Regions Financial Corp. (RF), Alabama's biggest bank, posted a profit that missed analysts' estimates as mortgage refinancings declined.
Net income dropped 5.3 percent to $285 million, or 20 a share, from $301 million, or 21 cents, a year earlier. The average estimate of 27 analysts surveyed by Bloomberg was 21 cents.
Regions, run by Chief Executive Officer Grayson Hall, 56, is focusing on cutting costs as tepid economic growth restricts lending. JPMorgan Chase & Co. (JPM), the biggest U.S. bank by assets, said this month that third-quarter mortgage fees and related revenue plunged 65 percent to $839 million. Wells Fargo & Co. (WFC), the largest home lender, said mortgage-banking revenue tumbled 43 percent.
Regions gained 41 percent this year through yesterday, the third-best performer in the 24-company KBW Bank Index.
Mortgage refinancings slumped after rates on 30-year loans jumped from historical lows of less than 3.5 percent earlier this year to an average of 4.32 percent at the end of September, data compiled by Freddie Mac show. Applications, which accounted for 82 percent of all requests for home loans last year, made up 63 percent in the third quarter, according to the Mortgage Bankers Association.
Loan growth, a stable net interest margin, controlled expenses, further loan-loss reserve releases and continued share repurchases will "more than compensate for a drop in mortgage-origination revenues," Jason Goldberg, a Barclays Plc analyst, said in an Oct. 8 note. "Prolonged declines in real estate prices within Regions Southeastern footprint" could have a negative effect on shares, Goldberg said.