Capital Bank Financial Corp (CBF), National Bank Holdings Corp (NBHC), Regions Financial Corporation (RF): Reasons to Buy These Undervalued Banks

The company’s financials display strong growth. In the first quarter of 2013, Regions reported net income of $1.1 billion, compared with a $0.2 billion loss in the last quarter of 2012. The capital position remains solid with a Tier 1 ratio of 12.3%. Tangible book value was $7.29 per share, an increase of $0.18 over the preceding quarter.

Regions Financial Corporation (NYSE:RF) disclosed its plan to repurchase $350 million in common shares and will obtain board approval to increase its dividend to $0.03 per share. In the first quarter of 2013, commercial and industrial loans grew 10% year-over-year. It’s low-cost deposits grew to $375 million, around 86% of the total deposits, compared to 80% last year. Regions’ entire focus is on residential and commercial banking products and services, which will enhance its future growth.

However, low interest rates and the slow-moving US economy would place some obstacles for Regions if these economic conditions continue for the remainder of 2013. For Regions, analysts estimated a mean target price of $9.01 and a target range of between $7 and $10.50.

Comparison of Liquidity ratio

If we calculate the liquidity ratios of the aforementioned banks for a comparison, Capital Bank Financial Corp (NASDAQ:CBF) has the highest loan-to-deposit ratio of 81%. In comparison, Regions Financial Corporation (NYSE:RF) and National Bank Holdings Corp (NYSE:NBHC) have 79% and 43% loans-to-deposit ratios, respectively. Generally 100% is considered as an ideal liquidity ratio for banks. A ratio below 1 means banks are more liquid but it generally affects the profitability of banks. Therefore, I believe Capital Bank is ideally positioned in terms of both profitability and liquidity


Although regional banks have posed some risks, the rebounding real estate markets in the U.S will benefit both National Bank and Capital Bank. Regions Financial Corporation (NYSE:RF) has a competitive edge of owning low-cost deposits, which are growing. Also, Regions’ cost control is better than its peers, which I believe will continue to improve in the future.

The article Reasons to Buy These Undervalued Banks originally appeared on and is written by Red Chip.

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