Increasing Our Fair Value Estimate Ahead of Regions' First-Quarter Results

Equity Analyst

Rajiv Bhatia

Strategist

Eric Compton

Revenue segments as reported by the company.

Interest income

Non-interest income

Revenue Segments

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Interest expense

Provision for (benefit from) credit losses

Non-interest expense

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

Regions Financial is a midsize U.S. regional bank, primarily concentrated in the Southeast. After the disastrous acquisition of AmSouth before the global financial crisis, Regions has stabilized its core operations and turned into a solid regional bank. It has shied away from dramatic acquisitions since and has improved its risk-management and underwriting capabilities, becoming a safer bank in the process. Regions also boasts one of the more advantaged deposit bases under our coverage, with lower costs leading to extra profitability. The bank's focus on improving operational efficiency and building out fee-generating businesses has also improved its profitability profile, as the firm has managed to keep its expense growth to a minimal level for years now while also increasing fees.

Regions arguably has one of the more dominant franchises in the Southeastern United States, where its operations are concentrated. After middling performance in the initial years after the financial crisis, Regions has improved its operations through internal initiatives, organic growth, and some bolt-on acquisitions. The bank has invested in its mortgage operations, leading to exceptional growth in 2020 and 2021 compared with 2019, while also completing several bolt-on acquisitions to better build out the wealth and capital markets segments. EnerBank, acquired in 2021, added a high-growth, higher-yielding consumer portfolio to the bank's balance sheet. 

After heavy exposure to real estate-related loans during the crisis (over half the loan book), Regions has increasingly focused on its commercial lending business and reduced its exposure to residential mortgages, which went from 40% of the book to roughly 20% today.

In our view, Regions has greatly improved the value of its franchise over the last five years, going from a sleepy franchise with worse efficiency and fee growth than peers to one where competitive operating efficiency and returns on tangible equity in the teens are now expected. Overall, we see a solid regional operator in Regions today.

Business Strategy & Outlook

While returns have generally improved for Regions over the last several years, we don’t yet assign the company an economic moat. The bank has admittedly narrowed the gap and may be worthy of an economic moat in the near future as we wait for operating efficiency to improve a bit more and for the firm's fee franchises to continue to grow.

Bank moats are derived primarily from two sources: cost advantages and switching costs. Cost advantages stem from three primary factors: a low-cost deposit base, excellent operating efficiency, and conservative underwriting, with regulatory costs also a consideration. Regions does have a relatively attractive deposit base, with costs generally below its peers since 2013. We believe Regions’ market share in key states helps with this, as the bank is one of the largest deposit collectors in its top six states, which account for a vast majority of the bank’s deposits. Most notably, Regions is the number-one deposit taker in Alabama, its home state and where almost one fourth of the bank’s deposits are located. Regions’ deposit base also has a fairly high percentage of deposits coming from its consumer customer base, roughly two thirds. 

Regions has historically had a credit cost disadvantage, largely due to the ill-timed acquisition of AmSouth just before the financial crisis, where portions of the loan book were eventually sold for $0.50 on the dollar. Regions has worked through these issues and has brought its credit quality back in line with peers. If Regions can avoid another disaster, we believe credit costs in the future should align with the yield of the loan book, providing neither an advantage nor disadvantage, which would be an improvement.

Regions has historically been disadvantaged with its operating costs. It has begun improving its efficiency ratio, largely by closing branches and reducing personnel, but the bank only broke the 60% efficiency ratio barrier in 2019 (as calculated in our model). Banks with moats usually have ratios consistently in the mid-50s. Regions is making improvements here over time, and if it can consistently improve its underlying efficiency, it may improve enough to warrant a narrow moat rating. 

