Regions Financial (RF)

Regional banking company Regions Financial (NYSE:RF) missed Wall Street’s revenue expectations in Q4 CY2025 as sales rose 3.4% year on year to $1.92 billion. Its non-GAAP profit of $0.57 per share was 6.8% below analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1971 and operating in a region known as the "heart of Dixie," Regions Financial (NYSE:RF) is a financial holding company that provides banking services, wealth management, and specialty financial solutions across the South, Midwest, and Texas.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Regions Financial competes with other regional banks like Truist Financial (NYSE:TFC), Fifth Third Bancorp (NASDAQ:FITB), and PNC Financial Services (NYSE:PNC), as well as national banks including Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Wells Fargo (NYSE:WFC) in its operating territories.

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Regrettably, Regions Financial’s revenue grew at a sluggish 4% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Regions Financial’s recent performance shows its demand has slowed as its revenue was flat over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Regions Financial’s revenue grew by 3.4% year on year to $1.92 billion, falling short of Wall Street’s estimates.

Net interest income made up 65.6% of the company’s total revenue during the last five years, meaning lending operations are Regions Financial’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Topline growth is certainly important, but the overall profitability of this growth matters for the bottom line. For banks, we look at efficiency ratio, which is non-interest expense (salaries, rent, IT, marketing, excluding interest paid out to depositors) as a percentage of total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, Regions Financial’s efficiency ratio couldn’t build momentum, hanging around 56.6%.

In Q4, Regions Financial’s efficiency ratio was 56.8%, close to analysts’ expectations.

For the next 12 months, Wall Street expects Regions Financial to maintain its trailing one-year ratio with a projection of 56.1%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Regions Financial’s EPS grew at an astounding 17.8% compounded annual growth rate over the last five years, higher than its 4% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Regions Financial, its two-year annual EPS growth of 2.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Regions Financial reported adjusted EPS of $0.57, down from $0.59 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Regions Financial’s full-year EPS of $2.34 to grow 11.2%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Regions Financial’s TBVPS grew at a tepid 3.5% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 13.6% annually over the last two years from $10.66 to $13.75 per share.

Over the next 12 months, Consensus estimates call for Regions Financial’s TBVPS to grow by 9.6% to $15.07, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Regions Financial has averaged a Tier 1 capital ratio of 10.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Regions Financial has averaged an ROE of 12.5%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for Regions Financial.

It was good to see Regions Financial narrowly top analysts’ tangible book value per share expectations this quarter. On the other hand, its EPS missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $28.64 immediately after reporting.

Updated: January 16, 2026 at 6:18 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Regions Financial, you should also grasp the company’s longer-term business quality and valuation.

Regions Financial isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its declining net interest margin shows its loan book is becoming less profitable. On top of that, its net interest income growth was weak over the last five years.

Regions Financial’s P/B ratio based on the next 12 months is 1.3x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $30.37 on the company (compared to the current share price of $28.64).