Regions Downgraded at Deutsche Bank

BIRMINGHAM, Ala. (TheStreet) -- Whether Regions Financial (RF Quote) offers an attractive price depends on how bullish investors are on an economic rebound, according to a Deutsche Bank report on Thursday.

Analyst Matt O'Connor downgraded Regions to hold from buy, saying the stock's value has run up too far, too fast, but still offers an attractive price for investors who think the worst is over and a recovery is imminent. O'Connor notes that shares of the Birmingham, Ala.-based bank have surged 44% since late-May, vs. a 10% climb for a group of competitors.

Regions was recently up two cents to $5.53, in line with O'Connor's low-level tangible book value and far above his $5 price target.

Still, while Regions has significant commercial real-estate exposure -- a big red flag in the banking sector today -- the company also seems to have adequate capital to cover losses. The bank has a Tier 1 common ratio of 8.4%, vs. an average 7% for peers. O'Connor expects those capital levels to remain high through 2011, meaning "less risk of additional large capital raises."

However, commercial real-estate losses will largely depend on the broader economic picture. Such assets are performing poorly, and many analysts, including O'Connor, expect it to be the proverbial "next shoe to drop" for loan losses.

But if those losses do not climb as high as some expect, Regions "is likely to be one of the bigger beneficiaries," says O'Connor, because of a relatively low tangible book value, its strong capital base, its asset book and its strong deposit franchise.