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Regions (RF) Reflects Effective Cost Control: Time to Hold?
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In the Q1 earnings season, the Finance sector turned out to be one of the best performers. So, we thought of bringing up a stock from the sector that reflects strong fundamentals and solid long-term growth opportunities.
Regions Financial Corporation (RF - Free Report) is one such stock. Though the company displays mixed prospects for revenue growth, cost-saving initiatives are anticipated 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 45.9% compared with 33.6% growth recorded by the Zacks categorized Southeast Banks industry.
However, the company’s earnings estimates remained unchanged for the current year, for the last 30 days. As a result, it carries a Zacks Rank #3 (Hold).
Improved funding mix augurs well and Regions Financial continues to benefit from lower deposit costs, reduced non-accrual levels and a decline in low-yielding interest earning assets. Net interest margin (NIM) improved in first-quarter 2017 and in 2016. Notably, improvements in deposit and borrowing costs have eased NIM compression to some extent. Further, an environment of rising rates is likely to support NIM growth. Notably, following the Mar 2017 Fed rate hike, the company further raised its prime lending rate to 4.00% from 3.75%.
Regions Financial has been undertaking initiatives to increase its revenues, but the muted growth in non-interest income has been weighing over the top line for the last few years. Though fee income increased in first-quarter 2017 and in 2016, it witnessed a negative CAGR of 1.8% for the last five years (2011-2015).
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 acquired BlackArch Partners, in an effort 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 by 2018 is on track. Additionally, encouraged by recent increases in market interest rates, management expects to eliminate additional $100 million by 2019. We expect 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
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock jumped over 10% over the past six months. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 10%. It boasts a Zacks Rank #2 (Buy).
Northern Trust Corporation (NTRS - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 6.9% over the last six months. It presently holds a Zacks Rank #2.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth.
Image: Bigstock
Regions (RF) Reflects Effective Cost Control: Time to Hold?
In the Q1 earnings season, the Finance sector turned out to be one of the best performers. So, we thought of bringing up a stock from the sector that reflects strong fundamentals and solid long-term growth opportunities.
Regions Financial Corporation (RF - Free Report) is one such stock. Though the company displays mixed prospects for revenue growth, cost-saving initiatives are anticipated 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 45.9% compared with 33.6% growth recorded by the Zacks categorized Southeast Banks industry.
However, the company’s earnings estimates remained unchanged for the current year, for the last 30 days. As a result, it carries a Zacks Rank #3 (Hold).
Improved funding mix augurs well and Regions Financial continues to benefit from lower deposit costs, reduced non-accrual levels and a decline in low-yielding interest earning assets. Net interest margin (NIM) improved in first-quarter 2017 and in 2016. Notably, improvements in deposit and borrowing costs have eased NIM compression to some extent. Further, an environment of rising rates is likely to support NIM growth. Notably, following the Mar 2017 Fed rate hike, the company further raised its prime lending rate to 4.00% from 3.75%.
Regions Financial has been undertaking initiatives to increase its revenues, but the muted growth in non-interest income has been weighing over the top line for the last few years. Though fee income increased in first-quarter 2017 and in 2016, it witnessed a negative CAGR of 1.8% for the last five years (2011-2015).
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 acquired BlackArch Partners, in an effort 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 by 2018 is on track. Additionally, encouraged by recent increases in market interest rates, management expects to eliminate additional $100 million by 2019. We expect 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
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock jumped over 10% over the past six months. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 10%. It boasts a Zacks Rank #2 (Buy).
Northern Trust Corporation (NTRS - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 6.9% over the last six months. It presently holds a Zacks Rank #2.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth.
Download this IPO Watch List today for free >>