Regions Financial Corporation
's (
RF
) fourth quarter 2012 earnings from continuing operations came in
at 22 cents per share, marginally beating the Zacks Consensus
Estimate by a penny. Results were in line with the prior quarter.
Quarterly results benefited from a rise in non-interest income
backed by improved funding mix and HARP II loan production.
Moreover, expansion in net interest margin depicts interest
recovery to some extent. Yet, increased non-interest expenses and
higher provision for loan losses were the dampeners.
Net income available to common shareholders was $261 million or
18 cents per share, down from $301 million or 21 cents per share
reported in the prior quarter.
For full year 2012, Regions reported income from continuing
operations available to common shareholders of $1.1 billion or 76
cents per share. Moreover, this outpaced the Zacks Consensus
Estimate by a penny.
Performance in Detail
Total revenues (net of interest expense) came in at $1.4 billion,
in line with the Zacks Consensus Estimate. However, revenue
increased slightly on a sequential basis.
Regions reported adjusted pre-tax pre-provision income from
continuing operations of $493 million in the reported quarter, up
5% sequentially.
Net interest income was $818 million, up 0.1% sequentially.
Moreover, net interest margin expanded 2 basis points
sequentially to 3.10% in the quarter, attributed to interest
recoveries and lower deposit costs. Funding mix showed an
improvement as average low-cost deposits inched up as a
percentage of total deposits from 84% in the prior quarter to
86%.
Regions' non-interest income was $536 million, up 1%
sequentially. Non-interest income included $12 million in
securities gains. Excluding securities gains, non-interest income
surged 0.6% sequentially, as service charges income and mortgage
revenue improved. Year-to-date, HARP II loan production was $1.6
billion, surpassing the full-year target of $1 billion. Moreover,
Now Banking suite of products benefited the non-interest income.
However, non-interest expense increased 3.8% sequentially to $902
million. Excluding one-time items, adjusted non-interest expenses
were $849 million, down 2.3% sequentially.
Credit Quality
Credit quality was a mixed bag during the fourth quarter at
Regions. Net charge-offs decreased 31% sequentially to $180
million. Additionally, net charge-offs as a percentage of average
net loans stood at 0.96%, down 42 basis points sequentially.
Further, non-performing assets reduced 13% sequentially to $1.9
billion. Inflows of non-performing loans dipped 24% sequentially
to $350 million. Yet, provision for loan losses was up by 12.1%
sequentially to $37 million.
Capital Ratios
Capital ratios remained strong for Regions. As of Dec 31, 2012,
Regions' Tier 1 capital ratio came in at 12.0% compared with
11.5% in the prior quarter. Tier 1 common capital ratio was
10.8%, up from 10.5% in the prior quarter.
The company's loan-to-deposit ratio was 78.0% as of the same
date, down from 79% in the prior quarter. Tangible common book
value per share came in at $7.11 in the reported quarter, up from
$7.02 in the prior quarter.
Our Viewpoint
We believe the company's favorable funding mix, improved core
business performance, its expansion mode and strategies will
continue to yield profitable earnings in the upcoming quarters.
Additionally, significant improvement in its credit quality would
act as a positive catalyst. Yet, regulatory issues and elevated
non-interest expenses remain major areas of concern.
Regions currently carries a Zacks Rank #3 (Hold).
Among Regions' peers --
Virginia Commerce Bancorp, Inc.
(
VCBI
) reported fourth quarter 2012 adjusted operating earnings of 16
cents per share, marginally beating the Zacks Consensus Estimate
by 2 cents. However, results compare unfavorably with 17 cents
per share reported in the prior quarter. Elevated net interest
margin, loan and deposit growth and credit quality improvement
were the positives for the quarter.
Among other peers -
BancorpSouth Inc.
(
BXS
) with Zacks Rank #2 (Buy) is expected to release its
fourth-quarter 2012 earnings on Jan 23, while
IberiaBank Corp.
(
IBKC
) with Zacks Rank #1 (Strong Buy) will report on Jan 24.
BANCORPSOUTH (BXS): Free Stock Analysis
Report
IBERIABANK CORP (IBKC): Free Stock Analysis
Report
REGIONS FINL CP (RF): Free Stock Analysis
Report
VIRGINIA COMMRC (VCBI): Free Stock Analysis
Report
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