I was cautious about the near-term prospects of Regions Financial (RF)
after first quarter earnings, and the stock has since had a pretty
mixed run next to its peer group. I was concerned about the prospect of
higher provisioning/reserve-building and loan losses, and that's been
what has happened, though it's not clear to me that Regions is actually
as bad off as the share price would otherwise suggest.
Regions'
balance sheet sensitivity is a concern in a weaker rate environment,
even with the company's hedging efforts, and I'm not ruling out the risk
that the underlying credit situation is actually worse than its peers.
Even so, I think the risk perception is worse than the reality, and I
think Regions has positioned itself defensively relative to most of its
peers. It'll take time for the underlying long-term value I see here to
come out in the share price, but if the post-COVID-19 recession proves
worse than the market's current sentiment reflects, Regions could be an
outperformer.
Read the full article:
Regions Financial's Greater Conservatism Could Pay Off
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