Seeking Alpha: Regions Financial Has Capital To Spare, But What About Quality?

The fact that the shares of Regions Financial (NYSE:RF) are only up about 15% since mid-2011 doesn't tell you everything you need to know about this Southeastern regional bank, but its relative performance next to the likes of BB&T (NYSE:BBT), SunTrust (NYSE:STI), and Wells Fargo (NYSE:WFC) does underscore some of the issues of this asset-sensitive bank over the past few years.

Although management has outlined a credible plan to reduce expenses and has ample capital to deploy, I'm still concerned about the underlying credit quality of the bank and its ability to earn its cost of equity. On the other hand, those concerns appear to be more than accounted for by the share price. If the U.S. economy stays healthy enough to support higher rates and the economy in the Southeastern U.S. stays healthy enough to support Regions' loan book, the rewards here could be significant when compared to what most other banking stocks are offering in terms of prospective returns.

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Regions Financial Has Capital To Spare, But What About Quality?