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Regions (RF) to Buy EnerBank, Expand Home Lending Products
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Regions Financial’s (RF - Free Report) subsidiary, Regions Bank, has inked a deal to acquire specialized home improvement lender, EnerBank USA from its parent, CMS Energy (CMS - Free Report) for $960 million. The all-cash deal, expected to close in fourth-quarter 2021, is still subject to satisfaction of customary closing conditions and regulatory approvals.
Headquartered in Salt Lake City, UT, EnerBank offers prime and super-prime home improvement point-of-sale loans via a national network of contractors. It has a countrywide footprint and has served more than one million homeowners since inception. At present, the firm has more than 10,000 contractors through mobile, online, and phone-based point-of-sale lending options.
Besides, with loan balance worth $2.8 billion as of Mar 31, 2021, EnerBank’s platform consummates Regions’ recent investments in mortgage and home equity lending services. Over the years, Regions has been investing in products, services and omni-channel originations central to mortgage lending, mortgage servicing and home equity lending, which has significantly boosted its market share.
The acquisition of Enerbank is likely to expand the bank’s strategy of acquiring businesses, which help reinforce customer relationships by serving more of their needs via new channels, products & capabilities. Some of the recent deals, including the acquisition of equipment finance lender, Ascentium Capital LLC, in April 2020, and the August 2019 acquisition of Highland Associates — a leading institutional investment firm, are steps in the same direction.
Scott Peters, senior executive vice president and head of the Consumer Banking Group for Regions Bank, stated, “We have thoughtfully evaluated the home improvement point-of-sale lending space for a number of years, and we believe this is the right partner at the right time to deliver on our vision. EnerBank’s platform and skilled financial professionals, combined with the reach and experience of Regions’ Consumer Banking teams, will help us deepen relationships with clients while reaching new customers with convenient home improvement lending options.”
As part of the transaction, EnerBank’s team, along with Charlie Knadler, president and CEO of EnerBank, will come aboard Regions as part of its Consumer Banking Group, reporting to Peters. EnerBank will maintain its headquarters presence in Salt Lake City.
Financial Benefits
Regions expects the deal to be accretive to 2022 earnings per share (including Purchase Accounting Adjustments (PAA) and “no foregone share repurchases”) in low single-digit percentage, while over the medium term, it is projected to be 5% accretive to earnings.
Further, core net interest margin run rate, excluding PAA, is expected to be in the range of 10-15 basis points.
Also, Regions is estimated to generate a return on average tangible common equity of 25%. Return on average assets is projected to be 2.5%, while internal rate of return is estimated to be more than 15%. Moreover, the fair value of net assets at closing is anticipated to be $415-$445 million, while tangible book value is to be at $318 million.
Our Take
As the company is committed toward diversifying its revenue streams, we believe such acquisitions support its growth prospects. Moreover, Regions continues to take actions with respect to its Simplify and Grow initiative, including streamlining its structure and refining the branch network, while making investments in new technologies, delivery channels and other growth drivers.
In the past six months, shares of Regions have gained 41%, outperforming the 40.2% gain recorded by the industry.
In order to boost its payment offerings for healthcare clients, Bank of America (BAC - Free Report) has acquired Axia Technologies, Inc. on Apr 2 this year.
In order to fortify its existing Homeowners Association (HOA) banking services, PacWest Bancorp announced in April that its banking subsidiary, Pacific Western Bank, has signed an all-cash deal worth $250 million to acquire MUFG Union Bank, N.A.’s HOA Services Division.
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Regions (RF) to Buy EnerBank, Expand Home Lending Products
Regions Financial’s (RF - Free Report) subsidiary, Regions Bank, has inked a deal to acquire specialized home improvement lender, EnerBank USA from its parent, CMS Energy (CMS - Free Report) for $960 million. The all-cash deal, expected to close in fourth-quarter 2021, is still subject to satisfaction of customary closing conditions and regulatory approvals.
Headquartered in Salt Lake City, UT, EnerBank offers prime and super-prime home improvement point-of-sale loans via a national network of contractors. It has a countrywide footprint and has served more than one million homeowners since inception. At present, the firm has more than 10,000 contractors through mobile, online, and phone-based point-of-sale lending options.
Besides, with loan balance worth $2.8 billion as of Mar 31, 2021, EnerBank’s platform consummates Regions’ recent investments in mortgage and home equity lending services. Over the years, Regions has been investing in products, services and omni-channel originations central to mortgage lending, mortgage servicing and home equity lending, which has significantly boosted its market share.
The acquisition of Enerbank is likely to expand the bank’s strategy of acquiring businesses, which help reinforce customer relationships by serving more of their needs via new channels, products & capabilities. Some of the recent deals, including the acquisition of equipment finance lender, Ascentium Capital LLC, in April 2020, and the August 2019 acquisition of Highland Associates — a leading institutional investment firm, are steps in the same direction.
Scott Peters, senior executive vice president and head of the Consumer Banking Group for Regions Bank, stated, “We have thoughtfully evaluated the home improvement point-of-sale lending space for a number of years, and we believe this is the right partner at the right time to deliver on our vision. EnerBank’s platform and skilled financial professionals, combined with the reach and experience of Regions’ Consumer Banking teams, will help us deepen relationships with clients while reaching new customers with convenient home improvement lending options.”
As part of the transaction, EnerBank’s team, along with Charlie Knadler, president and CEO of EnerBank, will come aboard Regions as part of its Consumer Banking Group, reporting to Peters. EnerBank will maintain its headquarters presence in Salt Lake City.
Financial Benefits
Regions expects the deal to be accretive to 2022 earnings per share (including Purchase Accounting Adjustments (PAA) and “no foregone share repurchases”) in low single-digit percentage, while over the medium term, it is projected to be 5% accretive to earnings.
Further, core net interest margin run rate, excluding PAA, is expected to be in the range of 10-15 basis points.
Also, Regions is estimated to generate a return on average tangible common equity of 25%. Return on average assets is projected to be 2.5%, while internal rate of return is estimated to be more than 15%. Moreover, the fair value of net assets at closing is anticipated to be $415-$445 million, while tangible book value is to be at $318 million.
Our Take
As the company is committed toward diversifying its revenue streams, we believe such acquisitions support its growth prospects. Moreover, Regions continues to take actions with respect to its Simplify and Grow initiative, including streamlining its structure and refining the branch network, while making investments in new technologies, delivery channels and other growth drivers.
In the past six months, shares of Regions have gained 41%, outperforming the 40.2% gain recorded by the industry.
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Similar Moves by Peers
In order to boost its payment offerings for healthcare clients, Bank of America (BAC - Free Report) has acquired Axia Technologies, Inc. on Apr 2 this year.
In order to fortify its existing Homeowners Association (HOA) banking services, PacWest Bancorp announced in April that its banking subsidiary, Pacific Western Bank, has signed an all-cash deal worth $250 million to acquire MUFG Union Bank, N.A.’s HOA Services Division.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>