Regions: Federal Money on Its Way

Regions Financial (RF) shares jumped more than 5% Tuesday after the southern bank said the federal government had accepted its application for a government equity investment.

Regions, in a conference call to discuss third-quarter financial results, said that it "has been notified that it is eligible and does intend to participate in the capital purchase program announced by the Treasury Department on Oct. 13, 2008." The government last week said it would make $250 billion in preferred equity investments to shore up confidence in the banking system.

The equity investments are the most significant of several government initiatives intended to improve liquidity and confidence in the banking industry.

The government investments will be made out of the $700 billion financial sector rescue plan -- troubled asset relief program, or TARP -- approved by Congress earlier this month. The government has said nine major banks have already agreed to be a part of the equity program, which reportedly include Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), Morgan Stanley (MS), Bank of New York Mellon (BK) and State Street (STT).

Bank executives said they also expected to unload assets through the TARP, but had not yet received clarification on what type of assets the government would buy.

Regions' stock reacted positively to the news, despite a steep decline in third-quarter profits, which fell below Wall Street's expectations. The Birmingham, Ala., holding company reported third quarter net income of $80 million, or 11 cents a share, vs. the consensus analyst estimate of 27 cents a share, according to Thomson Reuters. The bank earned $206 million last quarter and $394 million in the third quarter of 2007.