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Regions Financial (RF) to Post Q3 Earnings: What's in Store?
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Regions FinancialCorporation (RF - Free Report) is scheduled to report third-quarter 2023 results on Oct 20, before the opening bell. The bank’s earnings and revenues are expected to have improved from the year-ago reported figures.
This Birmingham, AL-based player’s second-quarter 2023 earnings missed the Zacks Consensus Estimate on increasing expenses and provision for credit losses. Nonetheless, a rise in net interest income (“NII”) and average loan balances supported results to some extent.
Regions Financial has a disappointing earnings surprise history. Its earnings surpassed estimates in one of the trailing four quarters and missed thrice, the average negative beat being 2.07%.
Regions Financial Corporation Price and EPS Surprise
RF’s activities in the to-be-reported quarter were impressive to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of 59 cents per share has moved 1.7% north in the past week. The figure indicates a 5.4% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.88 billion, suggesting 1% growth from the prior-year reported figure.
Key Factors & Estimates for Q3
Loans: The challenging macroeconomic backdrop and high interest rates have hurt banks’ lending activities in the third quarter. Specifically, demand for commercial and industrial loans stayed muted in the quarter under review, per the Fed’s latest data.
The demand for commercial real estate loans declined in the quarter under review from second-quarter end. Given RF’s significant exposure to commercial loans, its loan growth in the third quarter is likely to have been affected. This is likely to have negatively influenced the average earning assets balance for the quarter.
Nonetheless, the Zacks Consensus Estimate for average interest-earning assets of $138.46 billion indicates a marginal increase from the last reported figure.
NII: The Federal Reserve raised interest rates by another 25 basis points in the quarter under review. Thus, the policy rate reached 5-5.25% in July 2023, marking the 11th FOMC interest rate hike in a tightening process that began in March 2022.
In September, the rate hike was paused. With this, interest rates reached a target of 5.25-5.5% in the third quarter, marking the highest level in around 22 years. Such high rates are likely to have positively impacted the company’s NII.
Despite the high interest rate environment, softer loan demand, inversion of the yield curve and higher deposit and wholesale funding costs are anticipated to have negatively impacted NII in the quarter to be reported.
Management expects NII to decline by around 5% sequentially. The Zacks Consensus Estimate for NII suggests a 4.7% sequential fall to $1.32 billion.
Non-Interest Income: As customers are likely to have migrated to higher-yielding alternatives, RF is expected to have witnessed a decline in deposit balances during the to-be-reported quarter. This is likely to have an adverse impact on revenues from service charges on deposits. The consensus estimate for the said metric of $139 million indicates a decline of 8.6% on a sequential basis.
Nonetheless, high inflation is expected to have increased card transactions, thereby supporting RF’s card and ATM fees in the quarter. The Zacks Consensus Estimate of $131 million implies a sequential increase of 1%.
Global deal-making witnessed a slight rebound in the third quarter, but on a year-over-year basis, merger and acquisition activities remained soft. Headwinds like geopolitical tensions, government shutdown, ‘sticky’ inflation, high interest rates and fears of a global economic slowdown continued to weigh on deal-making.
Thus, the deal volume and total value numbers crashed in the third quarter. Therefore, the company’s capital market income is likely to have been adversely impacted.
Nonetheless,management expects revenues from capital markets (excluding credit valuation adjustment and debit valuation adjustment) in the range of $60-$80 million. This marks an increase from $68 million recorded in the prior quarter. The Zacks Consensus Estimate is pegged at $70 million.
In the third quarter, mortgage rates continued to increase, with the rate on a 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing compared with the prior-year quarter.
These factors are likely to have weighed on RF’s mortgage income. Nonetheless, the Zacks Consensus Estimate for RF’s third-quarter 2023 mortgage income is pinned at $29.51 million, implying a 13.5% rise sequentially.
The Zacks Consensus Estimate for wealth management income is pegged at $111 million, suggesting a 1% rise from the prior quarter’s reported number.
Overall, the Zacks Consensus Estimate for total non-interest income is pinned at $567 million, indicating a 1.6% sequential decline.
Expenses:RF’s expenses are expected to have remained high in the third quarter due to general inflationary pressures. This is likely to have increased costs, whereas wage inflation is anticipated to have escalated personnel expenses, hurting the bottom line in the to-be-reported quarter.
Asset Quality: With expectations of a worsening macroeconomic outlook, growing recession risk and slower GDP growth, RF’s credit quality is likely to have deteriorated. Thus, it is expected to have built reserves in the third quarter. The Zacks Consensus Estimate for total non-performing assets of $532 million implies a 4.7% jump from the prior quarter.
Here is What Our Quantitative Model Predicts:
Our proven model predicts an earnings beat for Regions Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.
Earnings ESP: Regions Financial has an Earnings ESP of +0.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Regions Financial currently carries a Zacks Rank #3.
Other Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Cullen/Frost Bankers, Inc. (CFR - Free Report) are a couple of stocks you may want to consider, as they, too, have the right combination of elements to post an earnings beat in the upcoming release.
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Regions Financial (RF) to Post Q3 Earnings: What's in Store?
Regions Financial Corporation (RF - Free Report) is scheduled to report third-quarter 2023 results on Oct 20, before the opening bell. The bank’s earnings and revenues are expected to have improved from the year-ago reported figures.
