Regions ‘Monitoring’ Debit Interchange Rule as Card Income Dips

Regions Bank’s profit dipped during the third quarter as deposit costs rose and loan demand fell.

The regional lender released quarterly earnings Friday (Oct. 18) showing a 5.7% decline in net interest income (NII) — the gap between what a bank earns on loans and pays deposits — to $1.22 billion in the quarter.

Regions Bank’s non-interest income was up across nearly every category, including a 43.8% jump in capital markets income, and 14.3% increase in income from wealth management.

The only exception: card and ATM fee income, which declined by 6.3%. And as Deutsche Bank analyst Matt O’Connor noted during the question-and-answer portion of the earnings call, that category has been down in six of the last seven quarters.

Management insisted it was not a cause for concern.

“That’s really just a volume thing and a mix between debit and credit and it depends on what season you’re in,” said David Turner, Regions Bank’s finance chief. “You can get a little bit of noise and all that. There’s nothing systemic there that shouldn’t enable us to grow over that time.”

O’Connor also asked about the chance of pending debit interchange fee reforms going through. Turner said the bank was “going to continue to monitor” the issue, but did not expect it would happen in 2025.

Last October, the U.S. Federal Reserve proposed lowering the ceiling on what banks can charge for debit card transactions — otherwise known as swipe fees. The cap would decrease from 21 cents to 14.4 cents.

The banking industry has argued that this would hurt both banks and their customers, writing in a letter to the central bank that the change would end up “driving up costs to consumers for basic deposit accounts (disproportionately harming low-income and underserved consumers) and degrading the ability of banks and credit unions” to invest in payments innovation.

Meanwhile, four other regional banks – Commerce Bancshares, Huntington Bancshares, M&T Bank and S&T Bancorp – reported quarterly earnings this week that showed strong credit quality, but mixed results when it came to growth in lending and deposits.

“Credit quality remains excellent,” Commerce Bancshares President and CEO John Kemper said in an earnings release, with the bank reporting that the ratio of non-accrual loans was flat compared to the previous quarter with the ratio of annualized net loan charge-offs dipping from .23% to .22%.

And Huntington Bancshares Chairman, President and CEO Steve Steinour reported stable net charge-offs and better nonperforming asset and criticized asset ratios, saying in a news release that “credit continues to perform very well.”

“Our customers continue to show strength and resilience, which supports a constructive outlook,” Steinour added.