Regions Financial Corporation (NYSE: RF) is trading higher after beating earnings this morning. Rather than just summarizing the news, we would caution about the move and more importantly about the ability for this move higher to continue.
The bank reported earnings of $0.09 EPS outside of items versus the Capital IQ consensus estimate of $0.07 EPS. The bank also reported that its net interest income was stable at $849 million and that its net interest margin rose by about 4 basis points to 3.08%. The company further reported that its Tier 1 common ratio came in at an estimated 8.5% and 7.7% on a Basel III.
Where this gets interesting is that Regions’ shares are higher again and that is after a mega-run since the end of 2011. Shares closed out 2011 at $4.30 and shares have risen by 19% year-to-date to $5.11 in 2012 if you count a gain of nearly 4% today. More importantly, the new price of $5.11 generates a higher ratio to many of the troubled bank stock peers as its tangible common book value per share on a non-GAAP basis was listed as being $6.37 per share.
Unfortunately, trading at 80% of book value in today’s market is just not cheap when it comes to a banking stock. Until the regulatory and political bashing does not use the entire banking sector as the whipping boy for the recession and as the poster child of what harms America, bank stocks are much more likely to use book value analysis for discovering a ceiling rather than a floor as was done in normal times.
JON C. OGG
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