Regions Financial Corp. reported stronger-than-expected fourth-quarter results driven by strong revenues and a decline in allowance for credit losses.
Regions Financial’s (RF) 4Q earnings spiked 61% year-over-year to $0.61 per share and topped analysts’ expectations of $0.42 per share. The company’s revenue of $1.6 billion exceeded consensus estimates of $1.55 billion and grew 11.7% year-over-year.
The bank’s 4Q net interest margin (NIM), on a fully-taxable equivalent basis, declined to 3.13% from 3.39% in the year-ago period. At the end of the fourth quarter, average adjusted loans and leases increased 1.9% year-over-year, while average core deposits rose 26.7% year-over-year. The company said “the overall allowance reduction resulted in a net $38 million benefit to the credit loss provision during the fourth quarter.” (See RF stock analysis on TipRanks).
Following the 4Q results, Wedbush analyst Peter Winter maintained a Hold rating and a price target of $21 (18.4% upside potential) on the stock. The analyst said, “there will be challenges to generating positive operating leverage in 2021; which is the case for most banks. Net interest income projected to be down in 2021 due to a decline in average loans and margin pressure.”
Winter added, “the ability to grow NII and the resulting margin has to come from loan growth, plus the timing of PPP [paycheck protection program] forgiveness. Loan growth will be challenging in 2021 due to several consumer loan portfolios in runoff mode and a decline in PPP loans.”
Overall, the rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is based on 9 Buys, 6 Holds, and 1 Sell. The average analyst price target of $19 implies upside potential of about 7.1% to current levels. Shares have gained about 14.3% over the past year.
Furthermore, TipRanks data shows that financial bloggers have a bullish call on the stock.