Under current CEO Grayson Hall who took over four years ago, Regions (RF) has cleaned up problem loans, cut costs, and boosted its presence in some thriving sectors of business lending, writes Lawrence Strauss in this week's Barron's, and is also making all the right moves in key growth fields like mobile banking and wealth management.
Yes, the first quarter was a hiccup as profits fell thanks to a decline in mortgage lending, but this was industry-wide and Regions is less dependent on residential mortgage business than peers (accounts for 16% of all loans at RF). Regions' focus is commercial and industrial loans, and these grew 11% Y/Y.
Interest rates? Regions - thanks to nearly industry-low funding costs - saw a boost in its net interest margin in Q1 while many competitors posted declines. And when rates do rise, the bank - says CEO Hall - is "better positioned than most" to benefit.
Then there's capital. The bank's Tier 1 ratio of 10.8% is roughly 300 basis points higher than required. Other than supporting continued loan growth, a 2% dividend, and a $350M buyback (approved by the Fed), the money is there for some real expansion. "You could see them using that capital via M&A to fill in a number of markets where they don't have the density they need," says Goldman's Ryan Nash.