Regions Earnings: Stable Credit and Initial 2025 Outlook Close to Our Model

Key Morningstar Metrics for Regions Financial

• Fair Value Estimate: $23.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Regions Financial’s Earnings

Regions Financial RF reported mixed fourth-quarter results. As we incorporate the bank’s year-end results and 2025 guidance, we do not expect a material change to our fair value estimate of $23 per share. Adjusted revenue in the quarter came in at about $1.85 billion, down 1.2% from the third quarter but up 1.8% from the year-ago quarter. Adjusted non-interest income, which makes up roughly one-third of total revenue, was sequentially down 5.4%, fueled primarily by unfavorable market value adjustments on assets held for employee benefits.

Net interest income improved 1.1% sequentially, as the impact of declining asset yields was more than offset by total deposit costs declining 13 basis points to 1.47%. Deposit trends were not entirely positive, however, as non-interest-bearing deposits declined in both mix and absolute levels while the Federal Reserve continued to cut interest rates.

Regions’ fiscal 2025 guidance implies approximately $7.5 billion in revenue at the midpoint, slightly above our model before the earnings release but 1% below the FactSet consensus. Further, the loan book experienced continued modest declines in business loan balances during the fourth quarter, as customers are carrying excess liquidity and exhibiting utilization rates below historical levels. The bank anticipates this continuing into the first half of 2025 but reversing during the back half as businesses attain further clarity on tariffs and fiscal policy.

Credit trends were mostly stable during the quarter, as net charge-offs sequentially ticked up just 1 basis point to 0.49% and roughly equaled provisioning. Nonperforming loans modestly increased 11 basis points to 0.96% from the previous quarter. Still, this remains below the pre-pandemic historical average of 1.07%.