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Regions (RF) Reflects Mixed Revenue Picture & Cost Control
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The recent Fed rate hike and the Trump effect have led banking stocks to rally. Regions Financial Corporation (RF - Free Report) is one such stock. Though the company exhibits mixed prospects for revenue growth, cost-saving initiatives are expected to support bottom-line growth. However, strict regulations and litigation issues remain concerns.
Cost control throughout the current year and expansions aided the company to surge 51.7% compared with the 41.9% growth for the Zacks categorized Southeast Bank industry.
However, the company’s earnings estimates have remained stable for the current year, for the last 30 days. As a result, it carries a Zacks Rank #3 (Hold).
Though Regions continues to benefit from an improved funding mix and lower deposit costs, the company has been struggling with declining margins in the first nine months of 2016. However, an environment of rising rates should support NIM growth. Notably, following the recent Fed rate hike, the company raised its prime lending rate to 3.75% from 3.50%.
Management remains optimistic regarding growth in net interest income, led by a rise in short-term rates as well as an increase in loan balances. However, performance of non-interest income is likely to largely impact the company’s revenue growth. While non-interest income increased in the first three quarters of 2016, it exhibited a negative CAGR of 1.8% for the last five years (2011–2015). This portrays a mixed revenue picture for Regions.
Regions remains focused on growth through inorganic routes as well. In Oct 2016, the company acquired the Low Income Housing Tax Credit (LIHTC) corporate fund syndication and asset management businesses of First Sterling Financial, Inc. Earlier in 2015, the company had acquired BlackArch Partners, in efforts to boost its M&A advisory services and The A.I Group, Inc. to expand its insurance business.
Owing to the current global macroeconomic headwinds, management’s plan to curb $300 million of core expenses, over the next three years, is on track. We anticipate management to face difficulties in its aim to achieve the same, as stringent regulations are likely to reduce fee income growth and flare up compliance costs, apart from imposing a number of other restrictions.
Stocks to Consider
Some better-ranked stocks in the finance space include The Goldman Sachs Group, Inc. (GS - Free Report) , Zions Bancorporation (ZION - Free Report) and Comerica Incorporated (CMA - Free Report) .
Goldman has witnessed an upward earnings estimate revision of 2.2% for the current year, for the past 30 days. Its share price has risen 33.5%, year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comerica also boasts a Zacks Rank #1. Its Zacks Consensus Estimate for the current year has been revised slightly upward over the last 30 days. Its share price has increased 64.1% year to date.
Zions carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of 3.8% for the current year, over the past 90 days. Year to date, its share price is up 58.5%.
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Regions (RF) Reflects Mixed Revenue Picture & Cost Control
The recent Fed rate hike and the Trump effect have led banking stocks to rally. Regions Financial Corporation (RF - Free Report) is one such stock. Though the company exhibits mixed prospects for revenue growth, cost-saving initiatives are expected to support bottom-line growth. However, strict regulations and litigation issues remain concerns.
Cost control throughout the current year and expansions aided the company to surge 51.7% compared with the 41.9% growth for the Zacks categorized Southeast Bank industry.
However, the company’s earnings estimates have remained stable for the current year, for the last 30 days. As a result, it carries a Zacks Rank #3 (Hold).
Though Regions continues to benefit from an improved funding mix and lower deposit costs, the company has been struggling with declining margins in the first nine months of 2016. However, an environment of rising rates should support NIM growth. Notably, following the recent Fed rate hike, the company raised its prime lending rate to 3.75% from 3.50%.
Management remains optimistic regarding growth in net interest income, led by a rise in short-term rates as well as an increase in loan balances. However, performance of non-interest income is likely to largely impact the company’s revenue growth. While non-interest income increased in the first three quarters of 2016, it exhibited a negative CAGR of 1.8% for the last five years (2011–2015). This portrays a mixed revenue picture for Regions.
Regions remains focused on growth through inorganic routes as well. In Oct 2016, the company acquired the Low Income Housing Tax Credit (LIHTC) corporate fund syndication and asset management businesses of First Sterling Financial, Inc. Earlier in 2015, the company had acquired BlackArch Partners, in efforts to boost its M&A advisory services and The A.I Group, Inc. to expand its insurance business.
Owing to the current global macroeconomic headwinds, management’s plan to curb $300 million of core expenses, over the next three years, is on track. We anticipate management to face difficulties in its aim to achieve the same, as stringent regulations are likely to reduce fee income growth and flare up compliance costs, apart from imposing a number of other restrictions.
Stocks to Consider
Some better-ranked stocks in the finance space include The Goldman Sachs Group, Inc. (GS - Free Report) , Zions Bancorporation (ZION - Free Report) and Comerica Incorporated (CMA - Free Report) .
Goldman has witnessed an upward earnings estimate revision of 2.2% for the current year, for the past 30 days. Its share price has risen 33.5%, year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comerica also boasts a Zacks Rank #1. Its Zacks Consensus Estimate for the current year has been revised slightly upward over the last 30 days. Its share price has increased 64.1% year to date.
Zions carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of 3.8% for the current year, over the past 90 days. Year to date, its share price is up 58.5%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>