Second-quarter earnings were reduced by $71 million, or five cents a share, from the accelerated discount accretion related to the company's redemption in April of $3.5 billion in preferred shares held by the government, for bailout assistance received in October 2008, through the Troubled Assets Relief Program, or TARP.
The second-quarter results were boosted by a decline in the provision for loan losses to $26 million, from $117 million the previous quarter, and $398 million a year earlier, as asset quality continued to improve.
Another bright spot for Regions was that its net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- expanded to a tax-adjusted 3.16%, from 3.09% in the first quarter, and 3.07% in the second quarter of 2011, running counter to the industry trend, as short-term rates remain near zero, and long-term rates continue to decline.
Regions Financial's shares have now returned 55% year-to-date, following a 39% decline during 2011.RF data by YCharts
The shares trade just below their reported June 30 tangible book value of $6.69, and for nine times the consensus 2013 EPS estimate of 76 cents. The consensus 2012 EPS estimate is 62 cents. Jefferies analyst Ken Usdin rates Regions a "Hold," with a $7.50 price target, saying on Tuesday that the bank's net interest margin expansion "came sooner than expected," and that it was "a great quarter for credit," with the decline in the provision for loan loss reserves. Usdin added that "Forward-looking metrics looked solid as criticized loans were down 9% and nonperforming inflows were down $66mm to $315mm." Stifel Nicolaus analyst Christopher Mutascio also rates Regions Financial a hold, and said that "while the company continues to dispose of [repossessed real estate] and non-performing loans, we note that sequential declines of 11.2% and 18.8% in these balances were largely attributable to lower inflows (as opposed to higher sales levels), which we view as yet another positive indicator.
Mutascio estimates that Regions will earn 65 cents a share for all of 2012, followed by 2013 EPS of 80 cents. Interested in more on Regions Financial? See TheStreet Ratings' report card for this stock.
Email. Follow @PhilipvanDoorn
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV