Regions Financial trades at $28.44 per share and has stayed right on track with the overall market, gaining 6.7% over the last six months. At the same time, the S&P 500 has returned 6.2%.

Is now the time to buy Regions Financial, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Regions Financial Not Exciting?

We're swiping left on Regions Financial for now. Here are three reasons why RF doesn't excite us and a stock we'd rather own.

1. Net Interest Income Points to Soft Demand

Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.

Regions Financial’s net interest income has grown at a 5.1% annualized rate over the last five years, much worse than the broader banking industry. Its growth was driven by an increase in its net interest margin, which represents how much a bank earns in relation to its outstanding loans, as its loan book shrank throughout that period.

2. Net Interest Margin Dropping

Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It's a fundamental metric that investors use to assess lending premiums and returns.

Over the past two years, Regions Financial’s net interest margin averaged 3.6%. However, its margin contracted by 38.2 basis points (100 basis points = 1 percentage point) over that period.

This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean Regions Financial either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.

3. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Regions Financial’s EPS grew at a weak 2.2% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its flat revenue and tells us management responded to softer demand by adapting its cost structure.

Final Judgment

Regions Financial’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.3× forward P/B (or $28.44 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.

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