Higher NII & Fee Income to Support Regions Financial's Q2 Earnings

Regions Financial Corporation RF is scheduled to report second-quarter 2025 results on July 18, before the opening bell. Quarterly earnings and revenues are expected to have registered year-over-year growth in the to-be-reported quarter.

This Birmingham, AL-based player’s first-quarter 2025 earnings beat the Zacks Consensus Estimate, driven by a decline in non-interest expenses and an increase in non-interest income and net interest income (NII). However, a lower loan balance was concerning.

Regions Financial has an impressive earnings surprise history. Its earnings have surpassed estimates in each of the trailing four quarters, with an average surprise of 6.71%.

Regions Financial Corporation Price and EPS Surprise

Regions Financial Corporation price-eps-surprise | Regions Financial Corporation Quote

The Zacks Consensus Estimate for second-quarter earnings of 56 cents per share has remained unchanged over the past seven days. The figure indicates a 7.7% rise from the year-ago reported number.

The consensus estimate for revenues is pegged at $1.85 billion, indicating a 7.1% increase from the prior-year reported figure.

Key Factors & Estimates for RF's Q2

NII & Loans: During the second quarter, the Federal Reserve kept interest rates steady at 4.25–4.5%, due to tariff-related uncertainty and its potential impact on the economy and inflation. As such, Regions Financial’s NII is likely to have witnessed growth, as funding/deposit costs stabilized.

Management expects NII to increase approximately 3% from first-quarter 2025 reported level. The Zacks Consensus Estimate is pegged at $1.2 billion, indicating a marginal increase on a sequential basis.

In the second quarter, the loan demand was impressive despite an uncertain macroeconomic backdrop. Per the Fed’s latest data, the demand for commercial and industrial loans was solid, while consumer loan demand was decent.

Given this, the company is likely to have witnessed improvement in average interest-earning assets in the second quarter of 2025. The Zacks Consensus Estimate of $1.39 billion for average earning assets indicates a marginal sequential increase.

Non-Interest Income: Global merger and acquisition (M&A) activities were better than expected in the second quarter of 2025. Markets stumbled in early April following Trump’s trade tariff announcement, which disrupted business sentiment. Nevertheless, as trade demand eased and policy direction became clearer, deal-making activities resumed in the last month of the quarter.

Regions Financial expects capital markets revenues to improve modestly in the second quarter of 2025 compared to the prior quarter, although they are likely to remain below the strong levels recorded in the year-ago period. The Zacks Consensus Estimate for capital markets income is pegged at $80.1 million, indicating a slight increase from the prior quarter.

Despite the central bank's interest rate cuts in 2024, mortgage rates did not decrease significantly in the second quarter. The rates fluctuated, but they remained in the mid-to-upper 6% range. As such, refinancing activities and origination volumes have not witnessed significant growth. This might have affected RF’s mortgage revenue growth to some extent in the second quarter of 2025.

The Zacks Consensus Estimate for mortgage income is pegged at $39.6 million, indicating a nearly 1% decline from the prior quarter’s reported figure.

The Zacks Consensus Estimate for card and ATM fees of $118.9 million suggests a 1.6% marginal rise on a sequential basis.

The consensus estimate for revenues of $163.1 million from service charges on deposit accounts for Regions Financial indicates a sequential increase of 1.3%.

The Zacks Consensus Estimate for wealth management income is pegged at $127.5 million, indicating a 1.2% decrease from the prior quarter’s reported number.

Overall, the Zacks Consensus Estimate for total non-interest income is pinned at $621.4 million, indicating a 5.3% sequential rise.

Expenses: RF’s expenses are expected to have been high in the quarter under discussion due to increases in salaries, employee benefit expenses, and other expenses. Although the company is implementing expense management actions, its ongoing investment in technology advancement and franchise strengthening is likely to have kept the expense base elevated.

Asset Quality: The company is likely to have set aside a substantial amount of money for potential bad loans, given the expectations of a higher interest rate backdrop for longer and tariff-related uncertainty.

The Zacks Consensus Estimate for non-performing assets is pegged at $899.1 million, indicating a 1.7% rise from the prior quarter's reported figure.

What Our Quantitative Model Predicts for RF

Our proven model predicts an earnings beat for Regions Financial this time. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: Regions Financial has an Earnings ESP of +0.23%.

Zacks Rank: The company currently carries a Zacks Rank #2. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Other Bank Stocks to Consider

Here are some other bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post earnings beat this time around.

The Earnings ESP for U.S. Bancorp USB is +0.17% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2025 results on July 17. You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past seven days, the Zacks Consensus Estimate for U.S. Bancorp’s quarterly earnings has been unchanged at $1.07.

First Horizon FHN is scheduled to announce quarterly numbers on July 16. The company has an Earnings ESP of +0.20% and a Zacks Rank #3 at present.

Quarterly earnings estimates for First Horizon have remained unchanged at 41 cents over the past week.

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This article originally published on Zacks Investment Research (zacks.com).

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