Regions Financial's Slow-And-Steady Approach Not Really Standing Out

Regions Financial (RF) has chosen a different strategic approach from many of its peers recently, prioritizing quality over quantity and capital returns over growth. It hasn’t made all that much difference in terms of share price performance, though, as the shares have done about as well as the major regional bank indices, while lagging some peers like BB&T (BBT) and Bank of America (BAC) while outperforming SunTrust (STI) and First Horizon (FHN).

I like Regions’ strong core deposit franchise, and I think there’s some potential in the company’s specialty lending efforts. I also think prioritizing credit quality should pay off over the next few years, but I am concerned about how Regions’ relatively modest near-term and long-term earnings growth prospects will be priced by the market, even though capital returns should be strong. I do believe Regions is undervalued, but then so are most banks, and upside is likely tied to stronger spreads and/or efficiency gains than I currently model.

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Regions Financial's Slow-And-Steady Approach Not Really Standing Out