We do not view Regions’ individual nonbanking businesses as particularly moaty on their own, but the bank has built out the breadth of these businesses over time, so we are becoming more positive. Regions operates a mix of smaller nonbank operations, including wealth-management, securities brokerage, trust services, and capital markets services. For each of these businesses, scale, reputation, market share, and/or network breadth tend to matter, and Regions does not stand out in any of these areas. These businesses do provide convenient add-on services for customers and with more diverse fee revenue it does improve profitability and stability of revenue over time as well as switching costs. We do appreciate management’s increased focus on building out some of these services, such as the capital markets group, increased credit card penetration, and more wealth offerings, believing that these efforts have improved the economies of scope and switching costs of the bank. 

From a systemic standpoint, we believe the U.S. offers a fair but improving banking environment. Regulation has become considerably stronger since the crisis, and capital levels have never been higher, though the country still uses a complex and somewhat archaic system of regulation. Furthermore, the U.S. banking market remains relatively fragmented; Regions must compete with a variety of regional and community banks as well as large money center institutions. Our outlook is positive from a macroeconomic and political standpoint. The U.S. is still the world's leading democracy, has increased GDP at a steady pace for years, and maintains the world's reserve currency, all of which contribute to banking stability. 

Regions Financial is not large enough to be considered a global systemically important bank and therefore avoids some of the more onerous regulatory capital requirements. Regions is large enough to be subject to the Federal Reserve's stress tests because it has more than $100 billion in assets, but it only has to go through the full process every two years. The bank also avoids extra liquidity coverage and funding ratio requirements. Overall, because the bank avoids much of the extra regulation that larger peers are subject to, we would view the bank’s regulatory burden as slightly advantageous. While we do think Regions could benefit from some additional scale, it is still larger than several peers. It is also small enough to avoid some of the extra costs faced by its largest peers. Further requirements will be triggered if Regions surpasses $250 billion in assets.

None

Economic Moat

Regions Financial

Regions Financial Corp. operates as a bank holding company. It provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of investment banking, asset management, trust, mutual funds, securities brokerage, insurance and other financing. The firm operates through the following segments: Corporate Bank, Consumer Bank, Wealth Management, and Other. The Corporate Bank segment represents the commercial banking functions including commercial and industrial, commercial real estate and investor real estate lending. The Consumer Bank segment holds the branch network, including consumer banking products and services related to residential first mortgages, home equity lines and loans, small business loans, indirect loans, consumer credit cards and other consumer loans. The Wealth Management segment offers individuals, businesses, governmental institutions and non-profit entities a range of solutions to help protect, grow and transfer wealth. The Other segment includes the company's treasury function, the securities portfolio, wholesale funding activities, interest rate risk management activities and other corporate functions that are not related to a strategic business unit. The company was founded in 1971 and is headquartered in Birmingham, AL.

Earnings data Q3 2020

Earnings data Q4 2020

Earnings data Q1 2021

Earnings data Q2 2021

Earnings data Q3 2021

Earnings data Q4 2021

Earnings data Q1 2022

Earnings data Q2 2022

Earnings data Q3 2022

Earnings data Q4 2022

Earnings data Q1 2023

Earnings data Q2 2023

Earnings data Q3 2023

Earnings data Q4 2023

Earnings data Q1 2024

Earnings data Q2 2024

Regions Financial reports robust earnings and growth opportunities in 2023

Regions Financial's Q4 2022 performance reflects strong earnings, loan growth, and a focus on enhancing revenue streams while managing expenses effectively.
Despite facing challenges such as declining noninterest income and potential deposit runoff, the company remains well-positioned with a robust capital base and growth opportunities.
Strategic investments, customer deposit growth, and a competitive focus on credit risk management highlight Regions Financial's resilience and potential for future growth.

Regions Financial reports solid Q1 earnings, eyes growth opportunities

Regions Financial's Q1 performance reflects growth in loans and net interest income, with stable asset quality and a focus on managing expenses.
The bank's strengths lie in customer-centric strategies, strong deposit franchise, and a focus on fundamental banking principles.
Challenges include increased noninterest expenses, lower loan pipelines, and expected declines in deposit service charges.
Opportunities for the bank include improved business outlook, loan growth, and adjustments to revenue guidance for future growth.

