Birmingham, Ala.-based Regions Financial
For the time being, Regions looks content to integrate its latest purchase before pursuing more deals. The acquisition of crosstown rival AmSouth just finished up in November 2006 and was expected at the outset to lead to more than $500 million in cost-cutting savings through the closing of overlapping branches and the elimination of other redundancies. And while management didn't quantify where it stood on the savings front during Friday's fourth-quarter and year-end earnings release, it did mention that the "merger integration is on track and meeting or, in some cases, exceeding our goals."
As a result, investors can count on cost-cutting moves to help bottom-line earnings over the next two years, barring any unforeseen merger snafus. This is something investors have become accustomed to: Regions bought Tennessee-based Union Planters back in 2004 and successfully melded the two large firms.
There are still plenty of southeastern banks for Regions to snap up, and it may be wise to stay close to home as baby boomers and other groups migrate to coastal and Sun Belt states to get out of the cold. However, the law of large numbers could soon catch up with Regions, meaning that the larger it gets, the more difficult it will become to find deals capable of making a material impact on revenue and earnings growth. Currently, BB&T
Regardless of the developments on the acquisition front, Regions is exposed to a number of appealing markets such as Florida, South Carolina, and Texas. It also has a reasonable valuation -- about 13 times trailing earnings -- and a decent dividend yield of 3.9%. These metrics stand against those from any bank, while Regions' growth prospects and aggressive consolidation mindset could duly reward investors going forward.
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.