There are certainly things to like about Regions Financial (RF), including a generally conservative underwriting culture, very low deposit costs due to a high-quality, sticky deposit base, and management’s decision to hedge away some of the bank’s rate risk. Even with those positives, I thought the shares were fully and fairly valued back in February, and the stock has modestly underperformed its regional bank peers since then, with the shares basically flat.
I’m more bullish on the shares largely due to that lackluster relative performance, but investors have a lot of banks to choose from in the Southeast, some even more undervalued than Regions. I do like the acquisition of EnerBank and management’s decision to invest in upgraded IT capabilities, as well as management’s decision to start rolling back some of its hedges. On the negative side, I do have some concerns that low vaccination rates across Regions’ footprint could represent a threat to recovering business activity in the region, hurting the outlook for loan demand recovery.
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Regions Financial Continues To Put The Pieces In Place For Better Longer-Term Performance
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