Regions Financial posts solid Q2 earnings amidst growth opportunities

Regions Financial's Q2 performance reflects a balanced mix of strengths and challenges, with a focus on capital strength and revenue diversification.
The bank's customer-centric initiatives and strategic acquisitions position it well for growth opportunities in a dynamic economic environment.
While managing expenses and navigating interest rate uncertainties, Regions Financial aims to leverage its strong capital position for sustainable growth and profitability.
Strategic focus on organic growth, talent acquisition, and technology optimization underscore the bank's commitment to long-term success and resilience.

Regions Financial reports resilient earnings amidst fraud challenges and growth opportunities

Regions Financial navigated Q3 2023 with solid earnings despite elevated fraud losses, focusing on capital strength and growth opportunities.
Challenges include increased net charge-offs and concerns over risk management practices, countered by opportunities for improved performance and revenue growth.
Management's confidence in the company's resilience and ability to adapt to market changes underpins their strategic outlook and commitment to shareholder value.
Analysts' inquiries into financial outlook and risk management highlight the company's proactive approach to addressing concerns and optimizing performance.

Regions Financial reports solid 2023 earnings, eyes growth opportunities

Regions Financial's strong financial performance in 2023, supported by robust risk management and strategic investments, positions the company well for growth and stability in 2024.
While facing challenges such as soft loan demand and regulatory uncertainties, the company's focus on cost control, technology investments, and risk mitigation strategies presents opportunities for future success.
With a clear focus on maintaining capital strength, managing expenses, and adapting to market dynamics, Regions Financial aims to navigate economic uncertainties and drive positive operating leverage in the coming years.

Regions Financial reports solid Q1 earnings amidst industry-specific challenges

Regions Financial's Q1 performance showed resilience with stable asset quality and improved noninterest income. Challenges include loan decrease and industry-specific stresses. Opportunities lie in achieving NIM targets and managing funding costs for sustained margins.

Revenue

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

Regions is looking to make up revenue that it's forgoing due to reducing its customers' exposure to overdraft-related charge.

Regions offers a case example of an overdraft-reliant bank weaning itself off fees

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Financial Corp. announced the company will participate in the upcoming Credit Suisse Financial Services Forum.

Regions Financial Scheduled to Participate in Credit Suisse Financial Services Forum

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Bank announced the launch of a business development team focused on helping small businesses build customized plans for financial success.

Helping Small Businesses Thrive: Regions Bank Launches Commercial Business Development Team

Regions Financial's (RF) Q4 earnings witness a negative surprise on lower revenues and a weak capital position, offset by higher loans and deposits.

Regions' (RF) Q4 Earnings Miss Estimates, Revenues Fall

Regions Financial Corporation (RF) CEO John Turner on Q4 2021 Results - Earnings Call Transcript

Bank giants like Goldman Sachs (GS)  and Morgan Stanley (MS)  get all the high-profile headlines, but there are other financial names worth watching this earnings season.

Bank Stock Rattled by Earnings Miss

Regions Financial (RF) delivered earnings and revenue surprises of -10.20% and 0.77%, respectively, for the quarter ended December 2021. Do the numbers hold clues to what lies ahead for the stock?

Regions Financial (RF) Q4 Earnings Lag Estimates

Discover

Ford Motor Company

Freeport-McMoRan

International Paper

KeyCorp

Sealed Air

Welltower

WestRock

The three major U.S. equities indexes closed lower on Wednesday for the second day in a row.

5 S&P 500 Winners, 5 Losers in Thursday's Premarket

Shares of Regions Financial Corp. RF, -4.68% dropped 4.2% in premarket trading Thursday, to extend its pullback from a 14-year high to a third session, after the regional bank reported fourth-quarter profit that fell below expectations, while revenue matched forecasts. Net income declined to $414 million, or 43 cents a share, from $588 million, or 61 cents a share, in the year-ago period.

