We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Soft Fee Income to Impede Regions Financial's (RF) Q3 Earnings
Read MoreHide Full Article
Regions FinancialCorporation (RF - Free Report) is scheduled to report third-quarter 2022 results on Oct 21, 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 second-quarter 2022 earnings beat the Zacks Consensus Estimate on a rise in fee income and net interest income (NII). Average loan and deposit balances also improved. However, rising expenses and provision for credit losses 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 10.1%.
Regions Financial Corporation Price and EPS Surprise
RF’s activities in the to-be-reported quarter were adequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of 59 cents per share has moved marginally north in the past week. The figure indicates a 10.6% fall from the year-ago reported number. The consensus estimate for revenues is pegged at $1.81 billion, suggesting 12.1% growth from the year-ago reported figure.
Factors at Play
Loans: While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. Amid this, the company’s commercial loans (comprising commercial and industrial lending, as well as commercial real estate lending), which are notable parts 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.
NII: In the third quarter, the Fed hiked interest rates by 150 basis points (bps). With this, the level of the policy rate reached 3-3.25%, the highest since 2008. Hence, with Regions Financial’s solid asset-sensitive position, $1.2 billion securities added in the second quarter and decent loan growth, the bank is expected to have seen NII and net interest margin (NIM) improvements in the quarter.
The Zacks Consensus Estimate for NII suggests a rise of 10.6% to $1.22 billion sequentially. Management expects third-quarter NII to grow 8-10%.
Non-Interest Revenues: Geopolitical tensions and uncertainty due to recession fears have dampened the equity market performance. Wealth management income is likely to have declined due to this.
The fading stimulus, rising rates and high inflation are expected to have increased transactions and spend volumes, thereby supporting card and ATM fees in the quarter.
The removal of overdraft protection transfer charges and non-sufficient funds fees are likely to have had an adverse impact on revenues from service charges on deposits.
Mortgage originations, both purchase and refinancing, continued to decline in the third quarter. Also, in the third quarter, mortgage rates increased, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has taken a toll on the origination market. Hence, the company is likely to have continued seeing declines in its mortgage banking fee. The ZCE for the same is pinned at $41.84 million, indicating an 11% sequential decline.
Global deal-making shrank for the third consecutive quarter. Raging inflation, the equity markets’ rout and fears of a recession dealt a blow to business sentiments and plans for expansion via acquisitions. Thus, deal volume and total value numbers crashed in the third quarter.
With a decrease in global mergers and acquisition volumes, the company’s capital market income is likely to have been affected. The Zacks Consensus Estimate for capital market income is pinned at $91 million, indicating an 18.8% decline from the quarter-ago reported figure.
The Zacks Consensus Estimate for total non-interest income is pegged at $584 million for the quarter under review, indicating an 8.7% fall 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. Recent acquisitions and investments in technology are likely to have hiked costs, thereby affecting bottom-line growth.
In the third quarter, Regions Financial wasasked by the U.S. Consumer Financial Protection Bureau (“CFPB”) to pay $191 million in redressal and fines for levying illegal overdraft fees on customer accounts from 2018 to 2021.The financial impacts of the settlement will be reflected in RF’s third-quarter 2022 results and will result in higher expenses.
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 third quarter.
Here is What Our Quantitative Model Predicts:
RF does not have 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 -0.40%.
A few finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp (ASB - Free Report) and BankUnited (BKU - Free Report) .
Associated Banc-Corp is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
Image: Bigstock
Soft Fee Income to Impede Regions Financial's (RF) Q3 Earnings
Regions Financial Corporation (RF - Free Report) is scheduled to report third-quarter 2022 results on Oct 21, 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 second-quarter 2022 earnings beat the Zacks Consensus Estimate on a rise in fee income and net interest income (NII). Average loan and deposit balances also improved. However, rising expenses and provision for credit losses 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 10.1%.
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 adequate to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of 59 cents per share has moved marginally north in the past week. The figure indicates a 10.6% fall from the year-ago reported number. The consensus estimate for revenues is pegged at $1.81 billion, suggesting 12.1% growth from the year-ago reported figure.
Factors at Play
Loans: While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. Amid this, the company’s commercial loans (comprising commercial and industrial lending, as well as commercial real estate lending), which are notable parts 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.
NII: In the third quarter, the Fed hiked interest rates by 150 basis points (bps). With this, the level of the policy rate reached 3-3.25%, the highest since 2008. Hence, with Regions Financial’s solid asset-sensitive position, $1.2 billion securities added in the second quarter and decent loan growth, the bank is expected to have seen NII and net interest margin (NIM) improvements in the quarter.
The Zacks Consensus Estimate for NII suggests a rise of 10.6% to $1.22 billion sequentially. Management expects third-quarter NII to grow 8-10%.
Non-Interest Revenues: Geopolitical tensions and uncertainty due to recession fears have dampened the equity market performance. Wealth management income is likely to have declined due to this.
The fading stimulus, rising rates and high inflation are expected to have increased transactions and spend volumes, thereby supporting card and ATM fees in the quarter.
The removal of overdraft protection transfer charges and non-sufficient funds fees are likely to have had an adverse impact on revenues from service charges on deposits.
Mortgage originations, both purchase and refinancing, continued to decline in the third quarter. Also, in the third quarter, mortgage rates increased, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has taken a toll on the origination market. Hence, the company is likely to have continued seeing declines in its mortgage banking fee. The ZCE for the same is pinned at $41.84 million, indicating an 11% sequential decline.
Global deal-making shrank for the third consecutive quarter. Raging inflation, the equity markets’ rout and fears of a recession dealt a blow to business sentiments and plans for expansion via acquisitions. Thus, deal volume and total value numbers crashed in the third quarter.
With a decrease in global mergers and acquisition volumes, the company’s capital market income is likely to have been affected. The Zacks Consensus Estimate for capital market income is pinned at $91 million, indicating an 18.8% decline from the quarter-ago reported figure.
The Zacks Consensus Estimate for total non-interest income is pegged at $584 million for the quarter under review, indicating an 8.7% fall 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. Recent acquisitions and investments in technology are likely to have hiked costs, thereby affecting bottom-line growth.
In the third quarter, Regions Financial wasasked by the U.S. Consumer Financial Protection Bureau (“CFPB”) to pay $191 million in redressal and fines for levying illegal overdraft fees on customer accounts from 2018 to 2021.The financial impacts of the settlement will be reflected in RF’s third-quarter 2022 results and will result in higher expenses.
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 third quarter.
Here is What Our Quantitative Model Predicts:
RF does not have 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 -0.40%.
Zacks Rank: Regions Financial currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank Stocks Worth a Look
A few finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp (ASB - Free Report) and BankUnited (BKU - Free Report) .
Associated Banc-Corp is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.