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Regions Financial's (RF) Q3 Earnings Improve Y/Y, Revenues Up
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Regions Financial Corporation (RF - Free Report) reported third-quarter 2018 earnings of 32 cents per share, up 28% year over year. The Zacks Consensus Estimate was pinned at 36 cents. Results included certain non-recurring items.
Income from continuing operations available to common shareholders was $354 million compared with $296 million reported in the year-ago period.
Notably, net income, including the after-tax gain of $196 million related to the sale of Regions Insurance subsidiary and affiliates during the reported quarter, came in at $548 million or 50 cents per share.
Easing margin pressure and higher revenues were the positive factors. Moreover, credit quality recorded significant improvement. However, lower deposits balance was an undermining factor. In addition, expenses escalated in the reported quarter.
Revenues Improve, Costs Flare Up
Adjusted total revenues (net of interest expense) came in at $1.46 billion in the reported quarter, missing the Zacks Consensus Estimate of $1.47 billion. However, the reported figure climbed 6.4% from the year-ago quarter tally.
Regions Financial reported adjusted pre-tax pre-provision income from continuing operations of $604 million, up 15.5% year over year.
On a fully-taxable equivalent (FTE) basis, net interest income was $955 million, up 3.8% year over year. Net interest margin (on an FTE basis) expanded 14 basis points (bps) year over year to 3.50% in the quarter. Elevated market interest rates and deposit cost management aided the stellar results.
Non-interest income jumped 7.7% to come in at $519 million. Higher capital markets, wealth management income, card & ATM fees, other income and service charges on deposit account primarily led to this rise, partly offset by lower bank-owned life insurance income. Notably, mortgage income remained stable.
Non-interest expense escalated 8.1% year over year to $922 million. On an adjusted basis, non-interest expenses flared up 0.7% year over year to $853 million, mainly due to rise in salaries and employee benefits, outside services, professional, legal and regulatory expenses, credit card costs and other expenses.
Balance-Sheet Strength
As of Sep 30, 2018, adjusted total loans were up 3% year over year to $80.2 billion. Yet, total deposits came in at $93.9 billion, down 3% year over year. Total funding costs came in at 58 basis points (bps).
As of Sep 30, 2018, low-cost deposits, as a percentage of average deposits, were 93% compared with 92.8% as of Sep 30, 2017. In addition, deposit costs came in at 27 bps in the third quarter.
Credit Quality: A Mixed Bag
Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, contracted 30 bps from the prior-year quarter to 0.76%. Also, non-accrual loans, excluding loans held for sale, as a percentage of loans, came in at 0.66%, shrinking 30 bps from the year-ago quarter.
Allowance for loan losses as a percentage of loans, net of unearned income was 1.03%, down 28 bps from the year-earlier quarter. The company’s total business services criticized loans plunged 31.4% year over year.
However, net charge-offs, as a percentage of average loans came in at 0.40%, advancing 2 bps. Provision for loan losses was $84 million, up 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 Sep 30, 2018, Basel III Common Equity Tier 1 ratio (fully phased-in) and Tier 1 capital ratio were estimated at 10.1% and 11.0%, respectively, compared to 11.2% and 12.1%, recorded in the year-earlier quarter.
During the Jul-Sep quarter, this bank repurchased 30.6 million shares of common stock for a total cost of $581 million and announced $148 million in dividends to common shareholders.
Notably, on Aug 27, 2018, Regions entered into an accelerated share-repurchase agreement to buyback an additional common stock worth $700 million. The final settlement of the transaction is expected to take place this year.
Our Viewpoint
Regions Financial reported a decent quarter marked by top-line strength and improved credit quality. The company’s favorable funding mix, attractive core business and revenue-diversification strategies will likely yield profitable earnings in the upcoming quarters.
Though decline in deposits and loan growth at a slow pace pose concerns, we remain optimistic on the company's branch-consolidation plan and reduction of $400-million expenses by 2019.
Regions Financial Corporation Price, Consensus and EPS Surprise
People's United Financial Inc. delivered a negative earnings surprise of 2.9% in third-quarter 2018. Net earnings of 33 cents per share lagged the Zacks Consensus Estimate by a penny. However, the reported figure improved 26.9% year over year. Elevated expenses and provisions remained major drags. However, rising rates and higher fee income supported its results. Improvement in deposit balances reflected organic growth, with its capital position remaining strong.
Driven by stellar revenues, PNC Financial (PNC - Free Report) delivered a positive earnings surprise of 3.3% in the Sep-end quarter. Earnings per share of $2.82 beat the Zacks Consensus Estimate of $2.73. Moreover, the bottom line reflected a 30.6% jump from the prior-year figure. Continued easing of pressure on net interest margin led to higher net interest income during the reported quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth. Lower provisions remained another tailwind. Nevertheless, escalated costs hurt results to some extent.
Riding on higher revenues and lower provisions, U.S. Bancorp’s (USB - Free Report) third-quarter earnings per share of $1.06 outpaced the Zacks Consensus Estimate of $1.04. Also, the results came ahead of the prior-year earnings of 88 cents. Higher revenues along with loan growth and lower provisions were recorded in the quarter. Though lower mortgage banking revenues and escalating expenses were disappointing, easing margin pressure on rising rates and overall higher fee income acted as tailwinds.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Regions Financial's (RF) Q3 Earnings Improve Y/Y, Revenues Up
Regions Financial Corporation (RF - Free Report) reported third-quarter 2018 earnings of 32 cents per share, up 28% year over year. The Zacks Consensus Estimate was pinned at 36 cents. Results included certain non-recurring items.
