NEW YORK ( TheStreet -- Regions Financial (RF) has changed its hands off approach to credit cards by re-acquiring a $1 billion credit card portfolio from FIA Card Services, a Bank of America (BAC) subsidiary for an undisclosed amount.
Regions sold its Regions-branded credit card business, valued at $300 million portfolio, to MBNA in 2000.
The purchase announced Tuesday will balance out Region's consumer lending and commercial lending portfolios, which are about 38 pecent and 62 percent of the business respectively, says Sandler O'Neill analyst Kevin Fitzsimmons. He added that Regions recently also got back into the indirect-auto lending business and the credit card business goes along with this newfound strategy.
"These tend to be higher yielding assets. They are looking for growth where they can get it," said Fitzsimmons. "These are Regions-branded credit cards so and the servicing will still be done by FIA until 2012 so the customer won't see much impact.""They diversify their assets and get a relatively high yielding asset," said Jones Day partner Chip MacDonald. "SunTrust got back into credit cards a couple years ago. Credit cards are a good way to get into the consumer business." KBW analyst Jefferson Harralson says that it will be an $80 million capital bush toward the consumer business. "They are protecting the size of the balance sheet a bit," Harralson said. "I like this strategy a lot. These branded cards have lower loss rates and larger return rates to Regions." The deal is expected to close by the end of the second quarter. Even though Regions has yet to pay back the$ 3.5 billion it owes the Troubled Asset Relief Program, analysts do not think there will be much regulatory scrutiny against the deal. "They would have to ask permission, but as it does not damage the bank's capital position I don't see much objection," said Fitzsimmons. "Bank of America may have had an incentive to sell this off as larger banks are looking to get smaller instead of bigger." --Written by Maria Woehr in New York.
To contact the writer of this article, click here: Maria Woehr. To follow the writer on Twitter, go to http://twitter.com/newsgirlmw.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV