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Regions (RF) Q4 Earnings Beat Estimates on Stellar Revenues
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Regions Financial (RF - Free Report) reported fourth-quarter 2020 adjusted earnings of 62 cents per share, surpassing the Zacks Consensus Estimate of 42 cents on impressive top-line strength. Also, results compare favorably with the prior-year figure of 40 cents.
Results were driven by higher revenues on increases in both net interest income (NII) and fee income. Moreover, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Also, credit provision was a tailwind. However, rise in expenses was a major drag.
Including certain one-time items, net income available to common shareholders was $588 million or 61 cents per share compared with the earnings of $366 million or 38 cents reported in the year-ago period.
For 2020, income from continuing operations available to common shareholders was $991 million compared with the $1.5 billion reported in 2019. Earnings per share from continuing operations were $1.03, up from the prior year’s $1.50. Results include certain one-time items. The Zacks Consensus Estimate was pinned at 83 cents.
Revenues Increase, Costs Rise
Adjusted total revenues (net of interest expense) came in at $1.66 billion in the reported quarter, outpacing the Zacks Consensus Estimate of $1.55 billion. The revenue figure also increased 11.7% from the year-ago quarter’s reported tally.
Regions Financial recorded adjusted pre-tax pre-provision income from continuing operations of $725 million, up 18.3% year on year.
On a fully-taxable equivalent (FTE) basis, net interest income was $1.02 billion, up 9.2% year on year. Yet, net interest margin shrunk 26 basis points (bps) year over year to 3.13% during the December-end quarter.
Non-interest income increased 21% year on year to $680 million. This upsurge mainly resulted from higher capital markets income, mortgage income, card and ATM fees, commercial credit card income, bank-owned life insurance, wealth management income and other income. Nonetheless, lower service charges on deposit account acted as a headwind.
Non-interest expense rose 10% year over year to $987 million, mainly due to rise in salaries and employee benefits, furniture and equipment, FDIC insurance assessments, along with other expenses, partly offset by lower outside services, net occupancy, marketing, credit expenses, branch consolidation, property and equipment charges, along with professional, legal and regulatory expenses. On an adjusted basis, non-interest expenses flared up 7% year over year to $930 million.
Adjusted efficiency ratio came in at 55.8% compared with the prior-year quarter’s 58.1%. A lower ratio indicates a rise in profitability.
Balance-Sheet Strength
As of Dec 31, 2020, adjusted total loans declined 2.4% sequentially to $80 billion. Yet, total deposits came in at $122.5 billion, up 3.5%.
As of Dec 31, 2020, low-cost deposits, as a percentage of average deposits, were 96%, compared with the prior-year quarter’s 90%. In addition, deposit costs came in at 8 bps during the October-December period.
Credit Quality: A Mixed Bag
Credit metrics was a mixed bag during the fourth quarter. Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, advanced 21 bps from the prior-year quarter to 0.91%. Additionally, non-accrual loans, excluding loans held for sale, as a percentage of loans, came in at 0.87%, expanding 26 bps year over year.
Allowance for loan losses as a percentage of loans, net of unearned income was 2.54%, up 149 bps from the year-earlier quarter. The company’s total business services criticized loans surged 65.2% on a year-over-year basis.
Furthermore, annualized net charge-offs, as a percentage of average loans, came in at 0.43%, contracting 3 bps. Provision for loan losses was a credit of $38 million compared with the year-earlier quarter provision of $96 million.
Solid Capital Position
Regions Financial’s estimated ratios remained well above the regulatory requirements under the Basel III capital rules. As of Dec 31, 2020, Basel III Common Equity Tier 1 ratio (fully phased-in) and Tier 1 capital ratio were estimated at 9.8% and 11.4%, respectively, compared with the 9.7% and 10.9% recorded in the year-earlier quarter.
During the October-December period, the bank did not repurchase shares but announced $148 million in dividends to common shareholders.
Our Viewpoint
Regions Financial put up an impressive performance during the October-December quarter on higher revenues. The company’s favorable funding mix, attractive core business and revenue-diversification strategies will likely yield stellar earnings in the upcoming period as well.
Though rise in expenses is a concern, we are optimistic on the bank’s branch-consolidation plan and rising fee income. Nevertheless, margin pressure is expected to prevail.
Regions Financial Corporation Price, Consensus and EPS Surprise
Successful cost-saving initiatives and unexpected release of reserves supported Wells Fargo’s (WFC - Free Report) fourth-quarter 2020 earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line compared favorably with the prior-year quarter figure of 60 cents.
Increased gains on equity securities and higher mortgage banking revenues supported the bank. Moreover, the company reflects prudent expense management. Further, a net benefit to provision of credit losses was reported during the quarter. Nonetheless, reduced net interest income on lower rates negatively impacted its results.
Citigroup (C - Free Report) delivered an earnings surprise of 53.3% in the fourth quarter on reserve releases. Income from continuing operations per share of $2.07 for the quarter handily outpaced the Zacks Consensus Estimate of $1.35. Results were, however, down 3.7% from the prior-year quarter.
Citigroup recorded higher market revenues during the reported quarter. At the same time, investment banking revenues decreased on disappointing debt underwriting business and reduced advisory revenues, partly muted by higher equity underwriting. Corporate lending was also on the downside. Though reserve releases supported results, rise in expenses was a major drag.
Unexpected large reserve releases, along with solid capital markets performance, drove JPMorgan’s (JPM - Free Report) fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72.
As expected, fixed income markets revenues increased 15% on strong performance across products. Likewise, equity markets revenues jumped 32% on the back of solid client activities. Apart from this, historically-lower rates drove mortgage fees and related income to $767 million, up 62%.
