With 2012 squarely in the rearview mirror, it's a perfect time to see how some favorite financial stocks fared throughout the year. While past performance does not indicate future results, looking at recent successes and failures can be a good place to start as you build you investment thesis.
Today, I'm going to look at Regions Financial (RF 1.24%), a favorite regional operator that's also the 22nd largest bank in the country. The Alabama-based bank operates more than 1,700 branches and 2,400 ATMs across 16 states, primarily in the southeastern United States. Here's a quick look at some important stats.
|
2012 Stock Return |
62.4% |
|
Market Cap |
$10.4 billion |
|
Total Assets |
$121.8 billion |
|
Price-to-Earnings Ratio |
16.3 |
|
Price-to-Book Value |
0.69 |
|
Dividend Yield |
0.6% |
|
Banks of similar size |
SunTrust Banks (STI); |
Source: Yahoo! Finance. Total assets as of quarter ending September 2012.
The year in review
Regions Financial started off the year by finally unloading its investment-banking arm Morgan Keegan, finding a buyer in Raymond James Financial (RJF 0.20%) for nearly $1 billion. This influx of capital, however, failed to boost the bank's performance in the Federal Reserve stress test, prompting the bank to look for ways to raise even more capital.
One way the bank found some capital is by paying back $3.5 billion in TARP funds in April, freeing up the income formerly going to the Treasury for other uses. With the weight of TARP behind it, the bank nearly doubled its Tier 1 capital ratio by the end of the last quarter, checking in with a healthy ratio of 10.5%, which would have placed the bank in fourth place among the 19 that went through the stress tests.
After being rated as one of the worst-performing regional banks in 2011, Regions turned the corner in 2012, checking is as one of the best-performing bank stocks of the year. It helps that it started the year in such a terrible position, but the strong leadership of CEO Grayson Hall helped the bank outperform the juggernaut that is Apple (AAPL 0.55%) for most of the year.
It wasn't all good during the year for Regions. The year ended on a down note, with various federal agencies investigating the bank for possibly misclassifying loans during the financial crisis. The investigation marks the government's first foray into some of the smaller banks that are many steps below the massive banking behemoths that have been in the news more frequently. The coming months will shine more light on these problems, but it was a sour end to what was a seemingly great year.
What it all means
After its poor performance in 2011, Regions started 2012 looking to bounce back, and it appears that it managed to do so. Despite the news of the investigation ending its year, investors who stuck with the bank through its troubles were well rewarded. Only time will tell if 2013 is as kind to the bank.
