Regions Financial Has Capital To Spare, But What About Quality?
Stephen Simpson, CFA
Stephen Simpson, CFA
Regions Financial: Double-Digit Upside As Southern Recovery Continues
Helix Investment Research
Helix Investment Research
Tue, May 24, 10:22 AM
- Stocks had already started the morning nicely in the green, but a blowout new home sales number for April has the homebuilders higher by about 2.5%, and the major indexes up by more than 1%.
- It's also got traders upping bets on a June rate hike, with another move to follow before year-end. That's boosting the yield-starved financials (XLF +1.5%), particularly the banks (KBE +2%).
- Among the financial movers: Bank of America (BAC +1.4%), JPMorgan (JPM +1.9%), Regions Financial (RF +1.8%), Fifth Third (FITB +2.1%), E*Trade (ETFC +2.9%), Interactive Brokers (IBKR +2.6%), MetLife (MET +1.8%), Prudential (PRU +2.2%), Lincoln National (LNC +1.8%), State Street (STT +2.1%)
Wed, May 18, 1:08 PM
- The meme of rates lower for longer has been stood on its head in the last 24 hours thanks to some decent economic data, but also surprisingly hawkish Fedspeak yesterday.
- The fixed-income world now believes remarks from the Fed's Williams and Lockhart yesterday may have been a preview of what we'll get when the real power speaks tomorrow - Fischer and Dudley - and then on May 27, when Janet Yellen gives a speech.
- Up at 2 ET are the minutes from the FOMC's April meeting.
- The 10-year yield is higher by five basis points to 1.82% and short-term rate markets have upped expectations for a Fed move this year.
- XLF +1.85%, KBE +3.15%, KRE +3.3%
- Bank of America (BAC +3.7%), Citigroup (C +4.2%), JPMorgan (JPM +3.2%), Wells Fargo (WFC +2.1%), U.S. Bancorp (USB +2.1%), Regions (RF +3.3%), KeyCorp (KEY +3.7%), PNC Financial (PNC +2.7%), Fifth Third (FITB +3.7%), Capital One (COF +1.9%), E*Trade (ETFC +4.4%), Schwab (SCHW +4.8%), MetLife (MET +2.9%), Prudential (PRU +3.4%), Lincoln National (LNC +4.2%), BNY Mellon (BK +2.3%), Northern Trust (NTRS +2.9%)
Thu, Apr. 21, 4:33 PM
Fri, Apr. 15, 7:31 AM
- Q1 net income from continuing operations of $257M or $0.20 per share vs. $220M and $0.16 one year ago.
- Average loans and leases of $82B up 5% Y/Y. Average deposits up 2%. Net interest income of $862M up 5.8%. NIM of 3.19% up 11 basis points from last quarter and one basis points from a year ago.
- Noninterest income of $506M up 7.7% Y/Y. Mortgage income of $38M down from $40M. Wealth Management income of $106M up from $98M. Card and ATM fees of $95M up from $85M. Capital markets income of $41M jumps from $20M.
- Adjusted noninterest expense of $843M vs. $840M a year ago.
- Net loan charge-offs as a percent of average loans of 0.34% down four basis points from Q4, up six basis points from a year ago. Nonaccural loans of 1.22% up 26 bps from Q4, and 20 bps from a year ago. Total criticized and classified loans (business services) of $3.625M vs. $3.371M in Q4 and $2.824M a year ago - energy related.
- CET1 ratio of 10.9% flat from Q4, down 50 bps from ay ear ago. TBVPS of $8.97 vs. $8.52 in Q4 and $8.39 a year ago.
- Previously: Regions Financial beats by $0.01, beats on revenue (April 15)
- RF flat premarket
- Now read: Regions Financial Has Capital To Spare, But What About Quality?
Fri, Apr. 15, 6:03 AM
Thu, Apr. 14, 5:30 PM
Tue, Apr. 12, 3:05 PM
- “Let’s not sugarcoat it, this is not necessarily a loan a bank wants to make at this point,” says Evercore ISI's Glenn Schorr, talking about loans banks have committed to for energy companies, but upon which those firms have not yet drawn.
