On Friday, Goldman Sachs reiterated its Buy rating on Regions Financial (NYSE:RF) with a steady price target of $31.00.
The affirmation follows Regions Financial's fourth-quarter earnings report, which revealed an adjusted earnings per share (EPS) of $0.58, surpassing the Visible Alpha Consensus estimate of $0.55.
The company's pre-provision net revenue (PPNR) exceeded expectations, coming in at $829 million against a consensus of $811 million, driven by a slight outperformance in net interest income (NII) and lower-than-anticipated core expenses.
Regions Financial's NII for the quarter was reported at $1.243 billion on a fully taxable equivalent basis, slightly above the consensus forecast of $1.235 billion.
This beat was attributed to higher average earning assets, despite a modest growth in loans. The bank's net interest margin edged up by 1 basis point to 3.55%, slightly higher than the consensus of 3.53%. Meanwhile, loan yields increased, and deposit costs decreased more than expected, resulting in a deposit beta of 34%.
Core expenses for the quarter were reported at $1.029 billion, below the consensus estimates of $1.055 billion, with reductions in salaries contributing to the savings. Net charge-offs (NCOs) were slightly below expectations at 0.49%, compared to a forecasted 0.53%, and the provision for credit losses was also lower than anticipated at $114 million versus the expected $127 million.
Non-performing loans (NPLs) saw a modest uptick quarter-over-quarter to 0.96%.
The bank's tangible book value saw a quarter-over-quarter decline of approximately 8% to $11.42, while the common equity tier 1 (CET1) ratio improved by roughly 20 basis points quarter-over-quarter to 10.8% (8.8% excluding accumulated other comprehensive income (AOCI), a decrease of 30 basis points).
Looking ahead to 2025, Regions Financial provided guidance that aligned with market expectations.
The forecast includes average loans increasing by 1% to an implied $98.0 billion, average deposits remaining stable at $126.6 billion, and an NII increase of 2-5% from a baseline of $4.82 billion, implying $4.98 billion, which is consistent with consensus estimates.
Adjusted noninterest revenue is projected to rise by 2-4% from a baseline of $2.47 billion, implying $2.54 billion, with overall revenue anticipated to be $7.53 billion versus a consensus of $7.57 billion.
Adjusted expenses are expected to rise by 1-3% from a baseline of $4.23 billion, implying $4.31 billion, with the aim of generating positive operating leverage in 2025. NCOs are forecasted to be in the 40-50 basis points range, with an effective tax rate between 20-21%.
The bank also plans to manage its adjusted CET1 ratio around 9.25-9.75% in the near term.
Goldman Sachs analysts commented on the report, stating, "Overall this was a decent quarter and guide, in our view. PPNR was a beat on lower expenses and made up for some softness in fee income. Loan growth trends remained sluggish while deposits grew point to point."
They further added, "Despite concerns around higher NCOs for the quarter, credit was in-line as losses came in a touch below expectations, as did provisions, while NPLs increased 11bps QoQ and its guiding to the upper end of its 40-50bps range."
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