Regions Financial Corporation RF is scheduled to report fourth-quarter 2024 results on Jan. 17, before the opening bell. Quarterly earnings and revenues are expected to have registered year-over-year growth in the to-be-reported quarter.
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This Birmingham, AL-based player’s third-quarter 2024 earnings beat the Zacks Consensus Estimate, driven by a decline in expenses and an increase in non-interest income. However, a decrease in net interest income (NII) was a spoilsport.
Regions Financial has a decent earnings surprise history. Its earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.41%.
Regions Financial Corporation Price and EPS Surprise
Regions Financial Corporation Price and EPS Surprise
Regions Financial Corporation price-eps-surprise | Regions Financial Corporation Quote
The Zacks Consensus Estimate for fourth-quarter earnings of 55 cents per share has been unchanged in the past seven days. The figure indicates a 5.8% rise from the year-ago reported number.
The consensus estimate for revenues is pegged at $1.86 billion, indicating a 2.5% decrease from the prior-year reported figure.
Key Factors & Estimates for RF's Q4
NII & Loans: Since September 2024, the Federal Reserve has reduced interest rates by 100 basis points. This is likely to have led the funding/deposit costs to stabilize to some extent, thus aiding the company’s NII.
Management expects NII to grow modestly in the fourth quarter 2024 from the third-quarter 2024 reported level of $1.23 billion. The Zacks Consensus Estimate is the same as the management guidance, indicating an increase of 0.7% on a sequential basis.
Also, indications of future rate cuts by the Fed and a stabilizing macroeconomic backdrop are likely to have improved the overall lending scenario. Per the Fed’s latest data, the demand for commercial and industrial loans and consumer loans was solid in the fourth quarter.
Given RF’s significant exposure to commercial loans, this is likely to have positively impacted the company’s average interest-earning assets in the fourth quarter of 2024. The Zacks Consensus Estimate of $1.39 billion for average earning assets indicates a marginal sequential increase.
Non-Interest Income: Global mergers and acquisitions in the fourth quarter witnessed marked improvement after weakness in 2023 and 2022. Deal value and volume were solid In the quarter, driven by a robust financial performance, buoyant markets, interest rate cuts and a strong U.S. economy. Also, green shoots were observed in the capital markets. Yet, lingering geopolitical issues are likely to have limited growth to some extent.
The company expects capital markets revenues of $80-$90 million for the fourth quarter. The Zacks Consensus Estimate for capital markets income is pegged at $88.3 million, indicating a sequential decline of 4%.
Despite the central bank's interest rate cuts, mortgage rates did not decline significantly. Mortgage rates in the fourth quarter of 2024 were close to 6.8%, slightly higher than the 6.2% observed at the end of the third quarter. As a result, refinancing activities and origination volumes did not experience significant growth. This might have limited the company's mortgage revenue growth in the quarter-to-be reported.
The Zacks Consensus Estimate for mortgage income is pegged at $32 million, indicating an 11.1% decrease from the prior quarter’s reported figure.
The Zacks Consensus Estimate for card and ATM fees of $117.4 million implies a sequential marginal decline.
The consensus estimate for revenues of $159.2 million from service charges on deposit accounts for Regions Financial indicates a marginal sequential increase.
The Zacks Consensus Estimate for wealth management income is pegged at $128.3 million, implying a marginal increase from the prior quarter’s reported number.
Overall, the Zacks Consensus Estimate for total non-interest income is pinned at $615.1 million, indicating a 7.5% sequential rise.
Expenses: RF’s expenses are expected to have been high in the quarter under discussion due to an increase in salaries, employee benefit expenses and other expenses. Although the company is implementing expense management actions, its ongoing investment in technology advancement and franchise strengthening is likely to have kept the expense base elevated.
Asset Quality: Region Financial is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of an economic slowdown.
The Zacks Consensus Estimate for non-performing assets is pegged at $859.1 million, indicating a 1.7% rise from the prior quarter's reported figure.
What Our Quantitative Model Predicts for RF
According to our quantitative model, the chances of Regions Financial beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of two key ingredients, a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Regions Financial has an Earnings ESP of +0.61%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks to Consider
A couple of other bank stocks that also have the right combination of elements to post an earnings beat in their upcoming releases are Truist Financial Corporation TFC and State Street Corporation STT.
TFC has an Earnings ESP of +2.27% and a Zacks Rank of 3 at present. The company is slated to report fourth-quarter and 2024 results on Jan. 17.
STT is also scheduled to release fourth-quarter and 2024 earnings on Jan. 17. The company has an Earnings ESP of +0.67% and a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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