Regions Financial and Synovus Seek TARP Exit Strategies
June 28 2011 - 8:16AM
Marketwired
Several regional banks who still owe Troubled Asset Relief Program
(TARP) money are currently trading near 52 week lows. Analysts
argue that repaying TARP money is pivotal to a bank's recovery, as
it leads to fewer capital constraints being placed on the firm. The
Bedford Report examines the outlook for companies in the regional
banking sector and provides equity research on Regions Financial
Corporation (NYSE: RF) and Synovus Financial Corporation (NYSE:
SNV). Access to the full company reports can be found at:
www.bedfordreport.com/RF
www.bedfordreport.com/SNV
Erik Oja, a bank analyst with Standard & Poor's Equity
Research argues that "The Fed needs to see real increase in credit
quality before it would approve" paying TARP money back. Both
Synovus and Regions Financial continue to owe significant amounts
of TARP money.
Synovus received $968 million in TARP funds as the company
suffered significant residential and commercial real estate loan
losses through the recession as the housing market deteriorated and
businesses defaulted on commercial developments. Analysts at
Wunderlich Securities argue that the bank "will be greatly
constrained by the potential need to raise significant amounts of
common equity in order to exit the TARP program."
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Regions Financial still owes the $3.5 billion it received from
the Treasury Department. Earlier this month Regions said that it
enlisted Goldman Sachs to explore "different options" for Regions
subsidiary, Morgan Keegan's future. A research note from JP Morgan
argues that a sale of Morgan Keegan would significantly reduce the
amount of capital Regions would have to raise to be allowed to
repay its TARP funds.
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