Regions: Financial Winner

Tickers in this article: RF I:BKX

NEW YORK (TheStreet) -- Regions Financial (RF) was the winner among the largest U.S. banks on Friday with shares rising over 1% to close at $6.45.

The broad indexes ended the day with slight gains but weakened late in the day, after President Obama set up a battle with Republicans controlling the House of Representatives, by saying that he wanted taxes on higher-income families to be raised as part of a compromise over the "fiscal cliff," while the Republicans have indicated that there should be no increase in tax rates. Then again, Speaker of the House John Boehner (R-Ohio) indicated earlier this week that he might agree to an increase in tax revenue from closing loopholes.

The KBW Bank Index (I:BKX) was up slightly to close at 48.13, with 14 of the 24 index components seeing gains. The index was down 4% for the week, in the wake of President Obama's reelection.

Regions Financial of Birmingham, Ala., has seen its shares rise 51% year-to-date, following a 38% decline during 2011.

The shares trade for 0.9 times their reported Sept. 30 tangible book value of $7.02, and for eight times the consensus 2013 EPS estimate of 77 cents.

Regions has gone through quite a transition this year, with the sale of its Morgan Keegan subsidiary, followed by a common equity raise and the company's second-quarter redemption of preferred shares held by the government for assistance received during 2008 through the Troubled Assets Relief Program, or TARP.

The company currently pays a nominal quarterly dividend of a penny per common share, but investors are looking for a much more significant return of capital next year, especially since Regions reported an estimated Tier 1 common equity ratio of 10.5% as of Sept. 30.

Deutsche Bank analyst Matt O'Connor on Monday estimated that following the next round of Federal Reserve stress tests, Regions will be approved to return capital to investors totaling $275 million in 2013, including $225 million in dividends and $50 million in share buybacks. The analyst estimated that the dividend yield on the company's common shares would rise to 2.4%.

RF ChartRF data by YCharts

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-- Written by Philip van Doorn in Jupiter, Fla.

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