Regions Financial (RF) reported a fourth quarter loss of $606.0 million or 51 cents per share, worse than the Zacks Consensus Estimate of a loss of 35 cents per share. Last year, the company reported a net loss of $244 million or a loss of 35 cents per share. Results suffered mainly due to increased loan loss provisioning, reflective of continued underlying economic weakness and the related loss implications to Regions’ loan portfolio restructuring.
Regions reported a net interest margin of 2.72%, steady on a linked quarter basis, benefiting from continued low-cost deposit growth, especially in non-interest bearing products and improving loan spreads due to a better pricing discipline. As a result, net interest income increased 1.0% sequentially to $850.0 million.
According to management, dramatically falling interest rates have acted as a headwind for net interest income over the past few quarters. It believes that trends in deposit pricing and loan spreads should continue to support a stable net interest margin during this period of historic low interest rates.
Non-interest revenues were down 7.0% sequentially, due to a loss on the sale of investment securities and lower mortgage revenues. Total non-interest expense was down 2.0% sequentially due to cost savings from branch consolidation.
Tier 1 Capital stands at an estimated 11.6%, while the estimated Tier 1 Common ratio is 7.2%.
Net loan charge-offs increased to 2.99% of average loans from 2.86% in the previous quarter. Non-performing asset ratio increased 43 basis points sequentially to 4.83%. The sizable increase in both ratios reflects a significant deterioration in Regions’ most distressed categories (homebuilder/land/condo) and in geographical regions (Florida/Georgia).
Provisions for loan losses increased to $1.2 billion from $1.0 billion in the previous quarter. Asset quality deterioration was generally worse than expected, offsetting solid core operating performance.
Despite significant credit costs and their bottom-line effect, the results indicate solid core business performance as net interest margin steadied, new accounts opened at a record level for the third consecutive quarter and deposit growth remained strong. Management indicated credit costs are likely to remain elevated into 2010.
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