Regions Financial Corp. (RF) reported a first-quarter loss of $196 million, or 21 cents a share – its fourth-consecutive quarterly loss.
The first-quarter earnings compared with a prior-year profit of $77 million, or 4 cents a share. The latest period included a $59 million gain on the sale of collateralized mortgage obligations. Revenue decreased 13% to $1.64 billion.
Analysts polled by Thomson Reuters most recently forecast earnings of loss of 27 cents on revenue of $1.59 billion.
The company’s new CEO, Grayson Hall, said asset quality continued to stabilize in the quarter and deposit growth remained strong. However, the lenders substantial credit costs continued to more than offset the strength of its core business.
Hall said high credit costs continued to “offset the underlying strength of our core business,” he said. “…We are not satisfied with our financial performance and we remain intensely focused on returning the company to profitability.”
Regions’ first quarter results were hit hard by skyrocketing bad loans, net charge-offs and a substantial 81% boost in its loan loss reserves. Although many banks reported that bad-loan losses began abating late last year, Alabama-based Regions hasn’t been among them.
The company boosted its loan-loss provision to $770 million from $425 million a year earlier, though that was an improvement from $1.18 billion in the prior quarter. Net charge-offs rose to 3.16% of average loans from 1.64% a year earlier and 2.99% a quarter ago.
As of late, the company’s nonperforming assets as a percentage of other loans and real estate more than doubled to 5.2 percent, versus 2.4 percent during the same period last year. Also its allowance for loan losses as a percentage of net loans more than doubled to 3.6 percent, compared with 1.9 percent a year ago.
The bank’s non-interest income – primarily generated by fees – dipped 4 percent after lower customer transaction activity, according to a written statement.
Regions – the largest financial institution headquartered in Alabama – has been struggling with a plethora of unprofitable loans amid the economic slump, especially in the Florida market. To reduce its expenses, the bank eliminated 2,400 positions within the past year and closed at least 120 branches, which will bring in a net savings of $21 million, Hall said during an early morning press conference Tuesday.
In March, Todd Hagerman an analyst at Collins Stewart who covers 18 large and mid-size banking companies rated Regions as a buy predicting further upside, while projecting cautious optimism on regional banks in general.
“Bottom line results will be poor given expectations for slowing pre-provision profits, including lower earning asset levels, seasonally weak fee income, and high expense levels,” said Hagerman. “We expect about half of our coverage universe to post an operating loss in the quarter, with the remaining banks posting modestly improving profits.”
In late-day trading, Region’s stock was up 29 cents to $8.62.
