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UPDATE: Compass Point Lowers Price Target On Regions Financial Following 4Q14 Earnings Release


In a report published Wednesday, Compass Point analyst Kevin Barker reiterated a Neutral rating on Regions Financial Corp (NYSE: RF), but lowered the price target from $11.00 to $10.00.

In the report, Compass Point noted, “Regions continued to see fee income pressure due to a re-organization of its deposit products when it decided to phase out its use of high-to-low posting and deposit advances due to regulatory pressures. The decline in service fee income, combined with less-than-stellar mortgage banking and a tick-up in operating expenses, caused the efficiency ratio to jump up to 68% from 64% last quarter. While the pressure on fee income did not come as a surprise, the increase in operating expenses was more than expected and RF is proactively addressing operating margin headwinds by closing 50 under-performing branches in 2015.

"The closing of these branches will help RF sustain its operating margins despite the headwinds from low rates and lower service fees, but we likely won't see meaningful EPS growth without a significant increase in stock buybacks combined with higher rates. With that being said, we believe most of the operating headwinds and no optionality for higher rates are priced into the stock now trading at 10.9x FY15E EPS compared to peers at 12.6x. We would be more constructive on the stock if RF showed increasing operating leverage and the outlook for higher rates was clear. We are adjusting our FY15E operating EPS to $0.80 from $0.83 and FY16E to $0.83 from $0.89 to take into account the fee income pressure. We do not assume higher rates in our EPS estimates.”

Regions Financial closed on Tuesday at $8.74.

Latest Ratings for RF

Apr 2021DA DavidsonInitiates Coverage OnNeutral
Apr 2021Raymond JamesDowngradesStrong BuyOutperform
Apr 2021Deutsche BankMaintainsHold

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