On Jun 12, 2014, we issued an updated research report on Regions Financial Corporation (RF). This Alabama-based bank exhibits decent fundamentals amid a competitive banking environment while its strong capital position should help it remain competitive.
Regions’ solid capital position is reflected through its successful clearance of the 2014 stress test. As of Mar 31, 2014, the company’s Tier 1 capital ratio was 11.9%, Tier 1 common ratio was 11.4% and Basel III Tier 1 common equity ratio was estimated at 10.8%, well above the regulatory requirements. We believe its robust capital position not only gives it an edge over its peers but paves the way to invest in strategic acquisitions in the future.
Further, following the Federal Reserve’s approval of its 2014 capital plan, Regions increased its quarterly common stock dividend by 66.7% in Apr 2014. Also, it announced a share repurchase program under which it would be able to buy back shares worth up to $350 million through Mar 31, 2015. These efforts will continue to boost investors’ confidence.
Regions’ first-quarter 2014 earnings from continuing operations of 21 cents per share outpaced the Zacks Consensus Estimate by 5.0%. Results were aided by an increase in net interest income and reduced non-interest expenses. However, lower non-interest income was on the flipside.
Despite the positives, we remain cautious owing to several issues faced by Regions. These include the persistent decline in non-interest income, litigation issues and the prevailing stringent regulatory landscape.
Analysts’ mixed stance on the stock was reflected in the movement of the Zacks Consensus Estimate over the past 60 days. For 2014, the Zacks Consensus Estimate moved north 1.2% to 86 cents per share while it remained stable at 91 cents per share for 2015.
Regions Bank currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Capital City Bank Group Inc. (CCBG), Middleburg Financial Corporation (MBRG) and Midsouth Bancorp Inc. (MSL) are among the better-ranked stocks in the Banks-Southeast space. All these stocks hold a Zacks Rank #1 (Strong Buy).
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