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What's in the Cards for Regions Financial's (RF) Q2 Earnings?
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Regions Financial (RF - Free Report) is scheduled to report second-quarter 2022 results on Jul 22, before the opening bell. Although the bank’s earnings are expected to have declined from the year-ago reported figure, revenues are likely to have increased.
This Birmingham, AL-based player’s first-quarter 2022 earnings beat the Zacks Consensus Estimate on a rise in loan and deposit balances. Also, credit metrics were robust in the first quarter. However, falling fee income hurt overall revenue growth, while an expense rise affected the bottom line. Capital ratios continued to deteriorate in the quarter.
Regions Financial has a decent earnings surprise history. RF's results surpassed estimates in three of the trailing four quarters, missing the mark in the other, the average beat being 19.3%.
Regions Financial Corporation Price and EPS Surprise
RF’s activities in the to-be-reported quarter were inadequate to fuel analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings of 53 cents has moved marginally south in the past week. The figure indicates a 31.2% fall from the year-ago reported number. The consensus estimate for revenues is pegged at $1.66 billion, suggesting 6% growth from the year-ago reported figure.
Factors at Play
Loans: In the second quarter, lending activity improved sequentially. Per the Fed’s latest data, there was considerable strength in commercial lending in the second quarter, backed by commercial and industrial loans, and commercial real estate loans. Residential real estate loans and consumer loans also improved.
Amid this, the company’s commercial loans (comprising commercial and business lending, as well as commercial real estate lending), which are a notable part of its loan portfolio, are likely to have improved in the quarter under review.
Regions Financial is anticipated to have benefited from its strong loan pipeline and the past acquisition of EnerBank USA.
The Zacks Consensus Estimate of $145.9 billion for average interest-earning assets suggests a marginal increase from the prior quarter’s reported figure.
Net Interest Income (“NII”): In the second quarter, the Fed hiked interest rates by 50 basis points (bps) in May and another 75 bps in June. With this, the level of the policy rate reached 1.5-1.75%, the highest since just before the March 2020 pandemic. Hence, with the broader market environment remaining conducive for continued loan growth, $1.5 billion of securities added in the late first quarter and interest rate hikes, the bank’s NII and net interest margin (NIM) are likely to have improved in the quarter.
However, due to high pay downs and payoffs, interest income from the paycheck protection program (PPP) loans is expected to have declined.
The Zacks Consensus Estimate for NII is predicted to rise 6.8% to $1.08 billion sequentially.
Management expects NII to grow 6-8%.Adjusted NIM is expected to increase to 3.5% (excluding cash or PPP).
Non-Interest Revenues: The Russia-Ukraine war continued to dampen the equity market's performance. Investment management, and trust and investment services fees are likely to have been negatively impacted by a decrease in assets under management from outflows and lower equity market levels. This is likely to have decreased the company’s fee income.
Unlike the last several quarters, the deposit balance is not expected to have grown much in the second quarter. Also, Regions Financial removed overdraft protection transfer charges and non-sufficient funds fees from the end of the first quarter and second quarter of 2022. Such fee waivers are likely to have had an adverse impact on revenues from service charges on deposits.
Mortgage originations, both purchase and refinancing, continued to normalize in the second quarter. Mortgage banking revenues have been facing tough comps from the prior year, propelled by low mortgage rates.
However, mortgage rates increased in the second quarter. The climb in mortgage rates has been affecting origination volumes. Hence, the company is likely to have continued seeing declines in its mortgage banking fee. The ZCE for the same is pinned at $45.30 million, indicating a 5.6% sequential decline.
Deal-flow considerably dried in second-quarter 2022 due to fewer companies going public and stock price declines limiting equity deals. Also, a fall in investment banking activity due to subdued capital markets and a decline in debt issuance deal volume were seen. High market volatility, triggered by the Ukraine crisis, and uncertainty regarding an economic slowdown tied to inflation have continued to delay the finalization of deals in the June-end quarter.
With a decrease in global M&A volumes, the company’s capital market fees are likely to have been affected. Nonetheless, the company’s past acquisition of Clearsight and Sabal Capital Partners enhanced its capabilities in the M&A advisory services space. Hence, despite macro-economic headwinds, Regions Financial’s inorganic moves are anticipated to have helped it sail through the second quarter.
The Zacks Consensus Estimate for capital markets income is pinned at $84 million, indicating a 15% rise from the quarter-ago reported figure.
The Zacks Consensus Estimate for total non-interest income is pegged at $590 million for the quarter under review, indicating a 1% rise sequentially.
Expenses: A rising expense base, primarily due to higher salaries and benefits, as well as some inflationary pressures, is likely to have continued hurting the bottom line in the to-be-reported quarter. Further, recent acquisitions and investments in technology are likely to have hiked costs, thereby affecting bottom-line growth.
Asset Quality: With the anticipated rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, the company is anticipated to have built reserves in the second quarter.
Here is What Our Quantitative Model Predicts:
RF has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat this time around.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Regions Financial has an Earnings ESP of +0.89%.
Zacks Rank: Regions Financial currently carries a Zacks Rank of 3.
Other Bank Stocks Worth a Look
Here are a couple of other bank stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Truist Financial (TFC - Free Report) is +0.62% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 19.
Over the past week, the Zacks Consensus Estimate for TFC’s quarterly earnings has been revised marginally downward.
Image: Bigstock
What's in the Cards for Regions Financial's (RF) Q2 Earnings?
