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We Know Why Regions Financial Jumped After Announcing Earnings

By Robert Eberhard - Apr 23, 2013 at 12:27PM

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A multitude of reasons contributed to the early morning jump of the Alabama-based bank.

After announcing earnings this morning, Regions Financial's (RF 1.49%) shot up as much as 4.5%. One factor alone was not responsible for today's early gain: Many positive items can be found in the bank's first quarter. Here are a few highlights.

Exceeding expectations
Analysts were expecting the bank to post $0.20 earnings per share on $1.3 billion in revenue. The bank exceeded the earnings estimate, checking in at $0.23 per share , and met revenue expectations, though revenue was down from the fourth quarter.

Despite this decline in revenue, Regions managed to increase net income, both year over year and quarter over quarter. The bank's $327 million in net income was a 25.3% increase from the fourth quarter, and a 125.5% increase from the first quarter last year.

Increase in net interest margin
Regions continues to be one of the few banks reporting increasing net interest margin quarter to quarter. Similar to the fourth quarter, which saw a two basis points increase in this all important number, NIM increased a modest three basis points from the end of last year. In the current low interest rate environment, interest rate spreads have had a major impact at banks much larger than Regions, so any improvement, no matter how slight, should be noted.

Loan growth amid consumer deleveraging
Overall, loan balances remained steady from the first quarter last year, but there was still some growth in certain parts of the loan portfolio. Middle market commercial and industrial loans increased 3.5% from the previous quarter, while auto loans grew by 6% during the same time frame. 

The loan growth in these two areas helped to offset the decline in the bank's real estate portfolio, which now accounts for 10% of its total loan portfolio, down from 13% a year ago. Nevertheless, the decline has started to slow, primarily because of a new home equity product that allows consumers to refinance higher cost debt at today's low rates.

A strong quarter
One quarter does not make a year, but if the first quarter is any indication, Regions Financial could be on its way to a strong 2013, especially considering its strong performance in this year's Fed stress test. With hopes for a higher dividend as a result, now could be a great time to consider the Alabama bank for your portfolio.

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