Regions Financial Corporation RF and its subsidiary, Regions Bank’s ratings, have been placed on review for a possible upgrade by Moody’s Investors Service. The company’s probable upgrade includes Baa3 senior unsecured, issuer and subordinated debt ratings, Ba2 (hyb) rating on noncumulative preferred stock, and its short-term issuer rating of Prime-3.
In addition, Regions Bank’s standalone baseline credit assessment of baa2, A3 long-term and Prime-2 short-term deposit ratings, Baa3 senior unsecured and subordinate debt ratings, and Baa1(cr) counterparty risk assessment (CR assessment) have also been included for potential upgrade. Moreover, Moody’s affirmed the bank’s short-term CR at Prime-2(cr).
Moody’s outlook for Regions has changed to “Rating under Review” from “Stable.”
Rationale Behind the Potential Upgrade
Moody’s will be considering Regions’ commitment to improve its risk management capabilities, along with its potential influence on earnings and asset quality. Management’s perspective on not resorting to risky loan lending and the sustainability of the company’s “pull-back” tactics on loan growth will also be taken into consideration.
Per Moody’s, Regions has adopted “pull-back” tactics on loan growth in certain areas due to risk concerns and pressure on profitability. It constrained its loan exposure in sectors that resulted in losses in the past, like commercial real estate and home equity loans. Moreover, despite operating in states with ample access to energy sectors, the company curbed its exposure in energy lending.
Further, Regions’ capital position adequacy and resiliency will also be reviewed, as it is expected to decline with the proposed capital deployment activities.
We believe the probable upgrade will positively contribute to Regions’ credit worthiness as a whole.
Regions currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the same space include Allegiance Bancshares, Inc. ABTX and American National Bankshares Inc. AMNB, carrying a Zacks Rank #2 (Buy) and Hancock Holding Co. HBHC sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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