NEW YORK (
) -- Four regional banks whose stocks have performed well so far this year could see pullbacks if the trend seen when
PNC Financial Services
disclosed its plan to repay bailout funds last week holds.
Bank of America
have all sold off over the past month mainly on regulatory fears aimed at the big banks, while large regionals
Fifth Third Bancorp
Regions Financial Corp.
are all solidly in positive territory. But that performance could easily reverse itself if these regionals are forced to raise additional equity to pay back TARP.
That's what happened to PNC, which
in addition to selling its servicing business to
Bank of New York Mellon
as part of its plan to pay back TARP.
PNC's shares have lost ground over the past month, possibly as investors began sensing from bank CEO James Rohr's comments that the bank was stepping up its timetable for paying back the Treasury. As I noted
, Rohr seemed to be sending a subtle signal to the market, even as he said he was being consistent with his timetable.
Every time a regional bank issues equity to pay back TARP, it gets harder for the rest to argue that they won't have to do the same thing. It would essentially be a repeat of what happened with Bank of America, Citigroup and
at the end of 2009.
Share prices typically fall following an equity raise as existing investors get diluted, and PNC shares are down roughly 3.5% since announcing the TARP repayment plans.
The TARP tabs of the previously mentioned regionals break down to $3.4 billion for Fifth Third, $3.5 billion for both SunTrust and Regions Financial, and $2.5 billion for KeyCorp. Meantime, their stocks are up 15%, 11%, 17% and 24%, respectively, in 2010, based on Friday's close. Those returns could be vulnerable if these stock sales become the standard.
Written by Dan Freed in New York