Compass Point analyst Kevin Barker reiterated a Buy rating and bumped his price target on Regions Financial (NYSE: RF) to $11.50 (from $11.00) following Q1 results. The analyst cited increasing operating leverage.

Barker commented, "We are raising our price target to $11.50 to take into account a slight increase in our FY16 EPS estimate due to increased balance sheet leverage. Core PPNR came in well above our estimates as RF reported stronger NII, fee income and lower expenses. While this bodes well for our longer-term view on operating margins, we did see a significant pickup in the provision expense as RF proactively built reserves related to some deterioration of commercial loans in the healthcare, energy and other sectors. We expect these provisions to remain elevated through FY16 as the company addresses risk rating migration and potential credit losses in the energy portfolio. While this certainly is a headwind, we expect the company to offset the higher expenses with operating efficiency initiatives and growth in the balance sheet. With shares trading at 11.3x FY16E EPS compared to peers at 12.4x, we believe the stock could re-rate closer to peers as the earnings base stabilizes and the market begins to give RF credit for its outsized levels of excess capital and above average asset sensitivity. We are adjusting our FY15E operating EPS to $0.78 from $0.80 primarily due to higher provisions and FY16E to $0.87 from $0.85 due to lower expenses and higher NII. We do not assume higher rates in our EPS estimates."

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Shares of Regions Financial closed at $9.58 yesterday.