Regions Financial Corp. (RF) has broadened its speciality banking groups business. Through its banking subsidiary, Regions Bank, the company has forayed into lending out to technology and defense firms. The company has formed a Technology & Defense banking group and appointed David Sozio to lead this new venture.
Regions Bank will offer a full collection of banking services to technology and defense firms, with stress on advisory services, syndicated financing as well as debt capital for growth and merger and acquisition activities. The focus on specialty banking growups continues since 2008 and already includes transportation, franchise restaurant, energy and health care.
The appointment of David Sozio is also a strategic fit as his 25 years of experience in financial services, including broad management and advisory experience in both technology and defense industry sectors, will help Regions flourish in this business. Sozio had previously served at Wachovia Securities. He established and built Wachovia’s Defense and Government Services Corporate Finance practice and subsequently led Wachovia’s Technology and Services Debt Capital Markets team. Wachovia was acquired by Wells Fargo & Co. (WFC) in 2008.
Regions Financial finally entered the profit region in the fourth quarter of 2010. The company reported a net income of 3 cents per share, significantly surpassing the Zacks Consensus Estimate of a loss of 13 cents.
Results were significantly impacted by improved core business performance and the high disposition of non-performing assets. Additionally, the company’s improved non-interest income, high pre-tax pre-provision total revenue and net margin expansion attributed to favorable funding mix and deposit pricing. However, these increases were partly offset by higher non-interest expenses.
While derisking measures at Regions Financial are encouraging, the upfront costs of such initiatives cannot be avoided. Nevertheless, the favorable funding mix, improved core business performance and an expected improvement in the economy over the new few quarters would support the company’s earnings. Additionally, the widening of its lending boutique is also viewed positively as it would support its top-line growth ahead.
Regions Financial currently retains a Zacks #3 Rank, implying a short-term ‘Hold’ recommendation. Considering the stock fundamentals we reiterate our long-term “Neutral” recommendation.
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