RF Regions Financial Corporation
Decent bank, thin spread: 12% ROE on 1.37x book now roughly fairly priced.
The story
Regions remains a solid Southeast regional franchise with trailing ROE of 12.6% near cycle-favorable levels given elevated rates; credit quality is benign but late-cycle. At 1.37x book, the market pays for ~12% normalized returns against a ~10.1% cost of equity, leaving only a thin excess-return spread. Price has fallen ~5% since my last take, closing most but not all of the gap to fair value.
Trailing 12.6% ROE is slightly above trend as NIMs sit near peak; I hold normalized ROE at 12% rather than extrapolate. Book growth of 3.5% fading to 3% matches mid-single-digit loan growth and continued buybacks, and beta/failure risk are unchanged as fundamentals and news flow are stable.
Value drivers
| Return on equity (normalized) | 12.0% |
| Book-value growth (Y1) | 3.5% |
| Terminal book growth | 3.0% |
| Beta | 1.15 |
| Failure probability | 1.5% |
| Cost of equity | 10.1% |
Valuation bridge
| PV of excess returns | 2.30B |
| PV of terminal excess | 2.45B |
| Equity value | 22.09B |
| ÷ shares → per share | $25.93 |
News
neutral -0.10 · 8 articles
- WesBanco, Pinnacle Financial Partners, Zions Bancorporation, Regions Financial, and M&T Bank Shares Are Falling, What You Need To Know
- Regions Financial (RF) Could Be a Great Choice
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- Regions Financial (RF) Stock Could Be A Bargain On Fair Value But Fully Priced On Earnings
- FB Financial's Southern Expansion and Buybacks Drive Analyst Optimism
- 3 Top-Ranked Dividend Stocks: A Smarter Way to Boost Your Retirement Income
- Winners And Losers Of Q2: Regions Financial (NYSE:RF) Vs The Rest Of The Regional Banks Stocks
- SouthState Gains 12% in the Past 3 Months: What's Ahead for Investors?
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 17.67B | 12.0% | 331.92M | 301.41M |
| 2 | 18.29B | 12.0% | 343.53M | 283.28M |
| 3 | 18.92B | 12.0% | 355.37M | 266.11M |
| 4 | 19.56B | 12.0% | 367.41M | 249.84M |
| 5 | 20.22B | 12.0% | 379.66M | 234.43M |
| 6 | 20.88B | 12.0% | 392.10M | 219.86M |
| 7 | 21.55B | 12.0% | 404.74M | 206.09M |
| 8 | 22.23B | 12.0% | 417.55M | 193.07M |
| 9 | 22.93B | 12.0% | 430.54M | 180.78M |
| 10 | 23.63B | 12.0% | 443.70M | 169.18M |
Key risks
- CRE/office credit deterioration in a slowing economy
- NIM compression as deposit costs reprice upward and rates fall
- Revenue growth stalls (5y CAGR ~1.7%), limiting book compounding
Catalysts
- Rate cuts steepen the curve and revive loan demand in Southeast footprint
- Buybacks and dividend growth at a discount to intrinsic value