Key insights
- Analysis suggests Regions Financial (RF) and FirstBank Financial (FBK) are undervalued despite recent gains, citing superior net interest margins, return on equity, and share buybacks. Both companies appear well-positioned for a sustained higher interest rate environment. This could signal continued strength in select regional bank stocks, offering a moderately bullish outlook for the sector.
Even though the KRE index is up 38% over the last year, there are still a few names that look cheap based on their financials.
I did a deeper dive into Regions Financial (RF) and FirstBank Financial (FBK). They are actually putting up better numbers than many of the largest banks (especially in net interest margin)
- FBK is currently running a net interest margin of 3.94%. 23% above the KRE average * RF has a return on equity of 18.26%. For context, the average for US banks is usually around 13.5%. * RF is also trading at a P/E ratio that is 14% below the average for other regional banks. * Management at RF spent 401 million dollars buying back their own shares in just the last 90 days. Authorization for $2.3B in buybacks in total * FBK is sitting on 18% more excess capital than the next regional bank, which is why it's PE is above KRE average
While both of these stocks have taken off over the last year, their metrics suggest there is more room to run. This is even assuming that we are in a higher for longer interest rate environment. Both earnings calls mention they are well positioned if interest rates were to hold for the next 12-18 months even.