The Federal Reserve's target federal funds rate has been in a range of between zero and 0.25% since late 2008, and most banks have already seen most of the benefits of lower rates on deposits and borrowings. Meanwhile, the central bank in September increased its monthly purchases of long-term mortgage backed securities -- a move dubbed QE3 -- in an effort to hold long-term rates at their historically low levels, or push them down even further.
Ironically, Regions Financial -- which many analysts considered one of the best-positioned among the regional banks for an expanding net interest margin, because it was asset-sensitive and had faced the margin squeeze early in the cycle -- saw its shares fall 8% on Tuesday, even though the company bucked the industry trend, with its net interest margin expanding by four basis points year-over-year, to 3.08% in the third quarter.
The problem was that the margin narrowed from 3.16% in the second quarter, and net interest income declined to $817 million in the third quarter, from $838 million in the second quarter, and $850 million, in last year's third quarter. Regions CFO David Turner sad during the company's earnings conference call that the company "had guided to 3.13% being kind of the normal recurring margin for the
Mosby says that Regions Financial's "earnings from operations increased by 10% from last quarter, which reflects over 80 cents in annualized earnings power." Investors are looking at a buying opportunity after Tuesday's share-price drop, because of "tangible book value that grew 5% and now exceeds seven dollars," and "earnings power
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