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Fee Income to Support Regions Financial's (RF) Q4 Earnings

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Regions Financial (RF - Free Report) is scheduled to report fourth-quarter 2019 results on Jan 17, before the opening bell. The bank’s results are estimated to reflect year-over-year rise in both revenues and earnings.

This Birmingham, AL-based company’s third-quarter 2019 earnings compared favorably with the prior-year quarter’s earnings, recording a 5.4% increase. Lower expenses and higher non-interest income were the positives. However, lower net interest income, due to reduced market-interest rates and elevated provisions, were major drags.

Further, the Zacks Consensus Estimate for fourth-quarter earnings has remained unchanged at 39 cents in the last seven days. This, however, suggests a year-over-year improvement of 5.4%. The Zacks Consensus Estimate for sales of $1.47 billion indicates 2.1% growth from the prior-year quarter’s reported tally.

Notably, the company’s share price has appreciated post third-quarter earnings. For the three-month period ended Dec 31, 2019, the stock has gained around 11%.

Will the upcoming earnings release give a boost to Regions’ stock? This depends largely on whether or not the firm is able to post a beat in the fourth quarter.

Factors at Play

Soft Loan Growth: Per the Fed’s latest data, rise in loans is likely to have been low on a sequential basis for the December-end quarter. Particularly, weakness in revolving home equity loans and commercial and industrial (C&I) are expected to have offset growth in consumer and commercial real estate loans. Also, trade-war concerns, though subsided to an extent, hurt business sentiments across the industries, which might had an adverse impact on loan demand.

Notably, management’s anticipations of loan growth in 2019 will likely be reflected in the quarterly results. The bank projects adjusted average loans to display year-over-year growth in low-single digits.

Net Interest Income (NII) Disappointing: A dismal lending scenario — mainly in the areas of commercial and industrial, and revolving home equity — during the fourth quarter might have adversely impacted net interest income (NII).

Further, the Federal Reserve’s accommodative monetary-policy stance, with decline in interest rates (three rate cuts in July, September and October), and its impact on the yield curve are likely to have dampened net interest margin in the to-be-reported quarter.

The Zacks Consensus Estimate for average interest earning assets of $109.6 billion for the quarter is almost stable. The consensus estimate of $941 million for NII reflects around 1% sequential decline.

Non Interest Income Improving: Rise in components of income is anticipated to have aided increase in non-interest income in the fourth quarter. Fixed income trading revenues are likely to have increased owing to rise in client activity.

Further, consumer spending trend was stronger during the October-December quarter, which is likely to have bolstered the bank’s credit and debit card revenues. Additionally, mortgage banking performance is also projected to have improved, aided by lower mortgage rates, which drove refinancing activities during the quarter.

Notably, the Zacks Consensus Estimate for capital market revenues is $50 million, up 38.9% sequentially, while commercial credit fee income is up 4% to $19.8 million.

Expenses to Remain Stable: The bottom line will likely reflect Regions’ efficient expense management during the quarter to be reported. While investing in revenue-generating areas, the company intends to keep expenses stable.

Here is what our quantitative model predicts:

Regions does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Regions is 0.00%.

Zacks Rank: Regions currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Citizens Financial Group, Inc. CFG is set to release results on Jan 17. The company has an Earnings ESP of +0.45% and carries a Zacks Rank of 3, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cullen/Frost Bankers, Inc. CFR is slated to release earnings on Jan 30. The company has an Earnings ESP of +0.06% and currently carries a Zacks Rank of 3.

TD Ameritrade Holding Corporation AMTD has an Earnings ESP of +0.39% and at present, holds a Zacks Rank of 3. It is scheduled to report quarterly figures on Jan 21.

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