Among the banks I like, Regions Financial (RF) has been pretty underwhelming, with the shares lagging their peer group by about 4% since my last update
and a few percentage points over the past year as well, as the Street
remains unimpressed with the weak loan growth, ongoing credit costs, and
limited capital opportunities. None of that is going to be fixed by
fourth quarter earnings; Regions didn't post a bad quarter, but guidance
for positive operating leverage doesn't seem to have convinced the
Street, particularly in light of weak lending performance.
I
think Regions management is doing a lot of the right things - focusing
on loan returns (versus growth), operating efficiency, and sources of
non-spread-based income growth. Still, I don't love this name so much
because I love the company or management as I think the valuation is out
of whack (with a fair value close to $19%). Valuation unfortunately
isn't a catalyst in and of itself, and investors will need patience for
this to work, meanwhile more dynamic names like Synovus (SNV) and First Horizon (FHN) still offer upside among Southeast U.S. banks.
Continue here:
Regions Financial Lagging On Weak Loan Growth And Lingering Credit Worries
No comments:
Post a Comment