Regions’ (RF) Q4 Earnings Miss Estimates, Revenues Fall

Regions Financial RF reported fourth-quarter 2021 adjusted earnings of 44 cents per share, missing the Zacks Consensus Estimate of 49 cents on top-line frailty. Nonetheless, results compare favorably with the prior-year figure of 61 cents.

Results were driven by a rise in loan and deposit balances. Also, credit metrics were robust during the fourth quarter. Fall in expenses also provided some respite. However, capital position and revenues witnessed a fall.

Including certain one-time items, net income available to common shareholders was $414 million or 43 cents per share compared with the earnings of $588 million or 61 cents reported in the year-ago period.

For 2021, income from continuing operations available to common shareholders was $2.4 billion compared with the $991 million reported in 2020. Earnings per share from continuing operations were $2.49, up from the prior year’s $1.03. Results include certain one-time items. The Zacks Consensus Estimate was pinned at $2.55 per share.

Revenues Decrease, Expenses Fall

Total revenues came in at $1.63 billion in the reported quarter, outpacing the Zacks Consensus Estimate of $1.62 billion. However, the top line slid 1.3% from the year-ago quarter’s reported number.

In 2021, total revenues were up 2.4% from the prior-year level to $6.44 billion. The top line beat the Zacks Consensus Estimate of $6.43 billion.

On a fully-taxable equivalent (FTE) basis, net interest income (NII) was $1.03 billion, up 1.2% year over year. However, net interest margin (NIM) shrank 3 basis points (bps) to 2.83%.

Non-interest income decreased 9.6% year over year to $615 million. This downside mainly resulted from lower card and ATM fees, capital markets income, mortgage income, bank-owned life insurance and other income.

Non-interest expense decreased marginally year over year to $983 million, mainly due to a fall in salaries and employee benefits, net occupancy expense and other expenses. On an adjusted basis, non-interest expenses rose 4% year over year to $967 million.

Adjusted efficiency ratio came in at 59.8% compared with the prior-year quarter’s 55.8%. A higher ratio indicates a fall in profitability.

Balance Sheet Position

As of Dec 31, 2021, loans, net of unearned income, increased 5% on a sequential basis to $87.8 billion. Moreover, total deposits came in at $136 billion, 5% up from the prior quarter’s level.

As of Dec 31, 2021, low-cost deposits as a percentage of end-of-period deposits, were 95.6% compared with the prior-year quarter’s 95.7%. In addition, deposit costs came in at 4 bps during the October-December months.

Credit Quality

Credit metrics were robust during the fourth quarter. Non-performing assets as a percentage of loans, foreclosed properties and non-performing loans held for sale, shrank 37 bps from the prior-year quarter’s level to 0.54%. Additionally, non-accrual loans, excluding loans held for sale as a percentage of loans, came in at 0.51%, contracting 36 bps.

Allowance for credit losses as a percentage of loans, net of unearned income was 1.81%, down 100 bps from the year-earlier quarter’s level. RF’s total business services criticized loans fell 23%.

Moreover, annualized net charge-offs as a percentage of average loans came in at 0.2% (lowest annual net charge-off ratio since 2006), contracting 23 bps. However, provision for credit losses of $110 million was recorded during the quarter against the year-earlier quarter’s benefit of $38 million.

Capital Position

Regions Financial’s estimated ratios remained well above the regulatory requirements under the Basel III capital rules. As of Dec 31, 2021, Basel III Common Equity Tier 1 (CET1) ratio (fully phased-in) and the Tier 1 capital ratio were estimated at 9.5% and 11%, respectively, indicating a decline from the corresponding ratios of 9.8% and 11.4% recorded in the year-earlier quarter.

Our Viewpoint

Regions Financial put up a decent performance during the October-December months on higher loans and deposit balances. RF’s favorable funding mix, attractive core business and revenue-diversification strategies will likely yield stellar earnings in the upcoming period.

Though a fall in revenues is a concern, we are optimistic about the bank’s branch-consolidation plan and an improved credit quality. Nevertheless, margin pressure is expected to prevail.

Regions Financial Corporation Price, Consensus and EPS Surprise

Regions Financial Corporation Price, Consensus and EPS Surprise

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

Currently, Regions Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

First Republic Bank’s FRC fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by an increase in net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. C delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting as well as growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp USB reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality acted as a tailwind. Growth in loan and deposit balance and a strong capital position were encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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