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Regions Financial (RF) to Post Q2 Earnings: What's in Store?
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Regions FinancialCorporation (RF - Free Report) is scheduled to report second-quarter 2023 results on Jul 21, before the opening bell. The bank’s earnings and revenues are expected to have improved from the year-ago reported figures.
This Birmingham, AL-based player’s first-quarter 2023 earnings missed the Zacks Consensus Estimate on increasing expenses and provision for credit losses. Nonetheless, a rise in net interest income (NII) and average loan balances supported results to some extent.
Regions Financial has a decent earnings surprise history. RF's earnings surpassed estimates in two of the trailing four quarters and missed twice, the average beat being 1.18%.
Regions Financial Corporation Price and EPS Surprise
RF’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings of 60 cents per share has moved 1.6% south in the past month. Nonetheless, the figure indicates a 1.7% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.94 billion, suggesting 10.9% growth from the prior-year reported figure.
Key Factors & Estimates for Q2
Loans: Lending activities gradually waned in the second quarter amid a challenging macroeconomic backdrop. Per Federal Reserve’s latest data, demand for commercial and industrial loans as well as commercial real estate loans were soft in April and May.
Given its significant exposure to commercial loans, RF’s loan growth in the quarter under review is likely to have been affected. This is likely to have negatively influenced the average earning asset balance.
The Zacks Consensus Estimate for average interest-earning assets of $137.35 billion indicates a marginal decline from the last reported figure.
NII: Federal Reserve hiked rates by 25 basis points in the to-be-reported quarter. With this, the policy rate was at a 15-year high of 5-5.25% as of second-quarter end. Such high interest rates are likely to have increased funding costs for the company.
Despite higher rates, rise in deposit costs and weakening lending scenario are expected to have negatively impacted the bank’s NII and net interest margin in the quarter to be reported.
Management expects NII to decline 1.5-3.5% sequentially. The Zacks Consensus Estimate for NII suggests a 3.2% sequential fall to $1.37 billion.
Non-Interest Income: As customers are likely to migrate to higher yielding alternatives, RF is expected to have witnessed a decline in deposit balances during the to-be-reported quarter. This is likely to have an adverse impact on revenues from service charges on deposits. The consensus estimate for the said metric of $148 million indicates a decline of 4.5% on a sequential basis.
Nonetheless, high inflation is expected to have increased card transactions, thereby supporting RF’s card and ATM fees in the quarter. The Zacks Consensus Estimate of $127 million implies a sequential increase of 5%.
Wealth management income are likely to have gained from favorable equity market performance. The Zacks Consensus Estimate is pegged at $114 million, suggesting a 1.8% rise from the prior quarter’s reported number.
Global deal making is likely to have continued shrinking in the second quarter from the prior-year period, with deal volume and total deal value numbers crashing. Geopolitical tensions, inflation, high-interest rates and fears of a global recession are likely to have acted as headwinds for merger and acquisition deals. Thus, the company’s capital markets income is likely to have been adversely impacted.
Nonetheless,management expects revenues from capital markets (excluding credit valuation adjustment and debit valuation adjustment) in the range of $60-$80 million. This marks an increase from $42 million recorded in the prior quarter. The Zacks Consensus Estimate is pegged at $65 million.
Mortgage rates continued to rise, with the rate on 30-year fixed mortgage reaching 6.71% in June, up from 6.32% reported in the prior quarter. Thus, mortgage originations and refinancing continued to decline in the quarter.
These factors are likely to have weighed on RF’s mortgage income. Nonetheless, a favorable change in the valuation of mortgage servicing rights is expected to have aided such revenues. The Zacks Consensus Estimate is pegged at $29.1 million, indicating a 21.2% sequential rise.
Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $564 million, indicating a 5.6% rise sequentially.
Expenses:RF’s expenses are expected to have remained high in the second quarter on general inflationary pressures. This is likely to have increased costs whereas wage inflation is anticipated to have escalated personnel expenses, hurting the bottom line in the to-be-reported quarter.
Asset Quality: With heightening recession fears and inflationary pressures, the company is anticipated to have built reserves in the second quarter. Management expects net charge-offs in the range of 35-45 basis points (bps). This metric recorded a value of 35 bps in the first quarter.
Here is What Our Quantitative Model Predicts:
Our proven model does not predict an earnings beat for Regions Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Regions Financial has an Earnings ESP of -0.65%.
First Citizens BancShares, Inc. (FCNCA - Free Report) and BankUnited Inc. (BKU - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and the stock currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 3.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
BKU currently has an Earnings ESP of +1.91% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Jul 25.
The Zacks Consensus Estimate for BKU’s second-quarter earnings has moved 2.6% north over the past 60 days.
