Regions Financial Earnings: Good Revenue Quarter and Raised Outlook

Key Morningstar Metrics for Regions Financial

• Fair Value Estimate: $24.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Regions Financial’s Earnings

Regions Financial RF reported second-quarter adjusted earnings per share of $0.60, up from $0.54 in the first quarter and $0.53 in the year-ago period. Net interest income was up 5% sequentially, driven by both net interest margin expansion and balance sheet growth.

Why it matters: Revenue and adjusted EPS were 2% and 7% ahead of the FactSet consensus estimates, respectively. We believe the firm’s outperformance relative to market expectations was attributable to slightly stronger performance in a broad range of metrics, including balance sheet size, funding costs, and fee income.

• Unlike what we saw at Truist, total deposit costs declined at Regions to 1.39% from 1.40%, and the firm’s non-interest-bearing deposit mix was roughly flat sequentially. Aided by asset repricing, these results raised the company’s net interest margin to 3.65% from 3.52% in the first quarter.

The bottom line: We will maintain our no-moat rating on Regions. With the firm’s results tracking ahead of our forecasts, we expect to raise our $24 per share fair value estimate by a single-digit percentage. Even so, we would still consider the shares to be fairly valued at current levels.

• Regions now expects 2025 net interest income to grow 3.0%-5.0% (compared with 1.0%-4.0% previously) and adjusted non-interest income to grow 2.5%-3.5% (versus 1.0%-3.0% in its previous outlook), both of which are above our model forecasts. Adjusted expenses are also expected to grow 1.5% at the midpoint, up from 1.0%, which we attribute to higher revenue levels.

Key stats: Non-interest income, which increased 5% on an adjusted basis, was decent, in our view. Capital markets revenue was up 5% despite tepid investment banking activity.

• Credit trends were generally healthy, with a decline in net chargeoffs and non-performing loans, similar to trends that we have seen from peers. Net chargeoffs are still expected to be at the upper end of a 40-to-50-point range for 2025.