margin pressure, increases in consumer loan chargeoffs, and a slowdown in mortgage originations could hurt earnings for the Montgomery, Ala., banking company.
Regions' shares fell 7.7% last week. The slide was capped by a 3.2% drop on Friday, when Richard Bove of Raymond James & Associates and Christopher Marinac of Robinson Humphrey Co. reduced their ratings and third-quarter earnings projections.
On Monday shares fell another 1%, to $31.75, after Catherine Murray of J.P. Morgan Securities, David C. Stumpf of A.G. Edwards & Sons, and John B. Wimsatt of Friedman, Billings, Ramsey & Co. added their voices to the chorus.
The company has been an aggressive acquirer, and the analysts predict Regions will continue down that path to grow and enhancing operations.
But there is a potential downside to the strategy, the analysts said. "There can be no assurance that Regions will be successful in integrating pending or future acquisitions," Mr. Wimsatt said. "Regions' earnings are sensitive to local market conditions, conditions in the Southeast, as well as overall interest rate conditions."
It was the second time this year that Ms. Murray reduced her estimates for Regions. After the second quarter she cut her 1999 estimate, to $2.58 from $2.65. On Monday, Ms. Murray reduced shares to "market performer" from "buy" and reduced her third-quarter estimate to 62 cents, from 66 cents. She cut her 1999 estimate to $2.50, from $2.59, and her 2000 estimate to $2.70 from $2.88.
Mr. Marinac came out with his downgrade to "market performer from "buy." He reduced his earnings per share for the third quarter to 60 cents, from 65 cents, and his 1999 estimate to $2.46, from $2.56.
Mr. Wimsatt downgraded shares to "accumulate" from "buy" and cut his third-quarter estimate by 3 cents, to 61 cents, and his 1999 projection to $2.47 from $2.55. He also downgraded the shares to "accumulate" from "buy" and lowered his 12-month projection for the stock to $37 from $45.
Mr. Stumpf reduced his third-quarter estimate to 60 cents, from 65 cents, and his full-year estimate to $2.46, from $2.55. He kept his "maintain" rating.
Meanwhile bank stocks continued their slide on Monday. The Standard & Poor's bank index dropped 3.70% and the Nasdaq bank index 1%. The Dow Jones industrial average rose 0.19% and the S&P 500 0.11%
Banks continue to lag on long-term and short-term expectations.
A sector analysis by Deutsche Banc Alex. Brown noted that the S&P 500 last week lost 1.2% while financial stocks were down 1.9%, placing them seventh among various industry groups that make up the index.
Since the beginning of the year, the S&P 500 is up 8.6%, and financial stocks are down 2.3%, while industries like technology, energy, and capital goods are all gained.
Fears of a rate hike increase, which had rocked financial stocks earlier in the week, subsided toward the end of the week, allowing financials to move up a notch from last place the week before, according to Edward Yardeni, chief economist with Deutsche Banc Alex. Brown.