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Regions Financial on Track to Achieve Cost Control Targets

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On Aug 24, we issued an updated research report on Regions Financial Corporation (RF - Free Report) . The company’s cost control measures are impressive. Further, its initiatives to generate new sources of revenues are supported by its strong capital position. However, pending legal issues remain a woe.

The Birmingham-based lender reported an earnings beat in second-quarter 2017. Results reflected increased revenues and loan balances. However, rise in adjusted operating expenses and a decline in non-interest income were the undermining factors.

Shares of Regions Financial have gained nearly 1% year to date versus the industry’s decline of 6.5%.

The Zacks Consensus Estimate for current-year earnings have remained stable at $1.00 over the last 30 days. Thus, the stock carries a Zacks Rank #3 (Hold).

Regions Financial’s expense control initiatives are encouraging. Though costs increased slightly in the last completed quarter due to investments in enhanced online banking platform and other technology initiatives, the company remains on track to achieve $300 million expense reduction by 2018 through branch consolidations. Regions Financial’s efforts to reduce expenses along with generating new sources of revenues are commendable.

Also, Regions Financial’s efforts are supported by its strong capital position. As part of its 2017 capital plan, it raised the common stock dividend by 28.6% and plans to repurchase up to $1.47 billion common stock. Further, the company’s consistently improving financial performance is indicative of the sustainability of these activities.

However, the company’s fee income has witnessed a declining trend over the last few years mainly due to lower securities gains and insurance proceeds. Though Regions Financial’s is undertaking initiatives to increase revenues, volatile trend in non-interest income has been weighing on its top line.

Also, Regions Financial is yet to solve some pending lawsuits from the investors and regulators for violation of rules and forgery. This is likely to impact its financials in the near term.  

Stocks to Consider

Some better-ranked stocks in the finance space are JPMorgan Chase & Co. (JPM - Free Report) , State Street Corporation (STT - Free Report) and Carolina Financial Corporation (CARO - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JPMorgan’s Zacks Consensus Estimate for current-year earnings have been revised 2.9% upward in the past 60 days. The company’s share price has increased almost 38.2% in the past year.

State Street’s Zacks Consensus Estimate for the current-year earnings has been revised 3.9% upward, over the past 60 days. Also, its shares have gained 35.8% in a year’s time.

Carolina Financial’s Zacks Consensus Estimate for the current year has moved up 8.9%, over the past 60 days. Its share price has increased 56.6% in the past 12 months.

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