We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Regions Financial (RF) Down 2.2% Since the Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Regions Financial Corporation (RF - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Revenues Drive Regions Financial Q2 Earnings, Costs Up
Regions Financials’ second-quarter 2017 earnings from continuing operations of $0.25 per share surpassed the Zacks Consensus Estimate by $0.01. Also, the figure came in 25% higher than the prior-year quarter figure.
The quarter witnessed impressive growth in revenues aided by easing margin pressure. Further, the company recorded growth in loans, though deposits balance remained stable. Credit quality metrics also improved. Rise in adjusted operating expenses and decline in non-interest income were the undermining factors.
Income from continuing operations available to common shareholders was $301 million, up 17.6% year over year.
Revenue Improves, Costs Up
Adjusted total revenue (net of interest expense) came in at $1.42 billion in the quarter, up 2.4% from the prior-year quarter figure.
Regions Financial reported adjusted pre-tax pre-provision income from continuing operations of $502 million, up 4.8% year over year.
On a fully taxable equivalent (FTE) basis, net interest income was $904 million, up 4% year over year. Net interest margin (on an FTE basis) expanded 17 basis points (bps) year over year to 3.32% in the quarter. Elevated market interest rates and favorable credit-related interest recoveries drove the results. These increases were partially offset by reduced average loan balances.
Regions Financial reported a slight decline in non-interest income to $525 million. On an adjusted basis, non-interest income remained stable year over year.
Non-interest expense edged down around 1% year over year to $909 million. On an adjusted basis, non-interest expenses rose 1.1% year over year to $899 million. An increase in salaries and benefits, FDIC insurance assessments, professional, legal and regulatory, along with furniture and equipment expenses, led to the rise. These were mostly mitigated by reduced provision for unfunded credit losses, marketing and other real estate expenses.
Balance Sheet Strength
As of Jun 30, 2017, total loans were down 2.3% year over year to $80.1 billion. Further, total deposits came in at $97.5 billion, almost stable year over year. Total funding costs were 34 basis points (bps).
As of Jun 30, 2017, low-cost deposits, as a percentage of average deposits, were 93.0% compared with 92.5% as of Jun 30, 2016. In addition, deposit costs came in at 15 bps in the reported quarter.
Credit Quality Improved
Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, contracted 26 bps from the prior-year quarter to 1.14%. Also, non-accrual loans, excluding loans held for sale, as a percentage of loans, came in at 1.03%, down 22 bps from the year-ago quarter.
Allowance for loan losses as a percentage of loans, net of unearned income was 1.30%, down 11 bps from the year-earlier quarter. In addition, provision for loan losses was $48 million, plunging 33.3% year over year.
Additionally, net charge-offs as a percentage of average loans came in at 0.34%, down 1 bp. The company’s total business services criticized loans declined 10.5% year over year.
Strong Capital Position
Regions Financial’s estimated ratios remained well above the regulatory requirements under the Basel III capital rules. As of Jun 30, 2017, Basel III Common Equity Tier 1 ratio (fully phased-in) and Tier 1 capital ratio were estimated at 11.3% and 12.2%, respectively, compared with 10.8% and 11.7% in the prior-year quarter.
During second-quarter 2017, Regions Financial repurchased 9.1 million shares of common stock for a total cost of $125 million and announced $84 million in dividends to common shareholders. This reflects 70% of earnings returned to shareholders.
Outlook
For 2017, Regions expects NII and other financing income growth in the range of 3–5%. Adjusted non-interest income is estimated to grow 1–3%. Management expects a pick-up in capital markets revenue along with modest growth in wealth management, mortgage and card and ATM fees to contribute to overall growth in adjusted non-interest income during the second-half of the year.
Regions projects adjusted expenses to trend from a flat to 1% increase, while efficiency ratio is expected to scale at approximately 62% in 2017. Adjusted operating leverage is expected in the range of 2–4%.
Management expects average loans in 2017 to be flat to marginally down on a year-over-year basis. This excludes the impact of the third-party indirect-vehicle portfolio.
Average deposits are expected to be relatively stable compared to the prior year.
Net charge-offs (NCOs) are estimated at 35–50 basis points for 2017.
The effective tax rate is projected to be in the 30–31% range for 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to one lower.
