Citi retains Buy on Regions Financial shares, buy rating on guidance

On Friday, Citi analyst Keith Horowitz reaffirmed a Buy rating on Regions Financial (NYSE:RF), with a steady price target of $30.00. Horowitz's endorsement came after Regions Financial reported a one-cent earnings beat for the fourth quarter compared to consensus estimates.

According to InvestingPro data, Regions Financial, currently valued at $22.29 billion, appears slightly undervalued based on its Fair Value analysis. The stock has shown remarkable strength with a 43% return over the past year.

The bank also provided guidance suggesting an approximate $3.2 billion core pre-provision net revenue (PPNR) for 2025, which is marginally below Street expectations by about 1%. This forecast is anticipated to be well-received by the market, especially considering the cautious sentiment prior to the earnings release.

Regions Financial's net interest income (NII) guidance indicates a 2-5% increase, aligning with current estimates. However, the fee income guidance is projected to grow by 2-4%, which falls short by approximately 2% against expectations.

On the expense front, the bank expects a 1-3% rise, which could present a slight advantage of about 1% over consensus estimates. The fourth quarter showed encouraging deposit trends, with stable balances and a cost of deposit increase (beta) of around 33%, which is consistent with management's guidance for the quarter.

Moreover, Regions Financial has undertaken another securities repositioning effort, which is expected to yield an increase of about 220 basis points, albeit at the cost of realizing roughly $30 million in losses.

During the quarter, the bank also executed $58 million in stock buybacks, resulting in a pro-forma Common Equity Tier 1 (CET1) ratio decrease of approximately 30 basis points to 8.8%. This figure is slightly below the management's reiterated target range of 9.25-9.75%.

The analyst's commentary underscores the company's strategic financial maneuvers and the implications of its guidance on stock performance. The assessment suggests that, despite some areas not fully meeting market expectations, the overall financial health and strategic actions of Regions Financial are poised to sustain investor confidence.

Trading at a P/E ratio of 14.05x, the bank maintains a "GOOD" Financial Health Score according to InvestingPro's comprehensive evaluation system, which analyzes multiple financial metrics and growth indicators.

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