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.

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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.

Shares of Wells Fargo ( WFC) rose 3% to close at $34.39.

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The shares have now risen 25% year-to-date, following a 10% decline last year.

Wells Fargo now trades for nine times the consensus 2013 EPS estimate of $3.71. The 2012 EPS estimate is $3.22.

Wells Fargo on March 14 raised its quarterly dividend to 22 cents from 12 cents, for a yield of 2.56%, based on Monday's close.

Wells Fargo also said the Federal Reserve hadn't objected to a plan to increase its share buybacks from last year, when the company bought back 26.6 million shares, and under its buyback program was authorized to repurchase another 117.3 million shares, as of Dec. 30.

Wells Fargo was among the four super-regional bank stocks recommend by Betsy Graseck listed among her favorites heading into earnings season. The analyst Sunday raised her price target for Wells Fargo to $46 from $34, while increasing her first-quarter EPS estimate to 78 cents from 72 cents, "due to stronger mortgage banking."

Graseck estimates that Wells Fargo will earn $3.38 a share for all of 2012, followed by 2013 EPS of $3.31.

Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.

Shares of Capital One Financial ( COF) rose 2.5% to close at $57.15.

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The shares have returned 35% year to date, following last year's flat return.

The company recently completed its long-delayed acquisition of ING Direct, and expects soon to complete its purchase of HSBC's ( HBC) $30 billion U.S. card portfolio for a $2.6 billion premium having been received. The company last Wednesday priced a $1.25 billion common equity offering.

Graseck likes card lenders "going into earnings on improving outlook for consumer credit," adding that "jobless claims are down and early-stage delinquencies continue to improve."

Capital One is the analyst's favorite in the card space, with a price target of $67.00.

Graseck estimates that Capital One will earn $1.38 a share for the first quarter, with full-year 2012 EPS of $6.87, followed by 2013 EPS of $6.96.

The analyst expects "some noise this quarter as COF closed the ING acquisition Feb 17," and added that "COF will also provide final accounting adjustments related to the ING Direct acquisition (either on earnings day or with 1Q12 10Q filing)."

Interested in more on Capital One? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
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.

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