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Regions Beats on Solid Commercial Loan Growth (Update 1)

  • Fourth-quarter adjusted operating EPS of 22 cents, beating the consensus estimate of 21 cents.
  • Average C&I loans grow 1.5% in fourth quarter, 9% year-over-year.
  • Average indirect auto loans grow 7% sequentially as residential loans continue decline.
  • Net interest margin expands slightly.
  • Mortgage revenue declines 15% from the third quarter.

Updated with late morning market action and comments from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- Regions Financial (RF - Get Report) on Monday beat fourth-quarter earnings expectations on an adjusted basis, while reporting significant loan growth in key categories.

The Birmingham, Ala., lender reported fourth-quarter net income available to common shareholders of $261 million, or 18 cents a share, compared to $312 million, or 21 cents a share, in the third quarter, and a net loss to common shareholders of $135 million, or 48 cents a share, in the fourth quarter of 2011.

Excluding "costs resulting from the termination of a third party investment in a subsidiary," Regions reported fourth-quarter adjusted net income available to common shareholders of $311 million, or 22 cents a share, beating the consensus estimate of a 21-cent profit, among analyst polled by Thomson Reuters.

Regions Financial's shares were up 3% in late morning trading, to $7.65, for the strongest morning performance among the 24 components of the KBW Bank Index (I:BKX) The index was up slightly to 53.58.

Other strong sector performers included State Street (STT - Get Report), which was up nearly 3% to $54.90, on the strength of a solid fourth-quarter earnings report on Friday, and Bank of America, which was up 1.5% to $11.29.

Bank of America's shares changed direction, following a 5% decline over the previous two sessions. The company on Thursday reported meager fourth-quarter earnings of three cents a share, springing from its large mortgage putback settlement with Fannie Mae (FNMA) and its portion of the $8.5 billion foreclosure settlement between federal regulators and the largest mortgage loan servicers.

Regions Financial's fourth-quarter net interest income was $818 million, increasing slightly from $817 million the previous quarter, but declining from $849 million a year earlier. The net interest margin (NIM) -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- was a tax-adjusted 3.10% in the fourth quarter, widening from 3.08%, both in the third quarter and in the fourth-quarter of 2011.

Average total loans were $74.622 billion in the fourth quarter, declining from $75.697 billion the previous quarter and $78.702 billion a year earlier, as planed declines in residential mortgage and commercial real estate loans were only partially offset by increases in commercial and industrial loans and indirect auto loans. Average fourth-quarter C&I loans were $26.414 billion, increasing from $26.024 billion in the third quarter and $24.310 billion in the fourth quarter of 2011. Average indirect auto loans were $2.295 billion in the fourth quarter, growing from $2.150 billion the previous quarter, and $1.825 billion a year earlier.
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