Regions Financial (RF - Free Report) is scheduled to report second-quarter 2022 results on Jul 22, before the opening bell. Although the bank’s earnings are expected to have declined from the year-ago reported figure, revenues are likely to have increased.
This Birmingham, AL-based player’s first-quarter 2022 earnings beat the Zacks Consensus Estimate on a rise in loan and deposit balances. Also, credit metrics were robust in the first quarter. However, falling fee income hurt overall revenue growth, while an expense rise affected the bottom line. Capital ratios continued to deteriorate in the quarter.
Regions Financial has a decent earnings surprise history. RF's results surpassed estimates in three of the trailing four quarters, missing the mark in the other, the average beat being 19.3%.
Regions Financial Corporation Price and EPS Surprise
Regions Financial Corporation price-eps-surprise | Regions Financial Corporation Quote
RF’s activities in the to-be-reported quarter were inadequate to fuel analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings of 53 cents has moved marginally south in the past week. The figure indicates a 31.2% fall from the year-ago reported number. The consensus estimate for revenues is pegged at $1.66 billion, suggesting 6% growth from the year-ago reported figure.
Factors at Play
Loans: In the second quarter, lending activity improved sequentially. Per the Fed’s latest data, there was considerable strength in commercial lending in the second quarter, backed by commercial and industrial loans, and commercial real estate loans. Residential real estate loans and consumer loans also improved.
Amid this, the company’s commercial loans (comprising commercial and business lending, as well as commercial real estate lending), which are a notable part of its loan portfolio, are likely to have improved in the quarter under review.
Regions Financial is anticipated to have benefited from its strong loan pipeline and the past acquisition of EnerBank USA.
The Zacks Consensus Estimate of $145.9 billion for average interest-earning assets suggests a marginal increase from the prior quarter’s reported figure.
Net Interest Income (“NII”): In the second quarter, the Fed hiked interest rates by 50 basis points (bps) in May and another 75 bps in June. With this, the level of the policy rate reached 1.5-1.75%, the highest since just before the March 2020 pandemic. Hence, with the broader market environment remaining conducive for continued loan growth, $1.5 billion of securities added in the late first quarter and interest rate hikes, the bank’s NII and net interest margin (NIM) are likely to have improved in the quarter.
However, due to high pay downs and payoffs, interest income from the paycheck protection program (PPP) loans is expected to have declined.
The Zacks Consensus Estimate for NII is predicted to rise 6.8% to $1.08 billion sequentially.
Management expects NII to grow 6-8%.Adjusted NIM is expected to increase to 3.5% (excluding cash or PPP).
Non-Interest Revenues: The Russia-Ukraine war continued to dampen the equity market's performance. Investment management, and trust and investment services fees are likely to have been negatively impacted by a decrease in assets under management from outflows and lower equity market levels. This is likely to have decreased the company’s fee income.
Unlike the last several quarters, the deposit balance is not expected to have grown much in the second quarter. Also, Regions Financial removed overdraft protection transfer charges and non-sufficient funds fees from the end of the first quarter and second quarter of 2022. Such fee waivers are likely to have had an adverse impact on revenues from service charges on deposits.
Mortgage originations, both purchase and refinancing, continued to normalize in the second quarter. Mortgage banking revenues have been facing tough comps from the prior year, propelled by low mortgage rates.
However, mortgage rates increased in the second quarter. The climb in mortgage rates has been affecting origination volumes. Hence, the company is likely to have continued seeing declines in its mortgage banking fee. The ZCE for the same is pinned at $45.30 million, indicating a 5.6% sequential decline.
Deal-flow considerably dried in second-quarter 2022 due to fewer companies going public and stock price declines limiting equity deals. Also, a fall in investment banking activity due to subdued capital markets and a decline in debt issuance deal volume were seen. High market volatility, triggered by the Ukraine crisis, and uncertainty regarding an economic slowdown tied to inflation have continued to delay the finalization of deals in the June-end quarter.
With a decrease in global M&A volumes, the company’s capital market fees are likely to have been affected. Nonetheless, the company’s past acquisition of Clearsight and Sabal Capital Partners enhanced its capabilities in the M&A advisory services space. Hence, despite macro-economic headwinds, Regions Financial’s inorganic moves are anticipated to have helped it sail through the second quarter.
The Zacks Consensus Estimate for capital markets income is pinned at $84 million, indicating a 15% rise from the quarter-ago reported figure.
The Zacks Consensus Estimate for total non-interest income is pegged at $590 million for the quarter under review, indicating a 1% rise sequentially.
Expenses: A rising expense base, primarily due to higher salaries and benefits, as well as some inflationary pressures, is likely to have continued hurting the bottom line in the to-be-reported quarter. Further, recent acquisitions and investments in technology are likely to have hiked costs, thereby affecting bottom-line growth.
Asset Quality: With the anticipated rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, the company is anticipated to have built reserves in the second quarter.
Here is What Our Quantitative Model Predicts:
RF has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat this time around.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Regions Financial has an Earnings ESP of +0.89%.
Zacks Rank: Regions Financial currently carries a Zacks Rank of 3.
Other Bank Stocks Worth a Look
Here are a couple of other bank stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for Truist Financial (TFC - Free Report) is +0.62% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 19.
Over the past week, the Zacks Consensus Estimate for TFC’s quarterly earnings has been revised marginally downward.
Citizens Financial Group (CFG - Free Report) is scheduled to release second-quarter 2022 earnings on Jul 19. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +5.22%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CFG’s quarterly earnings estimates have moved marginally downward over the past two months.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.