Regions Financial Corp., the lender that repaid a $3.5 billion taxpayer bailout this month, rose the most since March after reporting first-quarter profit that beat analysts’ estimates as losses on bad loans declined.
Regions gained 4 percent to $6.34 at 10:21 a.m. in New York. Net income increased to $199 million, or 11 cents a share, from $69 million, or 1 cent, a year earlier, the Birmingham, Alabama-based bank said today in a statement. Excluding a 3 cent per share loss from professional and legal fees tied to discontinued operations, earnings were 14 cents. The average estimate of 28 analysts surveyed by Bloomberg was 8 cents a share.
Chief Executive Officer Grayson Hall, 54, had said Regions, the 10th-largest U.S. bank by deposits, would repay the U.S. Treasury Department’s Troubled Asset Relief Program funds when the company returned to sustainable profitability. After reporting six consecutive quarters of losses starting in 2009, the bank reduced soured loans and has posted a profit in five of the last six periods. Regions cut its provision for loan losses to $117 million from $482 million last year.
The loan loss provision “is what’s really driving the favorable beat this quarter,” said Marty Mosby, an analyst at Guggenheim Securities LLC. “It does signal that Regions has dealt with a large majority of the losses and that, going forward, we should see asset quality being a lot less of a burden.”
Total Loans Decline
Regions paid $593 million in dividends to taxpayers since receiving the bailout in November 2008, the firm said in a statement earlier this month. Exiting the bailout means the lender no longer has to pay $175 million in annual dividends to the U.S., Regions said. To help repay TARP, Regions sold its Morgan Keegan & Co. brokerage unit to Raymond James Financial Inc. this month for total proceeds of $1.2 billion and raised $900 million in a March stock sale.
Non-interest income decreased 9.7 percent to $524 million as service charges on deposits fell to $254 million from $287 million and Regions booked $12 million in securities gains compared with $82 million last year. Non-interest expense declined to $913 million from $932 million.
Total loans fell to $76.7 billion in the first quarter from $81.4 billion last year as investor real estate loans dropped 32 percent to $10.1 billion. Net charge-offs declined to $332 million from $481 million.
Regions’s net interest margin, the difference between what a bank pays to borrow money and what it gets for loans, was unchanged from last year at 3.09 percent.