Barclays Maintains an 'Underweight' on Regions Financial (RF); Exploring Strategic Alternatives for Morgan Keegan Post SEC Settlement
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Price: $19.35 --0%
Rating Summary:
11 Buy, 23 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 9 | Down: 4 | New: 4
Rating Summary:
11 Buy, 23 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 9 | Down: 4 | New: 4
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Barclays maintains an 'Underweight' on Regions Financial (NYSE: RF), PT $8.
Barclays analyst says, "Post an agreement with the SEC settling recent regulatory matters, RF revealed it is exploring strategic alternatives for Morgan Keegan (MK) as it evaluates how best to manage its capital to increase shareholder value."
"Excluding Asset Management and Trust (which aren't part of the process), we believe MK posted 1Q revenues of $275MM (~$1.0B in '10 ex. settlement costs) and pre-tax income of $35MM (~$125MM in '10). According to MK's annual report, year-end tangible equity was $845MM (after $51MM in goodwill/other intangibles). Still, per RF's 10-K, its Investment Banking/Brokerage/Trust unit has $745MM in goodwill allocated to it (80bps of RWA). We suspect in a sale roughly two-thirds of this figure would go away. Given it has a heavy contribution of securities and cash, while reported assets look to be $2.2B at MK, we peg RWA at less than $1B (9bps). Using these metrics and trading comp multiples, values MK in the $1.4B area. Still,
we would expect the ultimate gain to be less than that amount after taking into
consideration where the unit is currently carried and taxes (don't think RF's $1.4B DTA helps much in this case)."
For more ratings news on Regions Financial click here and for the rating history of Regions Financial click here.
Shares of Regions Financial closed at $6.21 yesterday.
Barclays analyst says, "Post an agreement with the SEC settling recent regulatory matters, RF revealed it is exploring strategic alternatives for Morgan Keegan (MK) as it evaluates how best to manage its capital to increase shareholder value."
"Excluding Asset Management and Trust (which aren't part of the process), we believe MK posted 1Q revenues of $275MM (~$1.0B in '10 ex. settlement costs) and pre-tax income of $35MM (~$125MM in '10). According to MK's annual report, year-end tangible equity was $845MM (after $51MM in goodwill/other intangibles). Still, per RF's 10-K, its Investment Banking/Brokerage/Trust unit has $745MM in goodwill allocated to it (80bps of RWA). We suspect in a sale roughly two-thirds of this figure would go away. Given it has a heavy contribution of securities and cash, while reported assets look to be $2.2B at MK, we peg RWA at less than $1B (9bps). Using these metrics and trading comp multiples, values MK in the $1.4B area. Still,
we would expect the ultimate gain to be less than that amount after taking into
consideration where the unit is currently carried and taxes (don't think RF's $1.4B DTA helps much in this case)."
For more ratings news on Regions Financial click here and for the rating history of Regions Financial click here.
Shares of Regions Financial closed at $6.21 yesterday.
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