Out Fox The $treet

Back on November 16th, Stone Fox Cap added to its Regions Financial (RF) position when the stock swooned on the back of the departures of the Chief Risk Officer and others in the risk management area. The initial fear and typical of Wall Street was to be concerned that this was an indication that problem loans were escalating out of control and RF would be posting some horrible numbers. While on the surface that might be a plausible thought, it just didn't pass the rigor test. RF had performed badly during the financial crisis caught with numerous bad loans in Georgia and Florida. So if the CRO hadn't prevented RF from avoiding the housing crisis, why was the market concerned when he left? If anything, it seemed long overdue. Back in our article on the 16th [ Trade:Added Regions Financial on Management Shakeup ], we suggested that this was excellent news and hence bought more shares around $5.7. Management had followed up on the resignations that the BOD wanted them to leav...

Bought some more stock of Regions Financial (RF) in the Opportunistic (Long only) portfolio. Only had a 2% position and I doubled it to roughly 4% to bring it in line with the position weighting in the newly started model on Covestor.com that will be launched to the public in about a month. RF was down some 9% at one point today after announcing management changes in the credit risk department. Naturally the stock dropped on news of a shakeup in management especially with several individuals 'retiring' in one department . I'm sure most sellers assumed more bad news on the way or possibly even some yucky fraud situation. (ok its not that natural to always shoot first without understanding the news but thats how the market works). Whats so bad about the Chief Risk Officer and Director of Credit Risk leaving when they were the risk leaders when the problems occurred? What risk did they help mitigate anyway? This is another example of the market flying off the handle before...

Regions Financial (RF) hasn't had a huge reaction to such speculation because it's been a common myth so far that the regional banks would be buyout targets. So far nothing has happened in this sector so the market has been lulled to sleep. Likely on the new financial regulation in the US not to mention Basel III has limited the desire of banks to go on acquisition sprees. This might change in the near future so the speculation by Credit Sussie is likely logical. After all the Canadian Banks such as Toronto Dominion (TD) and Bank of Montreal (BMO) are relatively strong and would likely relish the opportunity to buy an American bank on the cheap. The price is likely a sticking point. Canadian Banks aren't likely to pay up and regional banks such as RF won't part with shares on the cheap. RF currently trades anywhere from 20-50% below book value depending on what number you use. Are Canadian Banks willing to pay a multiple of BV? The analyst mentions the option of me...

Most importantly to us, Regions Financial (RF) and Synovous Financial (SNV) our both up sharply today. For RF its clearly partly technical as they hit new 52 week highs and breakout from a double top. For SNV its like just a move with the sector today. Cramer was bullish on banks yesterday and in general the tone seems to be improving. The Opportunistic/CVIM Model is doing the best today as it has a higher concentration in those 2 stocks while the Growth Portfolio is also gaining in large part to a high concentration in the financial sector at roughly 20%. Though it contains much more of Hartford Financial (HIG) and ICICI (IBN) then these 2 regional banks. The chart on RF looks similar to how we expect the SP500 to go over the next few weeks. Initial weakness at the recent high (Jan in the case of the SP500) and then support from the rising 20ema and an eventual push to new highs on the 3rd try at 1150. SP500 Finally the chart of SNV. Not as impressive as RF. Still need to work thru s...

Regions Financial (RF) is one of the smaller holdings in our Growth Portfolio, but its worth following considering its proximity to the important housing markets in Florida and Atlanta. RF reported 'disappointing' results this morning causing the stock to plummet over 7% today. Earnings were indeed lower then expected (.46 vs .35), but it was largely driven by a large build in provisions and not chargeoffs. In fact, provisions exceeded chargeoffs by $487M or nearly 40% of the $1.2B provision was to build for future write offs. That seems excessive considering the stage in this credit cycle and considering that gross inflows of non-performing assets declined for the second consecutive quarter. 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 li...

The market might have sold off today 'due' to the results at JPMorgan (JPM) and the fears of higher credit costs, but if anything it was a buy the rumor and sell the news. Or maybe just the media reporting the results in such a negative way that it scared the market. We'd bet that come Tuesday, all the buyers will be back as they realize that JPM could easily earn $3.5 next year making the stock clearly cheap. JPM reported net income of $3.3B or $.74 per share easily beating the $.61 estimates. Revenue was lower then expected, but that's nothing to get excited about in this recovery. Earnings rule revenue any time of the day. They beat estimates by 20% after all but that got quickly brushed aside. reported fourth-quarter 2009 net income of $3.3 billion, compared with net income of $702 million in the fourth quarter of 2008. Earnings per share were $0.74, compared with $0.06 in the fourth quarter of 2008. For the full year of 2009, net income was $11.7 billion, or $2.26...

The Wall St Journal is reporting that the proposal to allow Tax Loss Carry Backs for 5 years is poised to be approved next week. It's been difficult to find information on this subject as we originally wrote about it on Wednesday [Tax Loss Proposal Gains Support] and hadn't seen any news about it until finding this article. The proposal is significant because it will provide immediate capital to a lot of struggling small cap stocks such as Liz Claiborne (LIZ) mentioned in the article. Basically any company losing money now would immediately be able to receive a portion of the taxes back that they've paid the last 5 years. The more they've lost the better. The article doesn't mention financials so we're still wondering what the impact will be on companies such as Regions Financial (RF) or Synovus Financial (SNV) that both received TARP money. If those companies were to get a refund, Congress might come under fire. If excluded, LIZ or Terex (TEX) would be our fa...

Today, Regions Financial (RF) reported Q3 results. The results were to some degree worse then expected, but in the crazy world of banking stocks RF rallied today after an initial selloff. Looking at the numbers and reading the transcript of the CC , it appears that RF largely reported a bigger then expected loss due to dramatically increasing the provision for losses. In fact the loan provisions were some $300M greater then charge offs and up over $100M from the linked quarter. Net loan charge-offs increased to $680 million or an annualized 2.86 percent of average loans, driven by value-related write-downs and problem asset dispositions Allowance for credit losses increased to 2.90 percent of loans with $1.025 billion provision for loan losses, exceeding net charge-offs by $345 million It appears that alot of investors see Q3 as the peak in provisions especially considering the comments about the inflows of non-performin...

Tom Brown from Bankstocks.com has some interesting points about Regions Financial (RF) and the banking industry sector as a whole from the Barclays conference. Tom is well known as one of the top banking analysts in the industry. Hes also known for being too positive and upbeat about the crisis that took place the last couple year. Whats interesting is that based on the information presented about RF, it may turn out that he wasn't that far off base. What it turns out is that the government and the naysayers were way off base in their worst case estimates. Estimates that just about brought down the global economy. Government “stress test” loss estimates are way too high. I’ve said this ever since the test results were released back in tk. Now, two quarters into the eight quarters the tests cover, and with high visibility into a third quarter, the tests’ excessive pessimism is more obvious than ever. None of the 19 big banks that were tested will come anywhere close to reaching th...