Morgan Stanley Maintains on Regions Financial

In a report published Wednesday, Morgan Stanley analyst Betsy Graseck maintained Overweight on Regions Financial (NYSE: RF), with a $12.00 price target.

According to the report, with strong 5 percent loan growth, resilient NIM and falling expenses, RF appears well positioned to drive a 3.5 percent improvement in efficiency in 2014. This should drive stronger cap return, we expect net payouts to increase from 36 percent in 2013 to 59 percent in 2014.

“We estimate 5% NII growth in 2014, driven by 5% EOP loan growth (3% avg growth) and avg full year NIM up 6bps y/y,” the report noted. “Loan growth is the key reason to be long the stock, in our view. 4Q loan growth took a pause as corporates tapped capital markets over banks and RF accelerated balance sheet cleanup by transferring $686mn in Troubled Debt Restructurings (TDRs) to Held for Sale (HFS). This action helped RF reduce high-cost, low yielding loans. 4Q13 EOP loans declined -1.7% q/q as a result (roughly half this decline was due to the TDR transfer). We believe RF is poised to drive accelerating loan growth given higher commitments and rising HPI in the Southeast.”

RF closed Tuesday at $10.86 with shares trading up at 2.74 percent.