10. Regions Financial
Shares of Regions Financial ( RF) of Birmingham, Ala., closed at $6.93 Friday, returning 62% year-to-date, following a 38% decline during 2011. The shares trade for just over their tangible book value, according to Thomson Reuters Bank Insight, and for nine times the consensus 2013 earnings estimate of 77 cents a share, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is 82 cents. 2012 has been a transformational year for Regions, with the company selling its Morgan Keegan brokerage subsidiary to Raymond James Financial for $900 million and raising another $930 million through a common equity offering during the first quarter. During the second quarter, Regions fully redeemed $3.5 billion in preferred shares held by the government for bailout assistance received in November 2008 through the Troubled Assets Relief Program, or TARP. The Wall Street Journal on Dec. 24 reported that the Regions was being investigated by federal bank regulators, the Securities and Exchange Commission and the TARP Special Inspector General for improperly accounting for nonperforming loans during the financial crisis. Regions didn't return a call requesting comment on the investigation, but Miller Tabak analyst Thomas Miller wrote last Monday that the investigation of the company's accounting was " not 'new news,' and the malefactors, if there were any, are long gone from RF's management. Management has aggressively addressed problem loans, and loan classification processes, in recent quarters, and we take the bank's recent improving credit metrics as a sign that a very substantial percentage of RF's recession legacy problem loans have been fully addressed." Miller added that "the investigations well may lead to RF paying a modest settlement and agreeing to maintain better practices -- practices already implemented -- in future periods." Assuming Miller is correct about a "modest settlement," the patience of Regions Financial's long-term investors may be rewarded with a significant dividend increase during 2011. Guggenheim analyst Marty Mosby rates Regions a "Buy," with a price target of $9, and estimates that the company will raise its quarterly dividend from a penny a share to a nickel following the stress tests. RF data by YCharts
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