Regions Financial (RF) announced its Q3 earnings yesterday. Besides expected continued losses, the call emphasized consolidation, staff reduction and expense reduction. For a transcript of the Tuesday RF Q3 earnings call transcript, go here.

 

What also stood out was the jump in the Commercial real estate net charge offs. It has been known for some time that after consumer real estate, it was the turn of commercial real estate to brake economic growth. Now we are seeing effects of that translated into actual dollar terms appearing on financial statements.

 

On the home builder and condominium portfolio, which have declined by $498 million, CEO Dowd Ritter expects the source of these losses to decline through 2010. He also expects gross level of NPA’s to peak by the end of this year or into the first quarter of next year.

 

The operating expense run rate for the next year or a period after that, is expected to hover around $1 billion.

 

As expected with a bank battling this credit crisis, Regions Financial (RF) is trying to pare down its operating expenses with its full force being directed towards “personnel related measures”. The plan is to consolidate 121 branches and more over the next two quarters. Look out for increased job cuts.

 

What is most surprising to me is the irony in its personnel related cost cutting measures and the pretty pay package of new CFO, Irene Esteves. (When you click on the link, scroll down to Senior Management Effectiveness and click on the datapoint to open it.) Regions Financial is a TARP recipient to the extent of $3.5 billion which raises the question on how RF is going to pay the ‘guaranteed’ million dollar bonus to its CFO for 2008 as well as 2009.

 

Of course with the dismal outlook, the company has been unable to set up a TARP repayment date. But the company responds, “…we are taking every action necessary to be prepared for that.”

 

Our weak governance score for Regions Financial is underlined by the less than sterling financial outlook for the company. Don’t forget to register with us to access all the tabs on this company. Tabs provide more details on Regions’ Board of Directors and its Internal Control Environment. Registration is simple and above all, it’s FREE!

 

New Scorecard Added – Occidental Petroleum (OXY)

 

Company Name: Occidental Petroleum (OXY)

 

Industry: Oil & Gas Producers

 

InvesGuard has just released a Corporate Governance scorecard for Occidental Petroleum. (OXY). Devon Energy scores well in its Internal Control Environment. Its Compensation practices need to be strengthened. It also needs to increase the level of its Social and Environmental reporting.

 

(Click here to view Occidental’s scorecard)

 

Given that it is a Oil & Gas Producer, Occidental’s poor showing on the Environmental and Social Commitment front could be of concern in the long term. Another concern from a long term perspective, is compensation. For a CEO, who as the proxy quotes has “Implemented a cost-cutting initiative in advance of world-wide economic deterioration” to take home a record breaking $65 million is both contra indicative to his cost cutting efforts as well as detrimental to increasing shareholder value.

 

From a reporting perspective, Occidental publishes certain mandated information on Emissions and certain other environmental metrics. But other critical metrics such as percentage of oil spill recovered are not reported in its Social Responsibility Report. nor is does it make a public commitment by participation in such collaborative initiatives like the UN Global Compact. More information about Occidental Petroleum’s Social and Environmental impact can be found on Occidental’s Company Page , under the “Social and Environmental” Tab.

 

Also of concern is the presence of a Board Executive Committee. This committee has been granted broad powers and is chaired by Dr Irani- Occidental’s CEO. Although this committee held no meetings during 2008, such a situation can intensify the dilemma of excessive CEO power versus a fully empowered one.

 

The company does however perform well across our Internal Control Environment criteria and demonstrates a well developed Audit mechanism with committee members that are not overextended.

 

Occidental’s Overview and Scorecard

 

Other companies covered by InvesGuard in the Oil & Gas Producers industry include:

 

- Vaalco Energy

 

- Chesapeake Energy

 

- Conoco Phillips

 

- Devon Energy Corp

 

Related news: Citigroup sells Phibro to Occidental

 

---------------------