Regions Profit Tops Analysts’ Estimates as Margin Widens

Regions Financial Corp., Alabama’s biggest bank, rose the most in the KBW Bank Index after reporting earnings that beat analysts’ estimates as net interest margin, a gauge of lending profitability, widened.

Regions climbed 4.4 percent to close $7.76 in New York, the most since Sept. 19. Fourth-quarter net income was $265 million, or 18 cents a share, compared with a loss of $548 million, or 48 cents, a year earlier, when the lender posted a non-cash charge tied to the sale of the Morgan Keegan brokerage, the Birmingham-based bank said today in a statement. Excluding some one-time items, profit was 22 cents a share, compared with the 21-cent average estimate of 26 analysts surveyed by Bloomberg.

Regions’ net interest margin, the difference between what it pays on deposits and charges for loans, widened to 3.1 percent from 3.08 percent in both the third quarter and a year earlier. Chief Financial Officer David Turner told investors in November the bank’s margin could widen or narrow by two basis points. Loan growth is expected to be in the low single digits in 2013, Regions said today in a slide presentation.

“These guys haven’t had much growth, they’ve had a lot of runoff in their portfolio, so the fact that their guidance is calling for low single-digit growth in 2013 is incrementally positive,” said Michael Rose, an analyst with Raymond James & Associates Inc. The net interest margin in the fourth quarter was “at the higher end of expectations,” Rose said.

The shares have climbed 58 percent in the past 12 months, the second-best performer in the 24-company index behind Bank of America Corp.

Losing Years

Full-year net income was $1.12 billion, compared with a loss of $215 million in 2011. It was the bank’s first annual profit following four consecutive years of losses.

Regions reduced its provision for loan losses to $37 million in the fourth quarter from $295 million a year earlier.

Total revenue in the period was $1.35 billion, compared with $1.36 billion in the last quarter of 2011. Revenue from fees increased 5.7 percent to $536 million. Mortgage income surged 58 percent to $90 million.

In December, the company was upgraded two levels by Moody’s Investors Service on improved asset quality. Regions is in a “better position to weather another real estate cycle” after cutting write-offs and overdue loans, Moody’s said at the time.

Total loans declined 4.6 percent to $74 billion from a year earlier. That was driven by a 28 percent decrease in investor real-estate loans, which fell to $7.72 billion. The company said in the slide presentation that commercial and industrial loan commitments increased 12 percent during the past year, which could imply future loan growth, Rose said.

Before it's here, it's on the Bloomberg Terminal.