At this time, the stock has a poor Growth Score of F, however its Momentum is doing a lot better with a C. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is more suitable for value than momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Regions Financial (RF) Down 2.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for Regions Financial Corporation (RF - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Revenues Drive Regions Financial Q2 Earnings, Costs Up
Regions Financials’ second-quarter 2017 earnings from continuing operations of $0.25 per share surpassed the Zacks Consensus Estimate by $0.01. Also, the figure came in 25% higher than the prior-year quarter figure.
The quarter witnessed impressive growth in revenues aided by easing margin pressure. Further, the company recorded growth in loans, though deposits balance remained stable. Credit quality metrics also improved. Rise in adjusted operating expenses and decline in non-interest income were the undermining factors.
Income from continuing operations available to common shareholders was $301 million, up 17.6% year over year.
Revenue Improves, Costs Up
Adjusted total revenue (net of interest expense) came in at $1.42 billion in the quarter, up 2.4% from the prior-year quarter figure.
Regions Financial reported adjusted pre-tax pre-provision income from continuing operations of $502 million, up 4.8% year over year.
On a fully taxable equivalent (FTE) basis, net interest income was $904 million, up 4% year over year. Net interest margin (on an FTE basis) expanded 17 basis points (bps) year over year to 3.32% in the quarter. Elevated market interest rates and favorable credit-related interest recoveries drove the results. These increases were partially offset by reduced average loan balances.
Regions Financial reported a slight decline in non-interest income to $525 million. On an adjusted basis, non-interest income remained stable year over year.
Non-interest expense edged down around 1% year over year to $909 million. On an adjusted basis, non-interest expenses rose 1.1% year over year to $899 million. An increase in salaries and benefits, FDIC insurance assessments, professional, legal and regulatory, along with furniture and equipment expenses, led to the rise. These were mostly mitigated by reduced provision for unfunded credit losses, marketing and other real estate expenses.
Balance Sheet Strength
As of Jun 30, 2017, total loans were down 2.3% year over year to $80.1 billion. Further, total deposits came in at $97.5 billion, almost stable year over year. Total funding costs were 34 basis points (bps).
As of Jun 30, 2017, low-cost deposits, as a percentage of average deposits, were 93.0% compared with 92.5% as of Jun 30, 2016. In addition, deposit costs came in at 15 bps in the reported quarter.
Credit Quality Improved
Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, contracted 26 bps from the prior-year quarter to 1.14%. Also, non-accrual loans, excluding loans held for sale, as a percentage of loans, came in at 1.03%, down 22 bps from the year-ago quarter.
Allowance for loan losses as a percentage of loans, net of unearned income was 1.30%, down 11 bps from the year-earlier quarter. In addition, provision for loan losses was $48 million, plunging 33.3% year over year.
Additionally, net charge-offs as a percentage of average loans came in at 0.34%, down 1 bp. The company’s total business services criticized loans declined 10.5% year over year.
Strong Capital Position
Regions Financial’s estimated ratios remained well above the regulatory requirements under the Basel III capital rules. As of Jun 30, 2017, Basel III Common Equity Tier 1 ratio (fully phased-in) and Tier 1 capital ratio were estimated at 11.3% and 12.2%, respectively, compared with 10.8% and 11.7% in the prior-year quarter.
During second-quarter 2017, Regions Financial repurchased 9.1 million shares of common stock for a total cost of $125 million and announced $84 million in dividends to common shareholders. This reflects 70% of earnings returned to shareholders.
Outlook
For 2017, Regions expects NII and other financing income growth in the range of 3–5%. Adjusted non-interest income is estimated to grow 1–3%. Management expects a pick-up in capital markets revenue along with modest growth in wealth management, mortgage and card and ATM fees to contribute to overall growth in adjusted non-interest income during the second-half of the year.
Regions projects adjusted expenses to trend from a flat to 1% increase, while efficiency ratio is expected to scale at approximately 62% in 2017. Adjusted operating leverage is expected in the range of 2–4%.
Management expects average loans in 2017 to be flat to marginally down on a year-over-year basis. This excludes the impact of the third-party indirect-vehicle portfolio.
Average deposits are expected to be relatively stable compared to the prior year.
Net charge-offs (NCOs) are estimated at 35–50 basis points for 2017.
The effective tax rate is projected to be in the 30–31% range for 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to one lower.
Regions Financial Corporation Price and Consensus
Regions Financial Corporation Price and Consensus | Regions Financial Corporation Quote
VGM Scores
At this time, the stock has a poor Growth Score of F, however its Momentum is doing a lot better with a C. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is more suitable for value than momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.