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News

Regions Financial Corporation (RF), BB&T Corporation (BBT): Sorting Through the Regionals

Published on April 17, 2013 at 7:45 am by The Motley Fool in News
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Huntington Bancshares Incorporated (NASDAQ:HBAN) didn’t see as impressive growth year over year in EPS during the fourth quarter. Its 4Q EPS came in at $0.19, compared to the same quarter last year of $0.14. This comes after a third quarter that showed disappointing loan growth, but growth rebounded in the fourth quarter. As well, for the fourth quarter results, nonperforming loans fell 9.5% from the third quarter and 28% from a year ago.

SunTrust Banks, Inc. (NYSE:STI) is another major regional that pays a small dividend like Regions, yielding 0.7%, but it’s also on the cheap side of the industry with a P/B of only 0.75. However, unlike Regions’ relatively low debt to capital ratio, SunTrust Banks, Inc. (NYSE:STI) is at 42%.

The bank is a bit larger than Regions with respect to deposits  owning 1.7% of the deposit market share and coming in at ninth (with BB&T Corporation (NYSE:BBT) is eighth and Regions tenth). The bank posted fourth quarter earnings of $0.65, compared to fourth quarter 2011’s $0.13, again like most peers, well above last year. However, revenue and loan growth was not as impressive and came in at the mid-range of peers.
SunTrust Banks, Inc. (NYSE:STI) does have an impressive lineup of hedge fund owners, with 37 hedgies owning the stock, but there were some notable sell-offs, including Adage Capital and Lansdowne Partners dumping two of the largest positions.

Fifth Third Bancorp (NASDAQ:FITB) operates in twelve states throughout the Midwestern and Southeastern U.S. This bank is in line with BB&T on a debt to capital (51%) and P/B basis (1.06). Like many of the other banks, Fifth Third also posted a strong fourth quarter. The bank managed to post 2012 EPS of $1.66, compared to the $1.18 for the same quarter last year, with mortgage banking driving fee income. Yet, its net interest margin fell 0.07% from the third quarter. However, many of Fifth Third’s recent earnings results have been elevated (artificially) by releases of reserves. What’s more is that Fifth Third Bancorp (NASDAQ:FITB)’s year-end Tier 1 capital ratio was 10.65%, which is below major peers.

Don’t Be Fooled

Regions BB&T Huntington SunTrust Fifth Third
Price to book 0.75 1.11 1.12 0.75 1.06
Debt capital 32% 51% 34% 42% 51%
Regions is one of the cheapest regional banks around and it also has a top-notch balance sheet. Meanwhile, other top industry pick BB&T Corporation (NYSE:BBT) is not quite as cheap but offers investors a 3.1% dividend yield and has one of the best returns on equity in the industry at 10.5%. I think these two banks are a couple of the top regional bank stocks, but the other three banks could be solid investment choices with a bit of work.
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool owns shares of Fifth Third Bancorp (NASDAQ:FITB) and Huntington Bancshares Incorporated (NASDAQ:HBAN).
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