Regions Financial Leads Banks as Consumer Confidence Rises

NEW YORK ( TheStreet) -- Regions Financial led major U.S. banks higher on Monday, with shares rising 2% to close at $9.82.

The Dow Jones Industrial Average and the S&P 500 ended with gains of 0.5%, while the Nasdaq Composite rose 1.1%, after the Department of Commerce reported that U.S. personal consumption during November increased by 0.5%, following an increase of 0.4% in October.

The Commerce Department also said that personal income was up 0.2% during November after a 0.1% decline in October, when the federal government was partially shut down for two weeks.

The personal consumption growth number for November matched the consensus estimate among economists polled by Thomson Reuters, while the growth number for personal income was well below the 0.5% forecasted by economists.

Also on Monday, the Reuters/University of Michigan consumer sentiment index for December came in at a final reading 82.5, revised from the previous number of 75.1, for the best reading since July.

Sterne Agee chief economist Lindsey Piegza on Monday wrote in a client note that the decline in the U.S. personal savings rate to 4.2% -- the lowest level since February -- suggested a rise in consumer confidence, but warned that if the "reduced safety net" from lower savings "is met with a much harsher reality than expected, it will be much more difficult to maintain current consumption levels."

"Consumers are feeling more optimistic in the final month of the year thanks in part to a heightened ability to spend with equity markets at all time highs fueling a wealth effect and cheaper gasoline costs providing relief to monthly budgets. Additionally, rising property values are helping support consumers' optimistic assessment of future conditions. Still, in order to maintain this heightened confidence level and positive spending patterns, expectations will need to turn into reality sooner rather than later," Piegza warned.

The "Santa Clause rally" has been driven by the Federal Open Market Committee's decision last Wednesday to taper the Federal Reserve's "QE3" purchases of long-term bonds to $75 billion a month from $85 billion, starting in January, as well as the revision on Friday of the estimated U.S. gross domestic product growth rate to an annual rate of 4.1% from 3.6%.

The latest upward revision to the GDP growth rate also adds confidence in the 7.0% U.S. unemployment rate for November, which was a significant improvement from 7.3% in October.

The KBW Bank Index ( I:BKX) on Monday rose 0.9% to 68.97, with all 24 index components ending with gains.  The index has risen 34%, following a 30% gain in 2012, underlying an amazing recovery for the banking sector.

Regions Financial

Shares of Regions Financial of Birmingham, Ala., have returned 39% this year.  The shares trade for 1.4 times tangible book value, according to Thomson Reuters Bank Insight.  The shares trade for 11.7 times the consensus 2014 earnings estimate of 84 cents a share and for 10.9 times the consensus 2015 EPS estimate of 90 cents.

Like many of its competitors, Regions suffered a third-quarter revenue decline as rising long-term interest rates led to a significant decline in mortgage loan refinancing applications, however, the company also reported solid commercial loan growth and an expanded net interest margin.

The following chart shows the performance of Regions Financial's stock this year, against the KBW Bank Index and the S&P 500:

RF Chart
RF data by YCharts

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

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

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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 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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