Even as it remains a committed lender to oil and gas firms, Regions Financial in Birmingham, Ala., is developing an expertise in renewable energy.
While solar lending is still a relatively small business for Regions, its capital markets and corporate banking units are working with clients — even oil and gas firms — to help them invest in renewable projects that could reduce their greenhouse gas emissions. The bank has also provided some financing for renewable energy projects, including funding to develop solar projects in rural areas in its footprint and green bond issuance for a leading utility company.
“We believe that it's important that the banking industry ... participate in financing the transition that will occur to a more climate-friendly environment,” CEO John Turner said on the bank’s first-quarter earnings call Friday. “We think that's a business opportunity.”
Many banks, including Regions, have pledged to do their part to help slow the pace of global warming by reducing carbon emissions and working with clients to reduce theirs. Regions, with $147 billion of assets, has also begun to look at the credit risk associated with the shift to a low-carbon economy and plans to release its first climate risk disclosures this summer, Turner said in response to an analyst’s question about the bank’s climate goals.
Environmental, social and governance issues have become increasingly important to the banking industry, especially over the past year, but analysts seldom asked bankers about these subjects on earnings calls. That may be changing, however, particularly as the
Regions first established a governance officer position in 2017. Earlier this year, it named Andrew Nix its new governance officer, succeeding Hope Mehlman, who moved to Bank of the West in California. Chief Financial Officer David Turner told American Banker that the company has additionally worked to cut its own energy consumption and has worked with its vendors to improve their own ESG efforts.
David Turner emphasized that Regions is not walking away from its oil and gas clients and is “not losing sight of the fact that we still have a business to run.” But it makes business sense to integrate ESG into the firm’s operations, he said, particularly since shareholders and policymakers alike are paying more attention to these issues.
“If you’re not talking about ESG, you’ve had your head in the sand somewhere,” the CFO said. “It behooves you to get on board and not treat it as an exercise but treat it as part of how you do business.”
Regions reported net income of $642 million in the first quarter, compared with $162 million in the same quarter last year. The growth was driven largely by large release of loan-loss reserves and strong growth in its fee-based businesses.
Regions recorded a negative provision for credit losses of $142 million, compared with a negative provision of $38 million in the prior quarter and a provision of $373 million in the year-ago quarter.
Net interest income rose 4% on a year-over-year basis to $978 million. The net interest margin narrowed 42 basis points to 3.02%.
Total loans ticked up almost 2% to $84.7 billion, driven by growth in commercial and industrial, investor real estate and residential mortgage lending.
Noninterest income increased 32% to $641 million, driven by growth in capital markets, wealth management, commercial credit and mortgage income. Card and ATM fees also recovered from a pandemic-induced slump, rising almost 10% to $115 million.
Total deposits rose 29% to $123 billion.
