The analyst estimates that Regions Financial's tangible book value per share will be roughly $6.50 at the end of 2012, including "the impact of $1b common issuance to repay TARP."
O'Connor added that "while some uncertainty remains surrounding the repayment of TARP, we expect Tier 1 common to reach 9% by year end 2012 on an organic basis," suggesting that "an outsized capital raise to repay TARP is unlikely."
Regions Financial is scheduled to announce its fourth-quarter results on January 24, before the market opens. The consensus among analysts polled by Thomson Reuters is for the company to report fourth-quarter earnings of five cents a share, declining from eight cents in the third quarter, but improving from a three-cent profit in the fourth quarter of 2010.
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Shares of Raymond James pulled back nearly 4% to close at 32.96.
The St. Louis brokerage firm indicated that it would raise $300 million in common equity to partially fund its acquisition of Morgan Keegan.
FBR analyst Steve Stelmach called the Morgan Keegan deal an "inside-the-park home run" for Raymond James and said the company's stock remained a "top pick" for his firm, with a $45 price target.
Stelmach said that the brokerage industry's "lull in industrywide retail activity has as much to do with the transitory state of the capital markets and interest rates in the wake of the financial crisis as it does with U.S. demographics," and that "moving forward, a capital-light business, such as retail brokerage, is only more attractive in the context of Dodd-Frank legislation and Basel III capital requirements that punish the balance sheet-intensive wirehouses and money-center banks."
The analyst added that the Morgan Keegan acquisition was "extremely attractive, done at a very reasonable price from what was arguably a forced seller."
Raymond James is scheduled to announce its fourth-quarter financial results on Jan. 25 after the market closes, with analysts polled by Thomson Reuters expecting the company to post EPS of 54 cents.
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