Regions Financial’s Net Income Declines in 1Q15
Analyzing Regions Financial’s 1Q15 Earnings (Part 1 of 4)
Earnings miss expectations
Regions Financial (RF) reported its first quarter earnings on April 21, 2015. While the revenue for the quarter increased by 1% YoY (year-over-year), the net income declined 26%. The company reported EPS (earnings per share) of $0.16—down 24% from $0.21 in the same quarter last year. The EPS was $0.15 for 4Q14.
The company missed the consensus EPS estimate of $0.18. Regions Financial closed marginally down on the day of the announcement. It closed up 1.6% on April 22. Regions Financial forms ~0.44% of the Financial Select Sector SPDR ETF (XLF).
Revenue grows
Net interest income for the quarter remained flat YoY, as the spread compression was offset by loan growth. Non-interest income rose 3%—primarily driven by higher card and ATM fees and wealth management income.
The YoY decline in net income was driven by higher provisions and non-interest expenses. The above graph shows Regions Financial’s net interest, non-interest, and net income over the last five quarters.
Spending for the future
Non-interest expense rose 10.8%—driven by extinguishment charges on redemption of high-cost debt and expenses related to the branch consolidation and space planning initiative.
During the quarter, the bank redeemed $250 million of high-cost debt. It incurred $43 million in extinguishment charges. The bank expects earnings to benefit from a lower run rate going forward. It also spent $9 million on a space planning initiative. It’s expected to reduce the occupancy expense going forward. The bank announced its plans for branch consolidation in the previous quarter. It incurred a $13 million expense related to that in 1Q15.
While the above expenses were incurred during the quarter, the expenses relating to ongoing operations—including salaries and employee benefits, occupancy expense, and furniture and equipment expense—didn’t show any significant rise in the quarter.
SunTrust Bank (STI) reported a 7% YoY increase in EPS in its first quarter results on April 20, 2015. Bigger banks including Bank of America, JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup reported their first quarter earnings in the previous week.
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