Regions Financial Corporation RF shares touched a new 52-week high of $27.32 on Friday before closing the session slightly lower at $27.28. 

The stock skyrocketed 81.8% in the past year, outperforming its industry’s growth of 58.1%. RF also outperformed its peers Community Trust Bancorp CTBI and Hilltop Holdings HTH over the same time frame.

Price Performance

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What’s Driving RF Stock?

Regulatory Changes to Aid Top Line: On Nov. 5, U.S. presidential elections were held, resulting in the victory of Donald Trump. With this, the regulatory landscape is expected to ease, which would benefit banks. The Trump administration is expected to change leadership in numerous federal regulatory organizations that oversee banks and other financial industry firms.

Currently, the Consumer Financial Protection Bureau oversees banks' consumer fee income and wants to enforce strict regulations on how much they can charge for services. With less strict rules under the new administration, Regions Financial is expected to earn more fee income and bolster its top line, which has been under pressure from erratic spread income.

Fed Rate to Support Net Interest Income (NII) Growth: The company’s NII witnessed a CAGR of 7.3% over the five years ended in 2023. The metric declined in the first nine months of 2024 due to high funding costs.

The Federal Reserve has started cutting interest rates. The central bank lowered the rates by 75 basis points (bps). Market participants expect another 25-bps cut in December. With this, funding costs will stabilize and decline eventually, driving NII growth.

Management expects NII to grow modestly from $1.23 billion in third-quarter 2024.

Solid Liquidity Profile to Aid Capital Distribution Moves: Regions Financial has a solid balance sheet and liquidity position. As of Sept. 30, 2024, its total debt (long and short-term borrowings) was $7.52 billion, whereas the liquidity sources aggregated $62 billion. Given a strong liquidity profile, Regions Financial is less likely to default on interest and debt repayments if the economic situation worsens.

Regions Financial’s efforts to enhance shareholder value through capital deployment activities look encouraging. In July 2024, the bank announced a 4% increase in its quarterly common stock dividend to 25 cents per share.

In April 2022, Regions Financial’s board of directors announced a share repurchase program of up to $2.5 billion of common stock from the second quarter of 2022 through the fourth quarter of 2024. In the first nine months of 2024, the company repurchased $193 million worth of shares under this program. Given its robust liquidity, its capital deployment activities seem sustainable and will drive investors’ confidence in the stock.

Rising Loan Balances: Regions Financial has witnessed steady growth in its loan balances, with a compound annual growth rate (CAGR) of 3.4% over the past five years (2018-2023). Although loans declined in the first nine months of 2024, the company's strong presence in strategic markets across the Southeastern and Midwest United States positions it to capitalize on favorable economic and business trends in the regions, which will likely drive loan growth.    

Should You Buy Regions Financial Stock Now?

Despite the huge rally in RF shares, it appears inexpensive relative to the industry. The company’s forward 12-month price/earnings (P/E) multiple of 12.05X is lower than the industry’s 13.44X. RF is also trading at a discount compared with CTBI and HTH.

Price-to-Earnings

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Hence, from a valuation perspective, RF’s shares present an attractive buying opportunity. The stock is still undervalued as the market is yet to recognize or price the company’s growth prospects fully.

RF is also witnessing northbound estimate revisions for the current and the next year over the past 30 days. 

EPS Revision Trend

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Regions Financial has demonstrated remarkable growth and resilience, significantly outperforming industry benchmarks and key peers. The rising loan and deposit balances, along with Fed rate cuts, are expected to generate positive gains in the upcoming period. 

Also, cheap valuation and positive estimate revisions make the RF stock an attractive pick. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Regions Financial Corporation (RF) : Free Stock Analysis Report

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