Regions Financial Corporation (RF) announced that its capital deployment plan, submitted under the 2013 Comprehensive Capital Analysis and Review (CCARF) or the stress test, has received approval from the Federal Reserve. This was followed by the authorization of a new share repurchase program by the company.
Regions authorized the equity repurchase of upto $350 million of its shares. However, the timing and the exact amount of shares to be repurchased will depend on various factors including market conditions, the company’s capital position and internal capital generation.
The buyback can be executed through open market operations, accelerated share repurchase transactions or privately negotiated transactions.
In Jan 2013, along with Regions, 18 other banks submitted the capital plans to the Federal Reserve for the stress test. Of the 18, Federal Reserve approved capital plans of 16 banks including Citigroup Inc. (C), Bank of America Corporation (BAC) and The Bank of New York Mellon Corporation (BK).
Citigroup received the Fed’s approval to repurchase shares worth $1.2 billion through first-quarter 2014. Further, BofA received a nod for the repurchase of up to $5.0 billion of common stock and the redemption of approximately $5.5 billion in preferred stock.
Another major bank, BNY Mellon got approval from the Fed to repurchase $1.35 million of its shares. Moreover, it is contemplating a 15% hike in its quarterly dividend from 13 cents per share.
Regions’ favorable funding mix, improved core business performance and strategic initiatives are expected to yield decent earnings in the near future. Also, the share buyback plan is expected to boost investors’ confidence in the stock. However, regulatory restrictions and sluggish economic conditions remain the causes of concern.
Regions currently retains a Zacks Rank #2 (Buy).
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