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Handicapping Earnings From 5 Regional Banks

Stocks in this article: ZIONRFSNVCFRFNFG

Regions Financial also has real estate loan exposure and a loan pipeline that are considered healthy according to the latest FDIC report. Yet it trades at 75% of its book value.

Regions has a negative daily chart pattern with the stock ending Friday on its 50-day simple moving average at $6.41. The 200-day moving average at $5.43 is major support.

Synovus Financial is overly exposed to commercial real estate loans. Those loans account for 336.5% of its risk-based capital, vs. the guideline for 300%.

The bank's pipeline ratio shows that 86.3% of all real estate loans have been funded, which is a potential problem. The stock of this bank trades at 54% of its book value.

The Treasury still holds a $967.9 million TARP investment in this bank. Synovus has a negative daily chart pattern with the stock above its 50-day and 200-day simple moving averages at $1.89 and $1.77, respectively.

If you decide to buy this stock, keep in mind that it would be a highly speculative purchase. Buying a stock trading at less than $2 is like buying an option on survival.

Cullen Frost Bankers has real estate loan exposures and a loan pipeline that are considered healthy according to the first-quarter FDIC report. This stock trades at 1.95% of its book value. CFR has a negative daily chart pattern with the stock between its 200-day simple moving average at $54.80 and its 50-day moving average at $56.57.

First Niagara Financial has real estate loan exposures and a loan pipeline that are considered healthy according to the first-quarter FDIC report, but the stock trades at 86% of its book value. FNFG has a neutral daily chart pattern with the stock below its 50-day and 200-day simple moving averages at $7.91 and $8.89, respectively.

How to Read the Table

OV / UN Valued: All five banks are undervalued according to my Web site, ValuEngine.

VE Rating: A 3-Engine rating is a Hold, while a 4-Engine rating is a Buy.

Last 12-Month Return (%): Banks with a red number declined by that percentage. Those with a black number increased by that percentage.

Forecast One-Year Return: Each of the four banks in black in the table is projected to be higher by that percentage over the next 12 months. First Niagara is in red, so it's projected to decline by 3.3% over the next 12 months.

Price-to-Earnings Ratios: Four of the banks have favorable forward P/E ratios between 8.5 and 17.6, but Synovus Financial has an elevated P/E of 26.9.

Value Level: The price at which to buy on weakness during the time frame referenced: W-weekly, M-monthly, Q-quarterly, S-semiannual or A-annual. You buy on weakness to establish or add to a long position, or cover a short, or become less short.

Pivot: A price that should be a magnet during the time frame referenced: W-weekly, M-monthly, Q-quarterly, S-semiannual or A-annual.

Risky Level: The price at which to sell on strength during the time frame referenced: M-monthly, Q-quarterly, S-semiannual or A-annual. You sell on strength to establish a short position or add to a short position, or remove a long position, or become less long.

I advocate the use of good-'til-cancelled limit orders to add to long positions or become less short on share price weakness to the value levels. Traders should enter GTC limit orders to reduce their long positions or to add to a short position on strength to risky levels.

At the time of publication, Suttmeier had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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