Earnings Call: Regions Financial Corporation Reports Q3 Earnings, Anticipates Fraud Losses Decline

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Earnings Call: Regions Financial Corporation Reports Q3 Earnings, Anticipates Fraud Losses Decline
Credit: © Reuters.

Regions Financial Corporation (NYSE: NYSE: RF ) reported third-quarter earnings of $465 million, translating to earnings per share of $0.49, despite experiencing elevated levels of check-related fraud which resulted in $53 million in losses. The company anticipates a significant decrease in fraud losses to approximately $25 million in the fourth quarter and expects this to normalize in 2024.

InvestingPro data shows an adjusted market cap of 13.55B USD and a P/E Ratio of 6.84, which is considered low, indicating that the company could be undervalued. Despite a recent drop in price, the company has a healthy dividend yield of 6.65%, which could be an attractive feature for income-focused investors.

Key takeaways from the call include:

Despite fraud-related setbacks, the company's balance sheet remains robust with solid capital, robust liquidity, and prudent credit risk management.

* Average and ending loans remained stable, while deposits declined slightly.

* Net interest income declined by 6.5% due to deposit cost normalization and hedging activities.

* The company expects stable to modestly lower deposits in the fourth quarter and a decline in net interest income.

Regions Financial is well-positioned to absorb proposed regulatory changes without major impact and expects share repurchases to resume in the near term.

According to InvestingPro Tips, Regions Financial has been showing signs of accelerating revenue growth and has consistently raised its dividend for 11 consecutive years. This is consistent with the company's robust financial performance and its commitment to shareholder returns.

David Turner, speaking on behalf of the company, discussed the challenging revenue environment and the company's efforts to manage expenses. Despite one-time costs related to fraud, pension settlement, equipment and software, and professional fees, Turner emphasized the need to double down on expense management. The company's reported number for 2024 is expected to be lower than that of 2023.

Turner expressed confidence in the company's ability to address fraud issues with new controls and technology. He also mentioned the possibility of resuming buybacks, given their CET1 ratio of 10.3%, and expressed confidence in their position relative to the Basel-III end-game proposal.

The company also discussed its treasury management team's success in penetrating its commercial base and doesn't expect service charges to decline significantly. Regions Financial believes it has enough capital to withstand a recession and sees no need to increase its capital beyond its current level of 10.3.

Regions Financial expressed confidence in the economy in its markets, noting low unemployment rates and strong consumer and business sentiment. The company believes that a declaration from the Federal Reserve that inflation is under control and a stable interest rate environment would help boost business confidence.

In conclusion, despite current challenges, Regions Financial Corporation remains confident in its business stability and resilience, with a positive outlook for future performance. For more insights like these, consider checking out InvestingPro's platform which offers additional tips and real-time metrics, which can be found here.

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