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Loan Growth to Support Regions Financial (RF) Q1 Earnings

Zacks Equity Research

Regions Financial RF is scheduled to report first-quarter 2019 results on Apr 18, before the opening bell. The bank’s results are estimated to reflect year-over-year rise in both revenues and earnings.

Notably, the company has a decent earnings surprise history. It surpassed earnings in two of the preceding four quarters, the average positive earnings surprise being nearly 1%.

This Birmingham, AL-based company’s fourth-quarter 2018 earnings surged 42% year over year. Lower expenses and higher revenues were the driving factors. Moreover, credit quality recorded significant improvement. However, lower deposits balances posed a headwind.

For the first quarter, the Zacks Consensus Estimate for earnings has remained unchanged at 37 cents over the past seven days, reflecting a year-over-year improvement of nearly 5.7%. The consensus estimate for sales of $1.46 billion indicates around 2.8% growth.

Regions Financial Corporation Price and EPS Surprise

Regions Financial Corporation Price and EPS Surprise | Regions Financial Corporation Quote

Notably, the company’s share price has appreciated 21.9% in the three-month period ended Mar 31, 2019, outperforming the industry’s growth of 19.7%.

Will the upcoming earnings release give a boost to Regions’ stock? That depends largely on its first-quarter results.

Factors to Influence Q1 Results

Loan Growth: A modest increase in lending — mainly in the areas of commercial and consumer — is expected. However, weakness in revolving home equity loans (due to slowdown in originations and refinancing activities) will partially offset this.

In addition, management’s expectations of loan growth in 2019 is likely to be reflected in this quarter. The bank projects average loans to reflect year-over-year growth in low-single digits.

Modest Rise in Net Interest Income (NII): NII is expected to benefit from the loan growth scenario. In addition, Regions’ results are expected to reflect a 1.1% rise in average interest-earning assets, on a sequential basis, with the Zacks Consensus Estimate for the quarter pegged at $109.4 billion.

However, flattening and sometimes inversion of the yield curve during the March-end quarter might have an unfavorable impact on net interest margin.

The consensus estimate of $960 million for NII reflects 5.6% year-over-year growth.

Non-Interest Income Might Decline: Fixed income trading revenues are expected to remain muted on a year-over-year basis due to a challenging trading environment during the quarter. Also, mortgage banking revenues are expected to fall.

However, the trend of consumer spending was strong during the first quarter, which is likely to bolster the bank’s credit and debit card revenues.

Expenses to Remain Stable: Regions’ efficient expense management during the quarter is expected to support its bottom line. Notably, the company is on track for a $400-million expense reduction by 2019. While investing in revenue-generating areas, it intends to keep expenses stable.

Here is what our quantitative model predicts:

Regions does not have the right combination of two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP is currently pegged at -5.41%.

Zacks Rank: Regions’ carries a Zacks Rank #3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.

Stocks to Consider

Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

Northern Trust Corporation NTRS is scheduled to release results on Apr 23. It has an Earnings ESP of +0.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here .

Fifth Third Bancorp FITB is scheduled to release results on Apr 23. The company, which carries a Zacks Rank of 2, has an Earnings ESP of +0.34%.

The Earnings ESP for People's United Financial PBCT is +2.59% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 18.

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