- In Q1, energy borrowers announced draws of more than $3B on these loans, saddling banks with maybe more exposure to the sector than they or their investors would like right now.
- Citigroup (NYSE:C), for example, has about $20B in funded energy loan exposure, but commitments for nearly another $40B. Bank of America (NYSE:BAC) has loans of just over $20B and commitments for another $20B-plus. Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), SunTrust (NYSE:STI), Comerica (NYSE:CMA), Regions Financial (NYSE:RF), and KeyCorp (NYSE:KEY) are showing similar stories (though mostly smaller amounts). Add it up, and there's $147B of unfunded loans disclosed by the ten of the largest U.S. banks.
Thu, Apr. 7, 3:09 PM
- The 10-year Treasury yield at 1.69% has returned back to levels not seen since the panicky action in mid-February. And while the Fed has marked down its expectation of rate hikes this year to just two, short-term interest rate markets haven't even priced in one.
- This leaves those whose business model depends on riding the yield curve having to contend with not only a middling macro picture, but - once again - a rates lower for longer picture (although Jamie Dimon says his big fear is that markets aren't pricing in nearly enough in the way of higher rates).
- Citigroup (C -4.1%), Bank of America (BAC -3.3%), U.S. Bancorp (USB -2.8%), KeyCorp (KEY -3.4%), Regions Financial (RF -3.4%), BNY Mellon (BK -3.6%), E*Trade (ETFC -4.7%), Manulife (MFC -5.2%), Lincoln National (LNC -3.6%)
Thu, Apr. 7, 12:44 PM
- "We are confident in the capital strength of the large and mid-cap banks - and with that, their capacity for increased capital returns," says Credit Suisse's Susan Roth Katzke.
- Stronger balance sheets, she says, should outweigh what is a harsher adverse scenario from the Fed.
- Roth and team see a total net capital return increase of 77% vs. 58% in 2015, with a median payout ratio of 31% vs. 27%. Incremental dollars should be skewed to buybacks given cheap stock valuations and the Fed's preference for the flexibility afforded by repurchases.
- Best positioned for the highest capital return are Morgan Stanley (NYSE:MS), Regions Financial (NYSE:RF), Goldman Sachs (NYSE:GS), Fifth Third Bancorp (NASDAQ:FITB), PNC Financial (NYSE:PNC), and U.S. Bancorp (NYSE:USB).
- The highest incremental capital returns should come from Zions Bancorp (NASDAQ:ZION), Citigroup (NYSE:C), Bank of America (NYSE:BAC), and M&T Bank (NYSE:MTB).
- The lower end of payout ratios should fall on Huntington Bancshares (NASDAQ:HBAN) and Bank of America.
- Now read: Sell The Banks: The Invisible Hand Is Broken (April 4)
Tue, Apr. 5, 1:23 PM
- The Department of Labor this week is expected to release final regulations requiring brokers to act with a fiduciary standard - that is act solely in the best interest of their client. Previously, recommendations only had to be "suitable" for clients - a less rigorous standard allowing excessive fees, and investments with hidden commissions.
- Investors now paying trading commissions will likely be moved into accounts where brokers collect fees based on AUM. Popular, but costly products like variable annuities, commodity pools and non-tradable REITs might no longer find a home in retirement accounts. They'll be replaced with low-cost index funds.
- Whether it all works out for the little guy remains to be seen, but one thing is sure: Regulatory costs will be on the rise, something larger shops - think Merrill Lynch (NYSE:BAC) and Morgan Stanley (NYSE:MS) - are going to be able to absorb better than smaller players who are more reliant on commissions - think LPL Financial (NASDAQ:LPLA) and Raymond James (NYSE:RF).
- Big providers of index mutual funds and ETFs are winners as well - BlackRock (NYSE:BLK), T. Rowe Price (NASDAQ:TROW), and WisdomTree (NASDAQ:WETF) fit the bill. Active mutual fund houses like Franklin Resources (NYSE:BEN), Legg Mason (NYSE:LM), and Waddell & Reed (NYSE:WDR), not so much.
- Insurers who are big providers are variable annuities could also be pressured - Ameriprise (NYSE:AMP), Lincoln National (NYSE:LNC), MetLife (NYSE:MET), Prudential (NYSE:PRU).