This Birmingham, AL-based player’s second-quarter 2023 earnings missed the Zacks Consensus Estimate on increasing expenses and provision for credit losses. Nonetheless, a rise in net interest income (“NII”) and average loan balances supported results to some extent.
Regions Financial has a disappointing earnings surprise history. Its earnings surpassed estimates in one of the trailing four quarters and missed thrice, the average negative beat being 2.07%.
Regions Financial Corporation Price and EPS Surprise
Regions Financial Corporation price-eps-surprise | Regions Financial Corporation Quote
Regions Financial’s Price and EPS Surprise
RF’s activities in the to-be-reported quarter were impressive to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of 59 cents per share has moved 1.7% north in the past week. The figure indicates a 5.4% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.88 billion, suggesting 1% growth from the prior-year reported figure.
Key Factors & Estimates for Q3
Loans: The challenging macroeconomic backdrop and high interest rates have hurt banks’ lending activities in the third quarter. Specifically, demand for commercial and industrial loans stayed muted in the quarter under review, per the Fed’s latest data.
The demand for commercial real estate loans declined in the quarter under review from second-quarter end. Given RF’s significant exposure to commercial loans, its loan growth in the third quarter is likely to have been affected. This is likely to have negatively influenced the average earning assets balance for the quarter.
Nonetheless, the Zacks Consensus Estimate for average interest-earning assets of $138.46 billion indicates a marginal increase from the last reported figure.
NII: The Federal Reserve raised interest rates by another 25 basis points in the quarter under review. Thus, the policy rate reached 5-5.25% in July 2023, marking the 11th FOMC interest rate hike in a tightening process that began in March 2022.
In September, the rate hike was paused. With this, interest rates reached a target of 5.25-5.5% in the third quarter, marking the highest level in around 22 years. Such high rates are likely to have positively impacted the company’s NII.
Despite the high interest rate environment, softer loan demand, inversion of the yield curve and higher deposit and wholesale funding costs are anticipated to have negatively impacted NII in the quarter to be reported.
Management expects NII to decline by around 5% sequentially. The Zacks Consensus Estimate for NII suggests a 4.7% sequential fall to $1.32 billion.
Non-Interest Income: As customers are likely to have migrated to higher-yielding alternatives, RF is expected to have witnessed a decline in deposit balances during the to-be-reported quarter. This is likely to have an adverse impact on revenues from service charges on deposits. The consensus estimate for the said metric of $139 million indicates a decline of 8.6% on a sequential basis.
Nonetheless, high inflation is expected to have increased card transactions, thereby supporting RF’s card and ATM fees in the quarter. The Zacks Consensus Estimate of $131 million implies a sequential increase of 1%.
Global deal-making witnessed a slight rebound in the third quarter, but on a year-over-year basis, merger and acquisition activities remained soft. Headwinds like geopolitical tensions, government shutdown, ‘sticky’ inflation, high interest rates and fears of a global economic slowdown continued to weigh on deal-making.
Thus, the deal volume and total value numbers crashed in the third quarter. Therefore, the company’s capital market income is likely to have been adversely impacted.
Nonetheless,management expects revenues from capital markets (excluding credit valuation adjustment and debit valuation adjustment) in the range of $60-$80 million. This marks an increase from $68 million recorded in the prior quarter. The Zacks Consensus Estimate is pegged at $70 million.
In the third quarter, mortgage rates continued to increase, with the rate on a 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing compared with the prior-year quarter.
These factors are likely to have weighed on RF’s mortgage income. Nonetheless, the Zacks Consensus Estimate for RF’s third-quarter 2023 mortgage income is pinned at $29.51 million, implying a 13.5% rise sequentially.
The Zacks Consensus Estimate for wealth management income is pegged at $111 million, suggesting a 1% rise from the prior quarter’s reported number.
Overall, the Zacks Consensus Estimate for total non-interest income is pinned at $567 million, indicating a 1.6% sequential decline.
Expenses:RF’s expenses are expected to have remained high in the third quarter due to general inflationary pressures. This is likely to have increased costs, whereas wage inflation is anticipated to have escalated personnel expenses, hurting the bottom line in the to-be-reported quarter.
Asset Quality: With expectations of a worsening macroeconomic outlook, growing recession risk and slower GDP growth, RF’s credit quality is likely to have deteriorated. Thus, it is expected to have built reserves in the third quarter. The Zacks Consensus Estimate for total non-performing assets of $532 million implies a 4.7% jump from the prior quarter.
Here is What Our Quantitative Model Predicts:
Our proven model predicts an earnings beat for Regions Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.
Earnings ESP: Regions Financial has an Earnings ESP of +0.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Regions Financial currently carries a Zacks Rank #3.
Other Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Cullen/Frost Bankers, Inc. (CFR - Free Report) are a couple of stocks you may want to consider, as they, too, have the right combination of elements to post an earnings beat in the upcoming release.
The Earnings ESP for FCNCA is +3.85% and the stock currently carries a Zacks Rank #2. It is slated to report third-quarter 2023 results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s third-quarter earnings has moved 2.7% north over the past 30 days.
CFR currently has an Earnings ESP of +1.00% and a Zacks Rank #3. It is scheduled to release third-quarter 2023 results on Oct 26.
The Zacks Consensus Estimate for CFR’s third-quarter earnings has increased marginally over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.