Goldman Sachs Upgrades Regions Financial (RF) to Conviction Buy
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Goldman Sachs analyst Ryan Nash upgraded Regions Financial (NYSE: RF) from Buy to Conviction Buy with a price target of $14.00.
The analyst comments "With short-term rates at zero and a 10-year in the 100bp range, we believe RF margins will prove to be much more defensive than others given its hedging of short-term interest rate risk, while its hedged a sizable portion of its fixed rate exposure. Given this dynamic, we see its net interest margin falling 8bps by 4Q21 and stabilizing at around 3.25%. This compares to peer margins falling 36bps. In addition, while credit remains uncertain at this point, given the limited balance sheet growth the past several years (loans have grown 1.4% CAGR the past 5 years vs. peers at 3-4%) and we see credit losses rising in our modest recession scenario ~30bps (to ~80bps) which is in-line with the peer group. When we factor in other potential offsets, we see 14% stressed EPS risk, which is just over half the regional bank average of 26%. With shares trading at just over 0.7x P/TBV and 5.1x our stressed EPS (peers at 7.4x) we think risk reward is amongst the best in our coverage."
Shares of Regions Financial closed at $7.49 yesterday.
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Related EntitiesGoldman Sachs Conviction Buy List, Goldman Sachs
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