Thursday, April 16, 2009

Regions Financial (RF) to Report a Profit, Restarting a Moderate Stake

One of the few smaller banks I still keep an eye on is former fund holding Regions Financial (RF). We ended our relationship after the stock fell week, after week, after week, after week - despite what is supposedly a very conservative management. [Sep 30, 2008: Regions Financial - Guilt by Association]

Birmingham-based Regions Financial Corp.'s stock plummeted 41 percent on Monday, but CEO Dowd Ritter expressed confidence in the strength of his company's Main Street business amid turmoil on Wall Street. "You hear all this Wall Street, Main Street talk. We really are a Main Street bank," Ritter said, adding that the bank services consumers and small businesses across its 16-state footprint. "We're not tied up with massive multibillion-dollar agreements there on Wall Street."

Ritter noted that while other banks are writing off billions every quarter, Regions has so far made about a half-billion in profit this year. "There's a pretty simple reason," he said. "
We always have taken a very conservative approach to our business. At times, we may not be doing what is in vogue, but that plain vanilla banking plays very well in times like this."

He also noted that
Regions is not burdened with exotic securities and risky mortgages that have prompted the demise of other institutions. Regions has few subprime mortgages in its entire portfolio, he said.

They just announced in a SEC filing this morning, that they indeed will be profitable this quarter.
  • Regions Financial says it expects to report a profit for the first quarter, bucking Wall Street's expectation for a loss. Echoing trends at other big banks, Regions says it has experienced significant deposit growth and record mortgage application volume.
  • Analysts expect a loss of 42 cents per share, according to Thomson Reuters.
  • Birmingham, Ala.-based Regions Financial Corp. says it hopes to repay $3.5 billion to the government soon. It reports full results on Tuesday.
I felt Regions had been unfairly tossed in with the Fifth Third's or National City's of the world, but just like it is impossible to sit now and take losses on short positions week after week, the exact opposite happened when we owned it. Even if theoretically correct, if the market herd moves in the opposite direction (at that time selling the stock relentlessly no matter the fundamentals), you just can't sit and take such losses.

The stock has just ramped 25% but this is the type of bank I have been looking at, similar to Hudson City Bancorp (HCBK) - we'll see how profitable next Tuesday.

I am going to restart a moderate stake here in the $6.40 area, about 2.3% of the fund, and then see what they have to say Tuesday. With the yield curve as it is, all I want to focus on are companies making plain vanilla loans... if the news Tuesday seems plausible for continued performance and the loan loss reserves don't skyrocket off the map, I'll create a larger position. I have a lot more confidence in something like this than a Citigroup.

Banks are the new potash.

EDIT: Update from CBS Marketwatch
  • Regions Financial Corp.'s Chairman, President and Chief Executive Dowd Ritter said the company will report a profit for the quarter ended March 31.
  • Regions said it has experienced significant customer deposit growth, with momentum extending into 2009.
  • The company also said it has undergone record new account openings driven by LifeGreen accounts, in addition to record mortgage application volume.

Long Regions Financial in fund and personal account

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