Banks have done well on a sector-wide basis since my last update on Regions Financial (RF), but my bullishness on this leading Southeastern franchise has nevertheless been rewarded, as the shares have outperformed its peer group by close to 10% (and the S&P 500 by around 15%) on growing recognition of the bank’s potential to generate double-digit pre-provision growth as loan demand improves and rates head higher.
Regions isn’t a perfect story – the Southeast is getting more and more competitive, higher expenses need to be monitored, and deposit betas are a big unknown – but I like the moves the company has taken to improve its loan growth outlook and its asset sensitivity. Region’s outperformance has brought it back to the pack as far as valuation goes, but I still lean favorably on this name.
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