Regions Financial Corporation (RF) announced that it will redeem its issued and outstanding 6.625% Trust Preferred Securities (TruPS) worth $498 million. These TruPS were issued by Regions Financing Trust II. The redemption is scheduled on May 31, 2013.
Regions has fixed the price of redemption of these TruPS at $1,000 per share. The company will pay this redemption price along with the accrued and unpaid distributions due on the securities till the date of redemption to its shareholders.
Regions’ decision to redeem TruPS follows the Federal Reserve’s approval of the company’s planned capital actions under 2013 Comprehensive Capital Analysis and Review (CCARF) in March. Earlier, the company authorized a new share repurchase program of up to $350 million of its shares. The board also announced a threefold hike in its quarterly cash dividend on common stock. The new dividend of 3 cents will be paid on Jul 1, to shareholders of record as of Jun 14.
TruPS redemption is viewed as a positive step for the banks, enabling them to reduce interest expenses, as these securities demand higher rates than other securities. Further, according to the Dodd-Frank Act, banks are not allowed to consider these securities as regulatory capital beginning 2013.
Many other major banks including Bank of America Corporation (BAC), Wells Fargo & Company (WFC) and U.S. Bancorp (USB) also received clearance from the Fed to move ahead with their planned capital actions. The Fed’s approval of capital plans for most of the major U.S. banks reflects stability in the banking system to a great extent. Moreover, such accomplishments for banks will definitely boost shareholders' confidence.
Currently, Regions carries a Zacks Rank #2 (Buy).
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