UPDATE: Stephens Upgrades Regions Financial (RF) to Overweight
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Stephens analyst Terry McEvoy upgraded Regions Financial (NYSE: RF) from Equal Weight to Overweight, PT $20.00.
The analyst comments "Our concerns last year for Regions centered on potential loan losses within several portfolios more at risk for losses during the pandemic. Today, we are comfortable with Regions' credit profile and 2021 net charge-off outlook (55bps-65bps). The ability to deploy excess liquidity, net interest income protection from a successful hedging strategy (unrealized gain ~$1.6 bil.), and disciplined expense management give us confidence in PPNR trends where we are ~2% above consensus in 2022. All of these topics are discussed below including additional insight into Regions’ higher risk loans and capital levels. Our model suggests a core ROA of 1.21% in 2022 vs. the 1.01% average for other Super Regional banks, yet shares of RF trade at 8.9x ’22 EPS estimates compared with 10.1x at peers. We see this valuation gap closing over the next year and are raising our rating on RF to OW (from EW). Our PT is $20."
Shares of Regions Financial closed at $17.01 yesterday.
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