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Regions Shares Rise as Profit Beats Analysts’ Estimates

Regions Financial Corp. (RF), the 10th- largest U.S. bank by deposits, gained in New York trading after reporting second-quarter profit that beat analysts’ estimates as provisions for loan losses declined.

Regions climbed 4.1 percent to $6.65 at 4:15 p.m. in New York. Earnings available to common shareholders increased to $284 million, or 20 cents a share, from $55 million, or 4 cents, a year earlier, the Birmingham, Alabama-based bank said today in a statement. Adjusted per-share earnings were 20 cents, compared with the average estimate of 27 analysts surveyed by Bloomberg for per-share profit of 14 cents.

Regions posted its sixth profit in the past seven quarters as provisions for loan losses tumbled to $26 million from $398 million a year earlier. Chief Executive Officer Grayson Hall, 55, has said his goal is to return the bank to what he calls sustainable profitability. The company repaid the Treasury Department’s $3.5 billion in bailout funds earlier this year.

“We continued to make incremental progress on many key fronts and are pleased with the improvement of our financial performance despite considerable economic and political uncertainty and an uneven economic recovery,” Hall said in the statement.

The bank’s shares gained 49 percent this year through yesterday, the best performer in the KBW Bank Index. (BKX)

The loan-loss provision in the second quarter is not at a “normalized” level because of non-performing loans that were paid off in the period, Chief Credit Officer Barb Godin said on a conference call following the results. The provision will probably be higher in the future, she said.

Service Charges

Non-interest income declined 6.6 percent to $507 million from a year earlier as service charges on deposit accounts fell 24 percent to $233 million. Net interest income fell 2.1 percent to $838 million from a year earlier. Non-interest expense dropped 12 percent to $842 million.

Total loans decreased 6.1 percent to $76.2 billion from the year-earlier period as residential first mortgage, consumer credit-card and investor real estate portfolios posted declines.

Regions’s net interest margin, the difference between what a bank pays to borrow money and what it gets for loans, widened to 3.16 percent from 3.07 percent a year earlier.

Regions has “room for improvement” on deposit costs, which will help keep the net interest margin stable amid record- low interest rates, Hall said on the call.

Non-performing loans were $1.92 billion, the first time that figure fell below $2 billion in three years, according to the statement. Net charge-offs fell 52 percent to $265 million.

Net income more than tripled to $355 million from $109 million in the second quarter last year. Regions reported $4 million of net income from the sale of its Morgan Keegan & Co. brokerage unit in April. The figure was reduced by $71 million, or 5 cents a share, due to the repayment of Troubled Asset Relief Program funds.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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