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Regions Bucks Market: Financial Winner

NEW YORK ( TheStreet) -- Regions Financial (RF - Get Report) was the winner among the largest U.S. banking names on Wednesday, with shares rising 2% to close at $6.59.

The broad indexes ended mixed, after the National Association of Realtors reported total existing-home sales in the U.S. declined 0.9% to a seasonally adjusted annual rate of 4.59 million in February from an upwardly revised 4.63 million in January, but were 8.8% higher than the 4.22 million-unit level reported the same time last year.

Meanwhile, the Mortgage Bankers Association said Wednesday that mortgage applications on a seasonally adjusted basis fell 7.4% in the U.S. last week from the previous week, as interest rates climbed.

The KBW Bank Index (I:BKX) pulled back 1% to close at 49.90, with 21 out of 24 index components showing declines for the session.

Regions Financial has now seen its shares return 50% year-to-date, following last year's 38% decline.

The company expects by the end of this month to complete the sale of its Morgan Keegan brokerage subsidiary to Raymond James Financial (RJF) for roughly $1.2 billion. "

Regions owes $3.5 billion in federal bailout funds received in November 2008, through the Troubled Assets Relief Program, or TARP. Following the completion of the Federal Reserve's annual stress tests last week, Regions priced a $900 million common stock offering, and said that including the offering's net proceeds of $875 million, the money from the Morgan Keegan sale and a full redemption of TARP preferred shares held by the U.S Treasury, the company's Tier 1 common equity ratio its Tier 1 common equity ratio would be a strong 9.1%, based on Dec. 30 numbers.

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Guggenheim Securities analyst Marty Mosby on Wednesday upgraded Regions to a "Buy" rating from a neutral rating, while raising his price target to $9 from $6, saying that "earnings momentum over the next year will be strong as asset quality pressures subside.

Mosby said that he expected "RF's core earnings continue to slowly improve, as loan loss provision declined for the fifth straight quarter," but said he also expect the company's "return to normalized earnings power to be gradual, as short-term rates need to rise to get net interest margin significantly above current levels, elevated credit-related operating expenses could take longer to be eliminated, and increased share count could dilute earnings further as TARP is repaid."

Regions trades for nine times the consensus 2013 EPS estimate of 73 cents.

Mosby is ahead of the consensus, estimating that Regions will earn 83 cents a share this year, followed by 2013 EPS of $1.05.

Interested in more on Regions Financial? See TheStreet Ratings' report card for this stock.
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