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RBC upgrades Regions Financial ahead of likely capital returns

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RBC upgrades Regions Financial ahead of likely capital returns


* RBC Capital Markets analyst Gerard Cassidy upgraded Regions Financial Corp. to "outperform" as he anticipates the company will return more capital to shareholders.

Cassidy wrote that he expects the Alabama-based company "will deliver on returning the excess capital" it is currently holding above required levels. That could mean about $2.5 billion in share repurchases and $500 million in dividends over the next 12 months, Cassidy wrote.

The analyst increased the company's price target to $21 from $18. His EPS estimate for the company in 2018 is now $1.45, up from $1.38. Cassidy also raised his EPS estimate for 2019 to $1.65 from $1.49.

The improved outlook is also partly due to the company's "quality of its low cost core deposit base," Cassidy wrote, noting that those "deposits will increase in value" as interest rates continue rising.

Lowered price target

* D.A. Davidson analyst Gary Tenner maintained the "neutral" rating of Houston-based Prosperity Bancshares Inc., though he lowered his price target to $70 from $77. Tenner wrote that the company is vulnerable to a flattening yield curve, partly because it has "the poorest combination of organic loan growth and balance sheet mix" out of the Southwest banks that D.A. Davidson covers.

Tenner downgraded the company's expected EPS in 2018 to $4.57, down from the previous estimate of $4.60. He also revised his estimate for 2019 EPS to $4.97, down from the prior projection of $5.14.