Regions Financial: Financial Winner

Shares of Regions Financial rose 3% on Thursday, as the broad market reacted calmly to a Greek austerity deal and a broad mortgage foreclosure settlement in the U.S.

Author:: Philip van Doorn
Publish date:: Feb 9, 2012 4:34 PM EST

NEW YORK (

TheStreet

) --

Regions Financial

(RF) - Get Report

was the winner among the largest U.S. banking names on Thursday, with shares rising 3% to close at $5.67.

The broad indexes saw slight gains, as investors reacted to an agreement between Greek political leaders on austerity measures required for a second European bailout of the country. Meanwhile, financial news in the U.S. was dominated by a

broad mortgage foreclosure settlement

between federal regulators, 49 states' attorneys general, and the largest U.S. loan servicers, including

Bank of America

(BAC) - Get Report

JPMorgan Chase

(JPM) - Get Report

Wells Fargo

(WFC) - Get Report

Citigroup

, and

Ally Financial

The servicers were to pay roughly $5 billion in cash to the states and federal regulators, as part of a $25 billion settlement, with a commitment of "more than $20 billion towards financial relief for consumers," according to Attorney General Eric Holder.

JPMorgan Chase said in a Securities and Exchange Commission filing that its contribution to the settlement would total $5.3 billion, including $1.1 billion for "payments to borrowers," "approximately $500 million of refinancing relief to certain 'underwater' borrowers whose loans are owned by the Firm," and "approximately $3.7 billion of additional relief for certain borrowers."
Wells Fargo said in a statement that its contribution would total $5.3 billion, including $900 for refinancing relief, "$3.4 billion in consumer relief programs," and "$1.0 billion paid directly to the federal government and the states for their use to address the impact of foreclosure challenges as they see fit."
Citigroup announced that its contribution to the mortgage settlement would total "approximately $2.2 billion," and expected that "that existing reserves will be sufficient to cover customer relief payments and all but a small portion of the cash payment called for under this settlement." However, Citi added that it would "adjust its fourth quarter and full year 2011 financial results to reflect an additional $84 million (after tax) charge," along with an additional $125 million in after tax charges, "in connection with the resolution of related mortgage litigation."
Ally Financial said it had agreed to pay $310 million, "with $110 million in cash for federal and state payments and $200 million in borrower relief." The company said it "expects that the financial impact of the agreement will not be material on financial results for the first quarter of 2012 and future periods."
That leaves Bank of America, which said its "commitment under the agreements in principle is $11.8 billion," with approximately "$7.6 billion in borrower assistance, including targeted principal reduction," $1.0 billion for "refinancing assistance to customers in the participating states," up to $1 billion to settle FHA claims, and "approximately $2.25 billion in direct payments to state and federal governments and in borrower restitution, of which $1.9 billion would be an upfront cash payment," with the remaining $350 million only being paid if the company "failed to meet certain principal reduction thresholds over a three-year period."

Investors' reaction was fairly subdued.

Shares of JPMorgan pulled back 1%, to close at $37.87. The shares have now returned 15% year-to-date, after dropping 20% last year.

Shares of Wells Fargo were down slightly, closing at $30.58. The shares have now returned ___% year-to-date, after a 10% pullback in 2012.

Citigroup was down 2%, to close at $33.66. The shares are up 28% year-to-date, following last year's decline of 44%.

Bank of America's shares rose 1% to close at $8.18. The shares have now returned 47% year-to-date, after falling 58% in 2011.

The

The KBW Bank Index

(I:BKX)

pulled back slightly to close at 45.11, with all but six of the 24 index components showing declines for the session.

Regions Financial's shares have now risen 32% this year, after declining 38% in 2011.

BlackRock

(BLK) - Get Report

disclosed in an SEC filing on Thursday that it was holding 68,299,879 shares in Regions, or 5.43% of the company's total shares outstanding, as of Dec. 30, increasing their holdings in Regions from 33,492,318 shares, or 2.66% of the common shares outstanding, as of Sept. 30.

BlackRock's c own shares have risen 7% this year, through Thursday's close at $190.19, after pulling back just 4% in 2011.

Regions CFO David Turner was scheduled to present on Thursday at the Credit Suisse Financial Services Forum, and according to an SEC filing, his presentation was going to focus on the company's strength and customer loyalty in its home market. According to the presentation, Regions has the lowest expenses per full-time employee in its peer group.

Regions owes $3.5 billion in federal bailout money received in 2008 through the Troubled Assets Relief Program, or TARP. The company agreed in January to sell its Morgan Keegan brokerage subsidiary to Raymond James Financial (RJF) for "total consideration of $1.18 billion."

Deutsche Bank analyst Matt O'Connor on Wednesday reiterated his "Buy" rating on Regions, saying that "outsized capital raise for TARP repayment

is unlikely given fundamental improvement," including the Morgan Keegan sale, "improvement in credit quality in 4Q and an increase in capital ratios." O'Connor expects the company's Basel I Tier 1 capital "to exceed 9% by the end of 2012."

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

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Written by Philip van Doorn in Jupiter, Fla.

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Philip van Doorn

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.