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Regions (RF) Q4 Earnings Beat Estimates on Stellar Revenues
Regions Financial (RF - Free Report) reported fourth-quarter 2020 adjusted earnings of 62 cents per share, surpassing the Zacks Consensus Estimate of 42 cents on impressive top-line strength. Also, results compare favorably with the prior-year figure of 40 cents.
Results were driven by higher revenues on increases in both net interest income (NII) and fee income. Moreover, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Also, credit provision was a tailwind. However, rise in expenses was a major drag.
Including certain one-time items, net income available to common shareholders was $588 million or 61 cents per share compared with the earnings of $366 million or 38 cents reported in the year-ago period.
For 2020, income from continuing operations available to common shareholders was $991 million compared with the $1.5 billion reported in 2019. Earnings per share from continuing operations were $1.03, up from the prior year’s $1.50. Results include certain one-time items. The Zacks Consensus Estimate was pinned at 83 cents.
Revenues Increase, Costs Rise
Adjusted total revenues (net of interest expense) came in at $1.66 billion in the reported quarter, outpacing the Zacks Consensus Estimate of $1.55 billion. The revenue figure also increased 11.7% from the year-ago quarter’s reported tally.
Regions Financial recorded adjusted pre-tax pre-provision income from continuing operations of $725 million, up 18.3% year on year.
On a fully-taxable equivalent (FTE) basis, net interest income was $1.02 billion, up 9.2% year on year. Yet, net interest margin shrunk 26 basis points (bps) year over year to 3.13% during the December-end quarter.
Non-interest income increased 21% year on year to $680 million. This upsurge mainly resulted from higher capital markets income, mortgage income, card and ATM fees, commercial credit card income, bank-owned life insurance, wealth management income and other income. Nonetheless, lower service charges on deposit account acted as a headwind.
Non-interest expense rose 10% year over year to $987 million, mainly due to rise in salaries and employee benefits, furniture and equipment, FDIC insurance assessments, along with other expenses, partly offset by lower outside services, net occupancy, marketing, credit expenses, branch consolidation, property and equipment charges, along with professional, legal and regulatory expenses. On an adjusted basis, non-interest expenses flared up 7% year over year to $930 million.
Adjusted efficiency ratio came in at 55.8% compared with the prior-year quarter’s 58.1%. A lower ratio indicates a rise in profitability.
Balance-Sheet Strength
As of Dec 31, 2020, adjusted total loans declined 2.4% sequentially to $80 billion. Yet, total deposits came in at $122.5 billion, up 3.5%.
As of Dec 31, 2020, low-cost deposits, as a percentage of average deposits, were 96%, compared with the prior-year quarter’s 90%. In addition, deposit costs came in at 8 bps during the October-December period.
Credit Quality: A Mixed Bag
Credit metrics was a mixed bag during the fourth quarter. Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, advanced 21 bps from the prior-year quarter to 0.91%. Additionally, non-accrual loans, excluding loans held for sale, as a percentage of loans, came in at 0.87%, expanding 26 bps year over year.
Allowance for loan losses as a percentage of loans, net of unearned income was 2.54%, up 149 bps from the year-earlier quarter. The company’s total business services criticized loans surged 65.2% on a year-over-year basis.
Furthermore, annualized net charge-offs, as a percentage of average loans, came in at 0.43%, contracting 3 bps. Provision for loan losses was a credit of $38 million compared with the year-earlier quarter provision of $96 million.
Solid Capital Position
Regions Financial’s estimated ratios remained well above the regulatory requirements under the Basel III capital rules. As of Dec 31, 2020, Basel III Common Equity Tier 1 ratio (fully phased-in) and Tier 1 capital ratio were estimated at 9.8% and 11.4%, respectively, compared with the 9.7% and 10.9% recorded in the year-earlier quarter.
During the October-December period, the bank did not repurchase shares but announced $148 million in dividends to common shareholders.
Our Viewpoint
Regions Financial put up an impressive performance during the October-December quarter on higher revenues. The company’s favorable funding mix, attractive core business and revenue-diversification strategies will likely yield stellar earnings in the upcoming period as well.
Though rise in expenses is a concern, we are optimistic on the bank’s branch-consolidation plan and rising fee income. Nevertheless, margin pressure is expected to prevail.
Regions Financial Corporation Price, Consensus and EPS Surprise
Regions Financial Corporation price-consensus-eps-surprise-chart | 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 Mega Banks
Successful cost-saving initiatives and unexpected release of reserves supported Wells Fargo’s (WFC - Free Report) fourth-quarter 2020 earnings of 64 cents per share, which surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line compared favorably with the prior-year quarter figure of 60 cents.
Increased gains on equity securities and higher mortgage banking revenues supported the bank. Moreover, the company reflects prudent expense management. Further, a net benefit to provision of credit losses was reported during the quarter. Nonetheless, reduced net interest income on lower rates negatively impacted its results.
Citigroup (C - Free Report) delivered an earnings surprise of 53.3% in the fourth quarter on reserve releases. Income from continuing operations per share of $2.07 for the quarter handily outpaced the Zacks Consensus Estimate of $1.35. Results were, however, down 3.7% from the prior-year quarter.
Citigroup recorded higher market revenues during the reported quarter. At the same time, investment banking revenues decreased on disappointing debt underwriting business and reduced advisory revenues, partly muted by higher equity underwriting. Corporate lending was also on the downside. Though reserve releases supported results, rise in expenses was a major drag.
Unexpected large reserve releases, along with solid capital markets performance, drove JPMorgan’s (JPM - Free Report) fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72.
As expected, fixed income markets revenues increased 15% on strong performance across products. Likewise, equity markets revenues jumped 32% on the back of solid client activities. Apart from this, historically-lower rates drove mortgage fees and related income to $767 million, up 62%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>