All the long-term ratings of Regions Financial Corporation (RF Quick QuoteRF - Free Report) receive a rating upgrade from Moody’s Investors Service, the rating services arm of Moody's Corporation. Regions Financial’s long-term senior unsecured debt is raised to Baa1 from Baa2. Following the rating action, the outlook was changed to stable from rating under review.

Reasons for Rating Affirmation

Per Moody’s, the ratings for Regions Financial are reflective of its strong balance sheet position, particularly solid liquidity and asset risk profile, and improved core profitability.

A well-diversified loan portfolio and prudent risk management help manage Regions Financial's risk profile. RF also boosted its fee revenues, which comprised nearly 40% of net revenues in 2021. Although net interest income (NII) is under persistent pressure because of weak loan demand and low interest rates, Regions Financial’s hedging program aided its loan yields and robust low-cost deposit base. RF's low dependence on confidence-sensitive wholesale borrowings and a high stock of liquid assets predicates its financial profile.

The rating agency believes that Regions Financial’s NII will grow in 2022 on the back of interest rate hikes, sturdier loan growth and relatively low deposit betas.

Though Regions Financial displays a sound capital position, Moody's feels that capitalization is weaker than its other rating factors. Despite the reduction of its Common Equity Tier 1 (CET1) capital ratio to the mid-point of its 9.25-9.75% operating range in the fourth quarter of 2021, Moody's expects RF’s capitalization to be steady over the following 12-18 months.

The stable outlook reflects Moody's view that Regions Financial's credit profile will be intact over the next 12-18 months, including the maintenance of a CET1 capital ratio within its target operating range.

Factors That Might Trigger Change in Ratings

An upward rating change is possible if Regions Financial materially improves its capitalization and maintains better-than-peer average core profitability and lower credit costs.

However, weakness in underwriting discipline or rebuilding of asset concentrations, such as commercial real estate and deterioration in asset quality or profitability beyond Moody's current expectations could also cause a rating downgrade. Moreover, a rating downgrade is likely if the capitalization softens below Moody's tangible common equity / risk-weighted asset ratio of 8.5%.

Price Performance & Zacks Rank

Shares of Regions Financial have gained 21.6% over the past six months compared with 13.1% growth recorded by the industry it belongs to.

Image Source: Zacks Investment Research

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Rating Actions by Moody’s on Other Firms

In February 2022, Raymond James Financial, Inc.’s (RJF Quick QuoteRJF - Free Report) senior unsecured debt and issuer ratings got an upgrade to A3 from Baa1.

The rating outlook for RJF was unchanged at stable post conclusion of the upgrade review that began in November 2021.

In the same month, Washington Federal, Inc. (WAFD Quick QuoteWAFD - Free Report) and its federally insured savings and loan association subsidiary WaFd Bank’s ratings were affirmed. Washington Federal and WaFd Bank’s issuer ratings were affirmed at Baa1. WaFd Bank has a long-term deposit rating of A1, while its short-term deposit rating was affirmed at Prime-1. The bank’s standalone baseline credit assessment was affirmed at a3.

However, the rating outlook on both Washington Federal and WaFd Bank was downgraded to negative from stable.

In December 2021, Moody’s affirmed the ratings of Associated Banc-Corp (ASB Quick QuoteASB - Free Report) and its banking subsidiary Associated Bank, N.A. Their outlook was re-affirmed at negative by the rating giant.

Associated Banc-Corp’s standalone BCA was affirmed at a3, while its issuer rating for long-term senior unsecured notes was affirmed at Baa1.