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Fee Income to Aid Regions (RF) Q1 Earnings Amid Low Rates

By Zacks Investment ResearchStock MarketsApr 22, 2021 07:17AM ET
Fee Income to Aid Regions (RF) Q1 Earnings Amid Low Rates
By Zacks Investment Research   |  Apr 22, 2021 07:17AM ET
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Regions Financial RF is scheduled to report first-quarter 2021 results on Apr 23, before the opening bell. The bank’s results are estimated to reflect year-over-year rise in earnings and revenues.

This Birmingham, AL-based company’s fourth-quarter 2020 earnings outpaced the Zacks Consensus Estimate. Results were driven by higher revenues and benefit to provisions for credit losses. Moreover, rise in deposit balances provided some respite. However, rise in expenses was an undermining factor.

The bank’s activities in the to-be-reported quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate of 48 cents for earnings has been revised upward in the past 30 days and indicates substantial growth from the year-ago reported number. Further, the Zacks Consensus Estimate of $1.55 billion for sales indicates a 9.5% increase from the prior-year quarter.

Factors at Play

Low Net Interest Income: The overall lending scenario was soft during the January-March quarter, with commercial and industrial, commercial real estate and consumer loan portfolios less likely to have offered support. Also, with the interest rates at near-zero level, Regions’ net interest margin and NII are likely to have been adversely impacted.

However, low deposit costs and higher average interest earning assets might have been offsetting factors.

The Zacks Consensus Estimate of $129.7 billion for average interest earning assets suggests 18.1% year-over-year improvement during the quarter. The consensus mark for NII of $993 million implies 5.6% rise.

Management expects first-quarter 2021 NII to be modestly lower due to impacts of fall in loan balances along with long-term rate environment pressure being offset by cash management strategies, deposit pricing and higher hedge notional.

High Non-Interest Revenues: The March-ended quarter witnessed continued strength in equity markets, boosting market-driven revenues. Wealth, trust, trading and asset management revenues are anticipated to have recorded high numbers. Also, rise in deposits in the quarter is expected to have driven fees from service charge on deposits.

Card fees might have gained from rise in consumer spending on a lower unemployment level during the quarter and support from the new stimulus package. In addition, the Federal Reserve’s accommodative monetary policy and decline in mortgage rates during the March-ended quarter drove refinancing activities. Growth in new originations was also impressive.

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

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.

Asset Quality: Having built significant reserves in 2020 and considering the improvement in economic scenario, Regions is likely to have released some provision for loan losses in the first quarter.

Here is what our quantitative model predicts:

Regions has 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 +1.60%.

Zacks Rank: Regions currently carries a Zacks Rank of 3.

Other Banks Worth a Look

Here are a few other bank stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

T. Rowe Price Group TROW is scheduled to release earnings on Apr 29. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +0.57%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for New York Community Bancorp (NYSE:NYCB) NYCB is +2.02% and it carries a Zacks Rank #2 at present. The company is slated to report quarterly numbers on Apr 28.

Carlyle Group (NASDAQ:CG) CG is slated to report quarterly results on Apr 29. The company currently has an Earnings ESP of +3.12% and a Zacks Rank of 3.

These Stocks Are Poised to Soar Past the Pandemic

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Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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Regions Financial Corporation (RF): Free Stock Analysis Report

T. Rowe Price Group, Inc. (TROW): Free Stock Analysis Report

Carlyle Group Inc. (CG): Free Stock Analysis Report

New York Community Bancorp (NASDAQ:CTBI), Inc. (NYCB): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research
Fee Income to Aid Regions (RF) Q1 Earnings Amid Low Rates

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Fee Income to Aid Regions (RF) Q1 Earnings Amid Low Rates

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