Citi cuts Regions Financial target to $28, maintains Buy rating

On Wednesday, Citi analyst Keith Horowitz adjusted the price target on Regions Financial Corporation (NYSE:RF) shares, bringing it down to $28 from the previous $30, while sustaining a Buy rating on the stock. Currently trading at $20.99, with a market capitalization of $19 billion, the stock has declined nearly 10% year-to-date. According to InvestingPro data, analyst targets range from $23 to $32, suggesting potential upside. The revision comes as Horowitz updates the bank’s financial model in anticipation of first-quarter earnings, taking into account revised base case interest rates and recent management guidance provided at a public industry conference.

Regions Financial’s management has indicated a slight decrease in loan growth expectations for the first half of 2025. Despite this, Citi’s analyst foresees a continued growth trajectory for the bank’s net interest income (NII), projecting a 3% year-over-year increase, which aligns with the bank’s guidance range of 2-5%. The bank maintains strong fundamentals with a P/E ratio of 12.2x and has demonstrated consistent shareholder returns, having raised its dividend for 12 consecutive years, as highlighted by InvestingPro. Additionally, the analyst anticipates a net interest margin (NIM) exit rate of around 3.6% by the end of 2025 and positive operating leverage throughout the year.

The lowered price target also reflects a more conservative view on Regions Financial’s return on tangible common equity (ROTCE), now expected to be 17%, down from the previously forecasted 18%. Despite this adjustment, Horowitz notes that this figure remains consistent with the performance of other top quartile banks.

The analyst also points out that Regions Financial’s stock has experienced a recent pullback, but given the bank’s robust capital position, it could potentially exceed consensus expectations regarding share buybacks. Citi estimates that the bank might execute approximately $150 million in buybacks per quarter in 2025.

The adjustment in Regions Financial’s price target and the maintained Buy rating reflect Citi’s updated expectations based on the latest management guidance and market conditions. The bank’s strong capitalization and potential for share buybacks are factors that continue to support the positive outlook.

In other recent news, Regions Financial Corporation reported a notable increase in total assets under management, rising by 4% to 27 billion euros, with a significant 10% rise in third-party AUM. The company also announced a 7% growth in management fees, reaching 389 million euros, and an 11% increase in Fund Raising Earnings (FRE), maintaining a margin within the target range of 35-40%. Regions Financial is considering potential mergers and acquisitions as part of its strategic growth initiatives, alongside a 50% planned increase in capital returns to shareholders. The company is also enhancing its international presence with senior hires in key regions. Furthermore, Regions Financial is optimistic about its future prospects, with expectations of continued fundraising momentum in 2025. The company is focusing on strategic growth, including potential mergers and acquisitions and asset rotation. Additionally, the company remains committed to impact investing and sustainability, strengthening its position in the European mid-market private equity space.

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