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Regions (RF) Offers Encouraging Long-Term Financial Targets

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Having achieved all the targets laid down in 2015, Regions Financial Corporation (RF - Free Report) has put forth its strategic growth plan and targets for the next three years (2019-2021). It seeks to meet the new goals by making opportunistic investments toward organic growth, efficiency advancements and digital innovations.

John Turner, President and Chief Executive Officer at Regions said, “Through our ongoing commitment to efficiency, effectiveness and continuous improvement, we will accelerate our growth by making strategic and disciplined investments in technology, talent and the markets we serve while also maintaining a strong and integrated risk management culture.”

Financial Targets

The company expects adjusted average loan growth for 2019 to be in the low single digits. Further, Regions anticipates 2-4% rise in full-year revenues. It expects adjusted expenses to trend flat in the year.

Notably, in three-year period, Regions expects to deliver adjusted return on average tangible common equity of 18-20% by 2021 compared with 15.59% in 2018. Also, adjusted efficiency ratio of 55% or lower is expected, which is below 59.3% reported in 2018. Further, in both the cases, Regions plans to achieve positive operating leverage.

Pillars of Success

Firstly, Regions plans on taking advantage of its existing strength in areas such as customer focus, markets, team, culture and risk management in order to establish presence in key growth markets like Atlanta, Houston and Orlando. Further, it intends to hire professionals such as corporate bankers, wealth management professionals and mortgage loan originators to better serve and meet clients needs.

The company plans to generate funds for these investments with help of its Simplify and Grow continuous improvement approach that it introduced in 2017. These initiatives aim at making banking easier for customers, simplify processes and drive profitable long-term growth.

Further, Regions is making efforts to reduce costs related to third-party spending through strategic sourcing and vendor selectivity. It anticipates annual cumulative savings of nearly $60 million between 2018 and 2021.  

Lastly, Regions highlights the importance of technology, and promises to continue driving innovation and expand digital banking capabilities, such as open accounts online, digital loan applications and wealth management digital advisory capabilities.

For the next three years, the company disclosed plans to pilot voice banking capabilities and expand its use of artificial intelligence for both customer-facing and back-office applications. Additionally, Regions is investing in technology to provide serve customers better and enhance credit risk management, as well as a variety of other internal processes across the company.

Our Take

Regions remains well poised for the future, supported by cost-control measures, restructuring efforts and improving economic backdrop. Further, strong capital position enables the company to undertake steady capital deployment activities and make investments at building digital capabilities. These positives have likely supported the stock’s rally of 1.8% over the past three months. However, muted growth in fee income and legal issues remain major concerns.

The stock currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

City Holding Company (CHCO - Free Report) has long-term earnings growth rate of 8%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stifel Financial Corporation (SF - Free Report) has long-term earnings growth rate of 8% and a Zacks Rank #1.

First Bancorp (FBNC - Free Report) has long-term earnings growth rate of 4.9% and a Zacks Rank #2 (Buy).

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