RF Regions Financial Corporation

Birmingham-based Regions Bank, a unit of Regions Financial Corp. (RF) has announced a definitive agreement to acquire the credit card portfolio of $1 billion from FIA Card Services, a subsidiary of Bank of America Corporation (BAC). The financial terms of the deal were not disclosed.

Regions will purchase approximately 500,000 customer accounts, comprising existing Regions' customers, for an undisclosed amount. The deal is expected to close during the second quarter of 2011.

The contract will help Regions in bringing greater balance and diversity into its business and open up better opportunities to meet customers’ borrowing needs more efficiently.  Regions have given efforts for the past two years to attract new checking customers, who will now provide a strong platform for operating this business successfully.

Regions would come up with more product offerings in the consumer market to compete effectively. The acquisition of portfolio will accelerate Regions’ efforts to strengthen its balance between the consumer and commercial loan portfolios coupled with diversification of revenue streams to better serve the customers.

Through the deal, Regions re-entered the credit card business, which it exited a decade ago. Prior to the agreement, Regions sold customers credit cards held and serviced by BofA's card business.

Further, FIA Card Services will continue to service the accounts held by Regions’ customers until mid-2012 as stated under an interim servicing agreement. After that Regions will merge credit card servicing into its industry-leading customer service environment. FIA Card Services was formed in 2006 by combining the former MBNA America Bank and other Bank of America assets.

With the help of this agreement, Regions is expanding its business. It forms an important component of the company’s strategy to build strong relationships with its customers. With the help of extensive branch network and customers’ satisfaction, Regions plans to grow its credit card business. We expect the company’s expansion mode and its strategies to continue to yield profitable earnings in the upcoming quarters.

Currently, Regions retains a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we maintain a long-term “Neutral” recommendation on the stock.

 
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