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Regions Financial (RF) Q1 Earnings Beat, Revenues Fall Y/Y

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Regions Financial Corporation (RF - Free Report) has reported first-quarter 2022 earnings of 55 cents per share, beating the Zacks Consensus Estimate of 48 cents. However, the results compare unfavorably with the prior-year figure of 63 cents.

Results have been driven by a rise in loan and deposit balances. Also, credit metrics were robust in the first quarter. However, falling fee income hurt overall revenue growth, while an expense rise affected the bottom line. Capital ratios continued to deteriorate in the quarter.

Net income available to common shareholders was $524 million, declining 15% from the year-ago period.

Revenues Decrease on Falling Fee Income, Expenses Rise

Total revenues were $1.6 billion in the reported quarter, missing the Zacks Consensus Estimate of $1.61 billion. Also, the top line slid 0.6% from the year-ago quarter’s reported number.

On a fully taxable equivalent basis, net interest income (NII) was $1.03 billion, up 4.9% year over year. However, the net interest margin shrank 17 basis points to 2.85%.

Non-interest income decreased 8.9% year over year to $584 million. The downside mainly resulted from lower capital market income and mortgage income.

Non-interest expenses rose 1.5% year over year to $932 million mainly due to increased credit/check card expenses and FDIC insurance assessment expenses.

Adjusted efficiency ratio was 57.9% compared with the prior-year quarter’s 57.3%. A higher ratio indicates a fall in profitability.

As of Mar 31, 2022, loans, net of unearned income, increased 1.8% on a sequential basis to $89.3 billion. Moreover, total deposits were $141 billion, 1.4% up from the prior quarter’s level.

Credit Quality Improves

Credit metrics were robust in the first quarter. Non-performing assets, as a percentage of loans, foreclosed properties and non-performing loans held for sale, were down to 0.39% from the prior-year quarter’s level of 0.9%. Additionally, non-accrual loans, excluding loans held for sale as a percentage of loans, were 0.37%, declining from 0.87% in the prior year.

Moreover, annualized net charge-offs, as a percentage of average loans, were 0.21% compared with 0.40% in the prior-year quarter. However, benefit from credit losses of $36 million was witnessed in the quarter, lower than the year-earlier quarter’s benefit of $142 million.

Capital Ratios Weak

Regions Financial’s estimated ratios remained well above the regulatory requirements under the Basel III capital rules. As of Mar 31, 2022, Common Equity Tier 1 ratio and the Tier 1 capital ratio were estimated at 9.5% and 10.8%, respectively, indicating declines from the corresponding ratios of 10.3% and 11.9% recorded in the year-earlier quarter.

Our Viewpoint

Regions Financial put up a decent performance in the first quarter on higher loans and deposit balances. RF’s favorable funding mix, attractive core business and revenue-diversification strategies will likely yield stellar earnings in the upcoming period.

Though a fall in revenues is concerning, we are optimistic about the bank’s branch-consolidation plan and improved credit quality. Nevertheless, expense pressure is expected to prevail.

Regions Financial Corporation Price, Consensus and EPS Surprise

 

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 Other Banks

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in NII and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with the $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII, net interest margin, and a rise in expenses were the key undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.