Regions Financial (RF Quick QuoteRF - Free Report) is scheduled to report first-quarter 2020 results on Apr 17, before the opening bell. The bank’s results are estimated to reflect a year-over-year decline in earnings, while revenues are likely to display growth.

This Birmingham, AL-based company’s fourth-quarter 2019 earnings surpassed the Zacks Consensus Estimate. Results benefited from an improvement in revenues. The company’s balance-sheet position remained strong in the quarter. However, higher expenses and a rise in provisions were major drags.

Notably, Regions has a decent earnings surprise history. The company's results surpassed the consensus estimate in one of the trailing four quarters and came in line in the other three, the average positive surprise being 0.64%.

Nonetheless, the company’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, its Zacks Consensus Estimate for first-quarter earnings has been revised downward in the last seven days. This suggests a year-over-year plunge of 48.7%. The Zacks Consensus Estimate for sales of $1.45 billion indicates a 0.1% increase from the prior-year quarter’s reported tally.
 

Regions Financial Corporation Price and EPS Surprise

Regions Financial Corporation price-eps-surprise | Regions Financial Corporation Quote

Now let’s discuss the factors that are likely to have impacted the company’s first-quarter results:

Factors at Play

Loan Growth: Per the Fed’s latest data, the loan balance is likely to have been high on a sequential basis for the March-end quarter, supported by rise in commercial and industrial (C&I), real estate and consumer loans in the first two months of the quarter. However, a marginal decline in the consumer loan demand in March due to the virus outbreak and the soft demand for corporate loans as an uncertain economic environment which resulted in lower business activities, hurting new investments, might have played spoilsport.

Notably, management’s anticipations of loan growth in 2020 will likely be reflected in the quarterly results. Management expects full-year 2020 average loan balances to remain relatively stable on a reported basis and grow in the low single-digit on an adjusted basis. This increase is anticipated to be aided by business services lending, specifically C&I loan with modest growth in owner-occupied commercial real estate and investor real estate. Within consumer lending, growth is anticipated in residential mortgage, indirect to other, card and direct lending.

Muted Net Interest Income Growth: The Fed slashed interest rates to near zero this March, in order to shield the U.S. economy from the coronavirus-related mayhem. This is likely to have substantially hurt the company’s net interest margin and net interest income. Also, low deposit costs might have been an offsetting factor for margins.

Moreover, a soft lending scenario is predicted to have curtailed growth in net interest income to some extent. However, the Zacks Consensus Estimate for average interest earning assets of $109.2 billion for the quarter indicates a marginal sequential improvement, while the NII is expected to decline 1.2% to $920 million.

Dismal Non-Interest Revenues: Due to the pandemic, a slowdown in economic activity in the quarter is likely to have strained fee income. Lower consumer spending might have hurt card fees toward the tail end of the quarter. In addition, the Federal Reserve’s accommodative monetary policy and decline in mortgage rates during the first quarter drove refinancing activities, while growth in new originations was muted.

However, fixed income trading revenues are likely to have increased owing to a rise in client activity on volatile markets.

Notably, the Zacks Consensus Estimate for capital market revenues is $56 million, suggesting an 8.2% decline sequentially, while commercial credit fee income is projected to be up 1.4% to $18.25 million.

Stable Expenses: The bottom line will likely reflect Regions’ efficient expense management during the quarter to be reported. The company intends to keep expenses stable while investing in revenue-generating areas.

Here is what our quantitative model predicts:

Regions 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.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Regions is -22.65%.

Zacks Rank: Regions currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.

Stocks That Warrant a Look

Here are a few stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.

BCB Bancorp, Inc. (NJ) (BCBP Quick QuoteBCBP - Free Report) is expected to release results around Apr 16. The company has an Earnings ESP of +4.17% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SB ONE BANCORP is likely to release earnings figures around Apr 28. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.56%.

The Earnings ESP for Carolina Financial Corporation is +1.43% and the stock carries a Zacks Rank of 3, currently. The company is expected to report quarterly numbers around Apr 22.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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