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Regions Financial (RF) to Manage Deposit Costs to Support NII
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Regions Financial Corporation (RF - Free Report) at Bank of America 2024 Financial Services Conference reiterated its net interest income (NII) guidance for the current year. It continues expecting NII to decline to $4.7-$4.8 billion from $5.32 billion in 2023.
The bank also mentioned that to achieve the same, the company would have to manage its deposit costs well while keeping it quite competitive.
Management is expecting Federal Reserve to implement four rate cuts this year, the first one being around May-June. Such rate cuts will have a positive impact on the repricing of RF’s balance sheet, and consequently, would act as a boon for its deposit costs. As such repricing benefits are projected to crystalize in the second half of 2024, the company is expecting NII to bottom out by second-quarter 2024 and then improve in the latter half of the year.
In the fourth quarter of 2023, RF’s NII declined 12% year over year to $1.23 billion. Also, its net interest margin declined to 3.6% from 3.99% a year ago.
Aiming to manage its deposit cost, Regions Financial has been shortening tenors of certificates of deposits. However, as its deposit mix is experiencing a shift from non-interest-bearing deposits to interest-bearing deposits, deposit costs are likely to take a hit. Hence, such costs are expected to be tactfully managed by the company.
Further, given the relationship-based business model, the company expects to keep its deposit balances and customers intact. For this, RF is likely to invest in both technological advancements and enhancement of its branch networks. Despite these, the company is making efforts to manage its expense base as it forecasts adjusted non-interest expense to decline to $4.1 billion in 2024 from $4.26 billion in the last year.
This aside, Regions Financial’s 2024 net charge offs to average loans ratio is expected in the range of 40-50 basis points. It is also expecting to witness more loan losses this year due to stress in its commercial real estate lending book.
RF’s shares have gained 14.3% in the past three months compared with the industry’s 10% growth.
Estimates for JPM’s 2024 earnings have moved marginally upward over the past 30 days. In the past three months, its shares have risen 14.3%.
The Zacks Consensus Estimate for PRK’s current-year earnings has moved north 4.9% over the past 30 days. Its shares have risen 14.2% in the past three months.
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Regions Financial (RF) to Manage Deposit Costs to Support NII
Regions Financial Corporation (RF - Free Report) at Bank of America 2024 Financial Services Conference reiterated its net interest income (NII) guidance for the current year. It continues expecting NII to decline to $4.7-$4.8 billion from $5.32 billion in 2023.
The bank also mentioned that to achieve the same, the company would have to manage its deposit costs well while keeping it quite competitive.
Management is expecting Federal Reserve to implement four rate cuts this year, the first one being around May-June. Such rate cuts will have a positive impact on the repricing of RF’s balance sheet, and consequently, would act as a boon for its deposit costs. As such repricing benefits are projected to crystalize in the second half of 2024, the company is expecting NII to bottom out by second-quarter 2024 and then improve in the latter half of the year.
In the fourth quarter of 2023, RF’s NII declined 12% year over year to $1.23 billion. Also, its net interest margin declined to 3.6% from 3.99% a year ago.
Aiming to manage its deposit cost, Regions Financial has been shortening tenors of certificates of deposits. However, as its deposit mix is experiencing a shift from non-interest-bearing deposits to interest-bearing deposits, deposit costs are likely to take a hit. Hence, such costs are expected to be tactfully managed by the company.
Further, given the relationship-based business model, the company expects to keep its deposit balances and customers intact. For this, RF is likely to invest in both technological advancements and enhancement of its branch networks. Despite these, the company is making efforts to manage its expense base as it forecasts adjusted non-interest expense to decline to $4.1 billion in 2024 from $4.26 billion in the last year.
This aside, Regions Financial’s 2024 net charge offs to average loans ratio is expected in the range of 40-50 basis points. It is also expecting to witness more loan losses this year due to stress in its commercial real estate lending book.
RF’s shares have gained 14.3% in the past three months compared with the industry’s 10% growth.
Image Source: Zacks Investment Research
RF presently carries a Zacks Rank #3 (Hold).
Bank Stocks Worth Considering
A couple of better-ranked stocks from the banking space are JPMorgan Chase & Co. (JPM - Free Report) and Park National Corporation (PRK - Free Report) . JPM currently carries a Zacks Rank #2 (Buy) and PRK sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for JPM’s 2024 earnings have moved marginally upward over the past 30 days. In the past three months, its shares have risen 14.3%.
The Zacks Consensus Estimate for PRK’s current-year earnings has moved north 4.9% over the past 30 days. Its shares have risen 14.2% in the past three months.