Regions Financial (RF)
Banca comercial regional
Regions is a regional bank in the South, Midwest and Texas with a low-cost deposit franchise (1.69% in the second quarter of 2026), tangible common equity returns among the best in its peer group (ROTCE TTM ~18.6%) and an aggressive shareholder-oriented capital allocation: it pays 3.5% in dividend yield with the dividend just raised 13% and a sustained buyback pace. At $30, it trades Undervalued against a 5-year value of $49, with a base CAGR of +14%.
- Price
- $30.46
- Intrinsic value (5y, base)
- $49
- Total annual return (5y)
- 13.7%
- Status (nominal)
- Undervalued
- Margin of safety
- +33%
The essentials
- Low-cost deposit franchise (1.69% interest-bearing in 2Q26) funding a US$161bn balance sheet with a funding advantage over competitors reliant on wholesale markets.
- Improving credit quality: annualized net charge-offs fell to 42bp (from 59bp two quarters ago) and reserve coverage over nonperforming loans rose to 241%.
- Aggressive capital return: the board raised the quarterly dividend 13% to US$0.30/share in July 2026 and sustains a buyback pace of ~US$1.1bn annually on a base of ~857M shares.
Intrinsic value — two valuation methods
Total return at 5 years: 13.7%/year = 10.1% appreciation + 3.6% dividend. The target price ($49) is ex-dividend; the $7 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $80 · Multiples $45) exceeds the market price ($30).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $30 trades ~32.9% below its value discounted to today (~$45); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — Infravalorado: the target price ($49) plus dividends yield above the required average return (10%) — the business compounds.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$29.
Thesis
The business
Regional commercial bank with a low-cost deposit franchise, ROTCE TTM ~18.6% — well above the 10% bar — and improving credit quality (net charge-offs at 42bp, reserve coverage at 241%). The moat is funding-cost and regional scale, classified narrow with a direction of eroding due to structural pressure from fintechs and non-bank platforms.
The valuation
Valued on normalized P/E over TTM net income to common (US$2.150bn, EPS ~US$2.51), with a base exit multiple of 13x — within the 10-15x bank band of the method, in the upper half for the quality of the return — plus a cross-check against tangible book value (P/TBV ~2.3x today). Method: Undervalued · 5-year value $49 · base CAGR +14%.
The margin of safety
It trades at a real discount to value, though short of the required margin of safety. The market price (US$31.90) is compared against the maximum price derived from the 15% hurdle, with the resulting discount being the Graham margin shown in the header. The return is made up of price appreciation and a dividend that grows from a base just raised 13% (to US$1.20/year).
What to watch
The central disconfirmer is the net interest margin trajectory: if the Federal Reserve cuts rates faster than deposit costs decline, the NIM (today 3.66%, near a recent-period high) compresses before the bank can reprice its funding, which would hit earnings right in the year the base case assumes the strongest acceleration (~8%).
Educational / informational. Does not constitute investment advice.