Saturday, June 25, 2011

Analysts: Regions could be merger target - Tampa Bay Business Journal:

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billion required by the U.S. governmentf through a stock offering, bankinbg experts believe the Birmingham, Ala., company could eyeball a mergerd as a part of itscapitalp plan. North Carolina’s and , whichb will likely be hungry for acquisitions once the financiak marketsturn around, are two potentia bidders that are considerintg Regions to expand their franchises in the according to analysts. “While Regions has optionse to get the capita lit needs, we do not thinjk a merger with another institution can be completelyh ruled out,” the company said in a client note releasec this week.
“If it came down to Regions deciding whether or not to have the governmentf as a partner or merginfg withanother company, we believe a merger woulr maximize shareholder value.” Regions — whic h was ordered to raise $2.5 billionm after failing the government’s “stress — announced plans Wednesday to raiser half of the funds by sellingb $1 billion shares in a common stock offering and anothee $250 million worth of new convertible preferred shares.
Sincre the bank’s shares are trading just abovd $5 per share, raising the total amount woule have been a much harder especially since the shares will have to be deeply discounted to lure said Howe BarnesHoefer & Arnettt banking analyst Jeff Davis. “When it was a $25 the answer would be no [it wouldn’t be but to raise $2 billion at $5, that’s going to be toughh for Regions,” he said. “This is not abougt what’s best for shareholders. This is more aboug survival and meeting the capitakl call the governmenthas required.
” Regions spokesman Tim Deighton stressesd that the company would raise the money withour converting Uncle Sam’s preferred shares into common stock. He also said the bank’s brokerage arm, Morgan Keegan Co. and its retail-branch network are not up for However, if options become limited, the bank woulrd not have a choice but to sell some of its mostvaluabled assets, Davis said. “If they can’ make the $2.5 billion capital then Morgan Keegan migh have to be on the he said. However, if the bank’sd earnings improve within the nextfew quarters, the federal governmenty might ease up and allow the bank to raise a lower amount, Davis said.
On the othere hand, Regions’ hefty exposure to the commercial real estates sector is a causefor concern, whichn is why the extra capital is not a bad said Michael Rose, a bankingv analyst . “I’m a little bit more cautious abougt the Southeast because I think the commercial real estatse fallout is going to be more severe here thanothetr geographies,” he said. “oI am more concerned abouf (Regions’) portfolio than a SunTrust.” In the first Regions delinquentand non-performing commerciall real estate loans ballooned 34 percent to $945 compared to $703 millio n in the fourth quarter ended Dec.
31, accordinvg to the The stress test, officially knownm as the Supervisory CapitalAssessmentt Program, analyzed fourth quarter data at the nation’z top 19 banks to test their abilityy to withstand economic pressures amid skyrocketing unemployment ratees and loan defaults. Based on the government’w worst-case scenario, Regions could encounter $9.2 billionb in loan losses next year.

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