Regions Financial Corporation (RF), a full-service provider of consumer and commercial banking, wealth management, mortgage products, and services, inked a deal to buy EnerBank USA, a unit of CMS Energy Corporation (CMS) for $960 million.
EnerBank, with $2.8 billion of loans as of March 31 and serving customers in all 50 states, is a point-of-sale home improvement lender supporting homeowners and contractors through innovative products and digital financing solutions.
The deal, subject to certain regulatory and closing conditions, is expected to close in the fourth quarter of 2021.
As of March 31, Regions Bank had $153 billion in assets, including $83 billion in loans. The deal is expected to be immediately accretive to the company’s net interest margins by 10 – 15 bps and to the efficiency ratio by 100 bps, but will be dilutive to EPS in 2022. (See Regions Financial stock analysis on TipRanks)
Scott Peters, senior executive VP and head of the Consumer Banking Group for Regions Bank said, “We have thoughtfully evaluated the home improvement point-of-sale lending space for a number of years, and we believe this is the right partner at the right time to deliver on our vision. EnerBank’s platform and skilled financial professionals, combined with the reach and experience of Regions’ Consumer Banking teams, will help us deepen relationships with clients while reaching new customers with convenient home improvement lending options.”
Following the news, Raymond James analyst Michael Rose reiterated a Buy rating on RF and said, “Management is assuming limited cost and no revenue synergies, which could be a source of upside from the transaction. This deal is similar to the Ascentium Capital deal that was announced last year and it helps advance Regions’ strategy of deepening customer relationships through offering new products and capabilities.”
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 9 Buys, 6 Holds, and 1 Sell. The RF average analyst price target of $22.93 implies 2.6% upside potential to current levels. Shares have gained 40% year-to-date.
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