Morningstar

Regions Earnings: Fees Shine, but Balance Sheet Is Range-Bound

Our long-term view of Regions is unchanged.

 and
Regions Financial Corporation logo displayed on a smartphone screen.
Pavlo Gonchar/SOPA Images via Getty
Securities in This Article
Regions Financial Corp
(RF)

Key Morningstar Metrics for Regions Financial

What We Thought of Regions Financial’s Earnings

Regions Financial RF reported solid third-quarter results, and credit was mostly healthy. Adjusted earnings per share grew 11% annually to $0.63, resulting in a strong adjusted return on tangible common equity ratio of 19.2%. The firm’s outlook changes were mixed.

Why it matters: With unexpected fraud losses from Fifth Third, Zions, and Western Alliance, investors are focusing on credit quality. As of the firm’s latest call reports, about 11.8% of the firm’s loans are from non-depositary financial institutions, which have been under scrutiny.

  • Regions’ management team stated that about 40% of the bank’s NDFI loan exposure is in its REIT portfolio, which has very low leverage and “very good credit quality.” The remainder is distributed across other verticals with no significant concentrations.
  • Overall, the firm expects net charge-offs to be 0.50% for 2025, which is a bit better than the 0.52% seen year to date. This looks reasonable to us, as non-performing loans and past-due loans declined sequentially.

The bottom line: As we incorporate the latest results and updated guidance, we plan to maintain our $26 per share fair value estimate for no-moat-rated Regions. We view the stock as fairly valued at current prices.

  • Our long-term view of the company is unchanged, with an efficiency ratio in the high-50s and a return on tangible common equity in the mid-to-high teens through the cycle.

Key stats: Adjusted fee income was up 6% from last year, driven by the growth of higher asset levels, which boosts wealth fees and deal activity, thereby boosting capital markets. As these factors continue in the short term, the firm raised its fee income forecast to 4%-5%, an increase of 150 basis points at the midpoint.

  • We view conditions on fee income as currently favorable and expect fee income growth to normalize to 2%-3% per year over the long term.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center