Analyst: Regions may be target of BB&T, JPMorgan

Regions Financial Corp., the Alabama bank that needs $2.5 billion after the government’s stress test, is a potential takeover target with BB&T Corp. and JPMorgan Chase & Co. the most logical bidders, Fox-Pitt Kelton Cochran Caronia Waller said in a report Tuesday.

BB&T may pay as much as $10 a share for Regions and generate an internal rate of return of 11 percent to 12 percent, analyst David Trone said in the report. JPMorgan is also a possible buyer in its desire to expand in the Southeast, home to most of Regions’ 16-state franchise, he said.

The Birmingham-based lender said it may sell common stock or other securities that are convertible into common shares to meet the capital requirement, and may sell non-core businesses, according to a May 7 statement. The bank questioned whether it should be forced to raise additional capital and said potential losses for 2009 and 2010 of $9.2 billion exaggerated the problems of its loan portfolio.

Regions’ plan to raise capital without converting government-owned preferred shares into common shares “might be hard to complete in the current environment,” Trone said. “If it came down to Regions deciding whether or not to have the government as a partner or merging with another company, we believe a merger would maximize shareholder value.”

Regions doesn’t comment on merger speculation, spokesman Tim Deighton said. BB&T declined comment, spokesman Bob Denham said.

JPMorgan looks at potential bank acquisitions “from time to time,” but nothing is imminent, Chief Executive Officer Jamie Dimon said at the company’s annual shareholders’ meeting Tuesday.