Regions Financial: Bank Stock Winner

NEW YORK (TheStreet) -- Regions Financial (RF) was the winner among the largest U.S. banking names on Monday, with shares rising 3% to close at $6.60.

The broad indexes all showed strong gains, after the Federal Reserve Bank of Chicago reported that its Chicago Fed National Activity Index's declined to -0.09 in February from +0.33 in January, but that the index's three month moving average increased to +0.30 in February from +0.22 in January, for "its highest level since May 2010," suggesting "that growth in national economic activity was above its historical trend," with "limited inflationary pressure from economic activity over the coming year."

The Federal Reserve Bank of Dallas reported that its Texas Manufacturing Outlook Survey showed that "factory activity continued to increase in March," with the production index for the state holding steady at 11.1, "suggesting growth continued at about the same pace as last month."

The KBW Bank Index (I:BKX) rose over 1% to close at 50.23, with all but one of the 24 index components rising for the session.

Regions Financial's shares have now returned 54% year-to-date, after falling 38% last year.

The stock trades for nine times the consensus 2013 earnings estimate of 75 cents a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 47 cents.

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'sannual stress tests, Regions on March 14 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.

Morgan Stanley analyst Betsy Graseck rates Regions "Underperform" but on Sunday raised her price target for the shares to $7 from $5.50, since the common equity raise was much lower than the $1.7 billion the analyst had expected, and that the TARP repayment -- which is expected to happen during April -- "removes a major overhang for the stock."

Graseck added that a recent upgrade of the company's credit rating to investment grade by Standard & Poor's "will allow RF to deploy excess liquidity on its balance sheet."

Graseck raised her 2012 EPS estimate for Regions by seven cents to 39 cents, and estimates the Birmingham, Ala., lender will earn 56 cents a share during 2013.

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

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