Regions Financial stock extends pullback after profit falls below expectations

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Financial Corp. announced earnings for the fourth quarter and full-year ended Dec. 31, 2021.

Record Performance. Accelerating Growth.

Regions Financial Corp. said Wednesday its Regions Bank subsidiary will eliminate non-sufficient funds fees by the end of the second quarter, as the regional bank matched moves made recently by Bank of America Corp. BAC, -3.44% and Wells Fargo & Co. WFC, -2.36% . The regional bank's stock rose 0.8% in premarket trading.

Regions Bank to eliminate non-sufficient funds fees in the coming months

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Bank announced the latest steps in its commitment to make banking easier while equipping customers with helpful financial tools and services.

Regions Bank Announces New Steps to Reduce Overdraft Charges, Eliminate Non-Sufficient Funds Fees

Citigroup

JPMorgan Chase & Co

Morgan Stanley

Raymond James

Charles Schwab

Wells Fargo

Beyond some technical issues the market is dealing with, this is a big week for earnings reports. So, here's what to do.

Earnings Season Is in Full Swing — and So Are the Buying Opportunities

Regions Financial's (RF) Q4 results are likely to reflect improving revenues and asset quality amid a recovering economic environment.

Regions Financial (RF) to Post Q4 Earnings: A Beat in Store?

Regions Financial (RF) possesses the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Regions Financial (RF) Expected to Beat Earnings Estimates: Can the Stock Move Higher?

Citizens Financial Group

Fifth Third Bancorp

First Republic

M&T Bank

UBS on Thursday launched coverage of seven banks, including five with buy ratings and two with hold ratings, as the group is poised to benefit from higher interest rates. Analyst Erika Najarian said she expects 21% upside in these names, despite strong stock performances thus far in 2022.

UBS analyst Erika Najarian initiates coverage of large cap regional banks

Regions Financial (RF) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

Why Regions Financial (RF) is Poised to Beat Earnings Estimates Again

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Bank announced Nikki Stephenson will serve as head of Corporate Development leading the bank's mergers and acquisitions (M&A) strategy.

Regions Bank Names Nikki Stephenson as Head of Corporate Development

U.S. Bancorp

The stock market is on pins and needles as interest rates have shot higher. While a huge increase would be dangerous for some sectors, the reality is that it looks like the Federal Reserve will begin to raise rates this year and will speed up the tapering of the quantitative easing program much faster than earlier expected.

Interest Rates Explode Higher: Buy These 5 Big Dividend-Paying Bank Stocks Now

BIRMINGHAM, Ala.--(BUSINESS WIRE)--The Regions Equipment Finance Corporation (REFCO), a subsidiary of Regions Bank, is expanding to include a new Technology Solutions platform and team.

Regions Bank Equipment Finance Builds Technology Solutions Platform, Hires Veteran Banking Team

Regions Financial (RF) completes the acquisition of Clearsight. The buyout enhances its specialty capabilities and M&A advisory services, enhancing non-interest revenues.

Regions Financial (RF) Wraps Up Acquisition of Clearsight

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Bank is announcing the results of a new survey that finds Americans feel financially unprepared for the year ahead.

Ready or Not: Regions Next Step Survey Takes Financial Pulse of Americans; Free Money-Management Tools Available

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Financial Corp. announced it has completed its acquisition of M&A firm Clearsight Advisors, Inc.

Regions Financial Closes on its Acquisition of Clearsight Advisors

Bank of New York Mellon

Capital One

Business restructuring plans of major banks like Citigroup (C), Regions (RF) and BNY Mellon (BK) will aid their financials. JPMorgan (JPM) & Capital One (COF) settle their legal issues.

Bank Stock Roundup: C, RF, BK's Restructuring & JPM, COF's Legal Charges in Focus

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Regions Financial announced it will release its fourth quarter and full year 2021 financial results on Thursday, Jan. 20, 2022.

News for Regions Financial Stock (RF)