- Now read: Congratulations To All The New Fiduciary FAs Out There: Financial Advisors' Daily Digest (April 4)
Tue, Apr. 5, 10:05 AM
- In a research note to clients, Goldman noted that investors typically over-penalize declining profitability. To wit, the S&P 500 currently trades slightly above its 2014 year-end level of 2,059, but its P/B ratio is 4% lower at 2.7x.
- Goldman recommends clients consider the following stocks with low P/B ratios:
- AIG - P/B of 0.73, implied upside 22%.
- BAC - P/B of 0.89, implied upside 26%.
- C - P/B of 0.7, implied upside 25%.
- CFG - P/B of 0.89, implied upside 24%.
- HES - P/B of 0.8, implied upside 29%.
- LNC - P/B of 0.92, implied upside 17%.
- RF - P/B of 0.96, implied upside 34%.
- ZION - P/B of 0.88, implied upside 24%.
- Now read Best-Performing Value Strategies: The Price-To-Book Ratio »
Tue, Mar. 29, 2:49 PM
- Not joining the broad market rally following Janet Yellen's caution on the pace of rate hikes are the financials (XLF -0.2%), where any earnings growth will depend, in part, on higher interest rates.
- The S&P 500 is higher by 0.85% and Nasdaq by 1.7%, but Bank of America (BAC -2.2%), Citigroup (C -1%), Wells Fargo (WFC -1.5%), Regions Financial (RF -2.1%), KeyCorp (KEY -1.8%), Fifth Third (FITB -2.1%), MetLife (MET -1.2%), and Prudential (PRU -0.8%) are among those under pressure.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, IYG, SEF, FNCL, FXO, RYF, FINU, RWW, FINZ, XLFS
- Previously: Stocks and gold turn higher, yields and dollar lower, on Yellen remarks (March 29)
- Previously: Yellen signals caution on rate hikes (March 29)
Wed, Mar. 16, 2:28 PM
- Rallying hard for the last few weeks alongside the markets and hope for a faster pace of rate hikes, the financials (XLF -0.4%) are the worst-performing sector in the minutes after the FOMC's dovish statement and economic/rate projections.
- Bank of America (BAC -2.6%), Morgan Stanley (MS -1.9%), Wells Fargo (WFC -0.9%), Citigroup (C -1.4%), Regions (RF -1.7%), PNC (PNC -1.2%), Fifth Third (FITB -1.9%), Schwab (SCHW -2.5%), MetLife (MET -0.4%)
- Previously: Stocks, bonds, gold gain, dollar slides, following Fed (March 16)
- Previously: Fed bows to markets (March 16)
- Previously: Fed stays on hold, sees just two rate hikes this year (March 16)
Tue, Feb. 23, 2:38 PM
- Holding its investor day today, JPMorgan said it was going to add another $500M to energy-related loan-loss reserves. This followed a $67M provision in Q4, which at the time brought total oil and gas loss reserves to $815M (vs. a portfolio with book value of $44B).
- In addition, the bank said it could need to add another $1.5B to reserves should oil hang around $25 per barrel over the next 18 months. For perspective, prior to Q4, JPMorgan hadn't had to add to reserves for six years - in fact reserve releases were a big boost to profits across the industry.
- "When the biggest bank increases reserves for potential oil losses it sets a tone for the industry,” says Mike Mayo.
- Separately, the FDIC says bad loan provisions across the banking sector were $3.8B higher in Q4 than a year earlier.
- JPMorgan (JPM -3.5%), Citigroup (C -2.9%), Bank of America (BAC -2.9%), Wells Fargo (WFC -2%), U.S. Bancorp (USB -3%), Regions Financial (RF -3.8%), Comerica (CMA -4.2%), Zions (ZION -4.1%), PNC Financial (PNC -2%).
- ETFs: KRE, KBE, IAT, KBWB, QABA, KBWR, KRU, KRS
Thu, Feb. 11, 4:35 PM
Thu, Feb. 11, 11:10 AM
Regions Financial Corp. operates as a bank holding company for Regions Bank. The company through its bank 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,... More
Industry: Regional - Southeast Banks
Country: United States
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