Regions Financial: Bank Stock Loser

NEW YORK ( TheStreet) -- Regions Financial ( RF) was the loser among the largest U.S. banking names on Monday, with shares sliding 3% to close at $5.63.

The broad indexes were mixed, as Greece moved closer to finalizing its second European rescue package, following last week's debt swap, which has been considered a "credit event," triggering payouts on credit default swaps.

Meanwhile, China reported a $31.5 billion trade deficit in February, which was the country's largest since 1989.

The The KBW Bank Index ( I:BKX) declined 1% to close at $45.40, with 17 of the 24 index components showing declines for the session.

Regions' Financial's shares have now returned 31% year-to-date, following last year's 38% drop.

Unlike most of the large regional banks for which the Federal Reserve will announce stress test results this week, for Regions, investors are not seeking a return of capital. They are seeking the repayment of $3.5 billion in government bailout funds received during 2008 through the Troubled Assets Relief Program, or TARP, and are hoping for a minimal dilutive common equity raise in the process.

Part of the TARP repayment money will come from the sale by Regions of its Morgan Keegan subsidiary to Raymond James Financial ( RJF) for "total consideration of $1.18 billion," in a deal expected to close late this month.

KBW analyst Jefferson Harralson rates Regions Financial "Market Perform," with a $5.50 price target, and said on Monday that the company's "capital plan and the Fed's ultimate results will allow for RF to repay its $3.54B in outstanding TARP," but that the company "has a $1.6B cash shortfall as it looks to repay this amount while maintaining its desired two-year cash reserves."

The analyst expects Regions to quickly take advantage of the recent run-up in its shares, before the Fed's full detailed release of its stress test results, by raising $1 billion in common equity through a public offering, "with the remainder of the gap to be filled through the up-streaming of cash from the bank to the hold-co, or potentially through a small, temporary debt issuance."

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Regions Financial's stock trades for 0.8 times tangible book value, according to HighlineFI, and for 13 times the consensus 2012 EPS estimate of 45 cents, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 71 cents.

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

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