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Regions Financial (RF) to Post Q2 Earnings: What's in Store?
Regions Financial Corporation (RF - Free Report) is scheduled to report second-quarter 2023 results on Jul 21, before the opening bell. The bank’s earnings and revenues are expected to have improved from the year-ago reported figures.
This Birmingham, AL-based player’s first-quarter 2023 earnings missed the Zacks Consensus Estimate on increasing expenses and provision for credit losses. Nonetheless, a rise in net interest income (NII) and average loan balances supported results to some extent.
Regions Financial has a decent earnings surprise history. RF's earnings surpassed estimates in two of the trailing four quarters and missed twice, the average beat being 1.18%.
Regions Financial Corporation Price and EPS Surprise
RF’s activities in the to-be-reported quarter were inadequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings of 60 cents per share has moved 1.6% south in the past month. Nonetheless, the figure indicates a 1.7% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.94 billion, suggesting 10.9% growth from the prior-year reported figure.
Key Factors & Estimates for Q2
Loans: Lending activities gradually waned in the second quarter amid a challenging macroeconomic backdrop. Per Federal Reserve’s latest data, demand for commercial and industrial loans as well as commercial real estate loans were soft in April and May.
Given its significant exposure to commercial loans, RF’s loan growth in the quarter under review is likely to have been affected. This is likely to have negatively influenced the average earning asset balance.
The Zacks Consensus Estimate for average interest-earning assets of $137.35 billion indicates a marginal decline from the last reported figure.
NII: Federal Reserve hiked rates by 25 basis points in the to-be-reported quarter. With this, the policy rate was at a 15-year high of 5-5.25% as of second-quarter end. Such high interest rates are likely to have increased funding costs for the company.
Despite higher rates, rise in deposit costs and weakening lending scenario are expected to have negatively impacted the bank’s NII and net interest margin in the quarter to be reported.
Management expects NII to decline 1.5-3.5% sequentially. The Zacks Consensus Estimate for NII suggests a 3.2% sequential fall to $1.37 billion.
Non-Interest Income: As customers are likely to migrate to higher yielding alternatives, RF is expected to have witnessed a decline in deposit balances during the to-be-reported quarter. This is likely to have an adverse impact on revenues from service charges on deposits. The consensus estimate for the said metric of $148 million indicates a decline of 4.5% on a sequential basis.
Nonetheless, high inflation is expected to have increased card transactions, thereby supporting RF’s card and ATM fees in the quarter. The Zacks Consensus Estimate of $127 million implies a sequential increase of 5%.
Wealth management income are likely to have gained from favorable equity market performance. The Zacks Consensus Estimate is pegged at $114 million, suggesting a 1.8% rise from the prior quarter’s reported number.
Global deal making is likely to have continued shrinking in the second quarter from the prior-year period, with deal volume and total deal value numbers crashing. Geopolitical tensions, inflation, high-interest rates and fears of a global recession are likely to have acted as headwinds for merger and acquisition deals. Thus, the company’s capital markets income is likely to have been adversely impacted.
Nonetheless,management expects revenues from capital markets (excluding credit valuation adjustment and debit valuation adjustment) in the range of $60-$80 million. This marks an increase from $42 million recorded in the prior quarter. The Zacks Consensus Estimate is pegged at $65 million.
Mortgage rates continued to rise, with the rate on 30-year fixed mortgage reaching 6.71% in June, up from 6.32% reported in the prior quarter. Thus, mortgage originations and refinancing continued to decline in the quarter.
These factors are likely to have weighed on RF’s mortgage income. Nonetheless, a favorable change in the valuation of mortgage servicing rights is expected to have aided such revenues. The Zacks Consensus Estimate is pegged at $29.1 million, indicating a 21.2% sequential rise.
Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $564 million, indicating a 5.6% rise sequentially.
Expenses:RF’s expenses are expected to have remained high in the second quarter on general inflationary pressures. This is likely to have increased costs whereas wage inflation is anticipated to have escalated personnel expenses, hurting the bottom line in the to-be-reported quarter.
Asset Quality: With heightening recession fears and inflationary pressures, the company is anticipated to have built reserves in the second quarter. Management expects net charge-offs in the range of 35-45 basis points (bps). This metric recorded a value of 35 bps in the first quarter.
Here is What Our Quantitative Model Predicts:
Our proven model does not predict an earnings beat for Regions Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Regions Financial has an Earnings ESP of -0.65%.
Zacks Rank: Regions Financial currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and BankUnited Inc. (BKU - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and the stock currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 3.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
BKU currently has an Earnings ESP of +1.91% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Jul 25.
The Zacks Consensus Estimate for BKU’s second-quarter earnings has moved 2.6% north over the past 60 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.