gently pressed upon potential quality loan customers as this would be the main roadblock to procuring their business at this current time.
One market condition that Regions Bank should take full advantage of is the newer propensity of banking customers to start saving money. Whether it be for a purchase of a house or a "rainy day fund," customers of Regions Bank should be encouraged to keep their money with it since it boosts the deposit figures at the bank, the customer still has easy access to the funds should they be needed, and they can even earn interest on the income while Regions Bank has use of it. This money, if harnessed, should not be used carelessly or foolishly, but a sharp increase in deposits would greatly increase the liquidity of Regions Bank and put it in a much more solvent position. This would allow Regions Bank to invest more while not over-leveraging its assets at the same time. Deposit growth is projected to level off for both the competition and Regions Bank in 2012 and this needs to be undone, at least with Regions Bank, if at all possible. The projection that Regions Bank's competition will surpass loans and deposits per employee figure cannot be allowed to happen. The projection of income growth falling could be disproven if that can be pulled off. Regions Bank trails the entire pack in interest income and this needs to change immediately. The Frost National Bank is just barely ahead so getting out of the cellar would not take a lot of movement.
All in all, Regions Bank has weathered the storm and it has an opportunity to buck the projections of flat growth and paltry asset performance. Complacency and just staying above water is not a sound strategy and should be the antithesis of how Regions Bank proceeds over the next three years. While things are not projected to get much worse than they recently have been, Regions Bank needs to constantly press the idea of doing better in any way that it can.
Relevant tables and reports relative to the above analysis is enclosed with this report as appendices and a reference list of the same is also provided. There is a plethora of data that was not explicitly mentioned in this report but the most important points were covered throughout.
Annual 10(k). (2011). Birmingham, AL: Regions Bank.
Competition. (2012). Online: Bankers GPS.
Forecast With Drift. (2012). Online: Bankers GPS.
Forecast With No Drift. (2012). Online: Bankers GPS.