Income from continuing operations available to common shareholders was $354 million compared with $296 million reported in the year-ago period.
Notably, net income, including the after-tax gain of $196 million related to the sale of Regions Insurance subsidiary and affiliates during the reported quarter, came in at $548 million or 50 cents per share.
Easing margin pressure and higher revenues were the positive factors. Moreover, credit quality recorded significant improvement. However, lower deposits balance was an undermining factor. In addition, expenses escalated in the reported quarter.
Revenues Improve, Costs Flare Up
Adjusted total revenues (net of interest expense) came in at $1.46 billion in the reported quarter, missing the Zacks Consensus Estimate of $1.47 billion. However, the reported figure climbed 6.4% from the year-ago quarter tally.
Regions Financial reported adjusted pre-tax pre-provision income from continuing operations of $604 million, up 15.5% year over year.
On a fully-taxable equivalent (FTE) basis, net interest income was $955 million, up 3.8% year over year. Net interest margin (on an FTE basis) expanded 14 basis points (bps) year over year to 3.50% in the quarter. Elevated market interest rates and deposit cost management aided the stellar results.
Non-interest income jumped 7.7% to come in at $519 million. Higher capital markets, wealth management income, card & ATM fees, other income and service charges on deposit account primarily led to this rise, partly offset by lower bank-owned life insurance income. Notably, mortgage income remained stable.
Non-interest expense escalated 8.1% year over year to $922 million. On an adjusted basis, non-interest expenses flared up 0.7% year over year to $853 million, mainly due to rise in salaries and employee benefits, outside services, professional, legal and regulatory expenses, credit card costs and other expenses.
Balance-Sheet Strength
As of Sep 30, 2018, adjusted total loans were up 3% year over year to $80.2 billion. Yet, total deposits came in at $93.9 billion, down 3% year over year. Total funding costs came in at 58 basis points (bps).
As of Sep 30, 2018, low-cost deposits, as a percentage of average deposits, were 93% compared with 92.8% as of Sep 30, 2017. In addition, deposit costs came in at 27 bps in the third quarter.
Credit Quality: A Mixed Bag
Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, contracted 30 bps from the prior-year quarter to 0.76%. Also, non-accrual loans, excluding loans held for sale, as a percentage of loans, came in at 0.66%, shrinking 30 bps from the year-ago quarter.
Allowance for loan losses as a percentage of loans, net of unearned income was 1.03%, down 28 bps from the year-earlier quarter. The company’s total business services criticized loans plunged 31.4% year over year.
However, net charge-offs, as a percentage of average loans came in at 0.40%, advancing 2 bps. Provision for loan losses was $84 million, up 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 Sep 30, 2018, Basel III Common Equity Tier 1 ratio (fully phased-in) and Tier 1 capital ratio were estimated at 10.1% and 11.0%, respectively, compared to 11.2% and 12.1%, recorded in the year-earlier quarter.
During the Jul-Sep quarter, this bank repurchased 30.6 million shares of common stock for a total cost of $581 million and announced $148 million in dividends to common shareholders.
Notably, on Aug 27, 2018, Regions entered into an accelerated share-repurchase agreement to buyback an additional common stock worth $700 million. The final settlement of the transaction is expected to take place this year.
Our Viewpoint
Regions Financial reported a decent quarter marked by top-line strength and improved credit quality. The company’s favorable funding mix, attractive core business and revenue-diversification strategies will likely yield profitable earnings in the upcoming quarters.
Though decline in deposits and loan growth at a slow pace pose concerns, we remain optimistic on the company's branch-consolidation plan and reduction of $400-million expenses by 2019.
Regions Financial Corporation Price, Consensus and EPS Surprise
Regions Financial Corporation Price, Consensus and EPS Surprise | Regions Financial Corporation Quote
Currently, Regions Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other banks
People's United Financial Inc. delivered a negative earnings surprise of 2.9% in third-quarter 2018. Net earnings of 33 cents per share lagged the Zacks Consensus Estimate by a penny. However, the reported figure improved 26.9% year over year. Elevated expenses and provisions remained major drags. However, rising rates and higher fee income supported its results. Improvement in deposit balances reflected organic growth, with its capital position remaining strong.
Driven by stellar revenues, PNC Financial (PNC - Free Report) delivered a positive earnings surprise of 3.3% in the Sep-end quarter. Earnings per share of $2.82 beat the Zacks Consensus Estimate of $2.73. Moreover, the bottom line reflected a 30.6% jump from the prior-year figure. Continued easing of pressure on net interest margin led to higher net interest income during the reported quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth. Lower provisions remained another tailwind. Nevertheless, escalated costs hurt results to some extent.
Riding on higher revenues and lower provisions, U.S. Bancorp’s (USB - Free Report) third-quarter earnings per share of $1.06 outpaced the Zacks Consensus Estimate of $1.04. Also, the results came ahead of the prior-year earnings of 88 cents. Higher revenues along with loan growth and lower provisions were recorded in the quarter. Though lower mortgage banking revenues and escalating expenses were disappointing, easing margin pressure on rising rates and overall higher fee income acted as tailwinds.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>