Regions Financial Builds Provisions Again
If we had to guess, this would appear to be the peak loan provision Q. Hence, future quarters will see declining costs. Its possible this was the kitchen sink Q making 2010 much cleaner. Time will tell but the regional banks appear alot more attractive now. They aren't on the target list of the government and they will now benefit from the credit crisis ending but still having high net interest margin. From a technical perspective RF is looking appealing if it can hold these levels around $6.
Key points for the quarter included:
Interesting comments from typically conservative analysts at S&P:
S&P MAINTAINS BUY RECOMMENDATION ON SHARES OF REGIONS FINANCIAL
(Standard & Poor's)
Q4 loss per share of $0.51 vs. a loss per share of $9.01 is wider than our per share estimate of $0.40 loss, largely on a $96M loss on securities. The tangible common equity ratio, one measure of capital, fell to 6.03% from 6.56% in Q3, a negative. However, one major positive, in our view, is that Q4 formation of new nonperforming loans, at $964M was sharply lower than in Q3 and Q2, and we expect this downward trend to continue in '10, which should result in lower provisions. We keep our target price of $8, based on a discount to peers $1.15X Q4 tangible book value per share.
Disclosure : Long in Growth Portfolio and personal account.