Regions Financial Corporation (RF), a company that offers an array of banking services in the South, was recently downgraded by ratings agencies, Fitch and S&P. While some may struggle to distinguish between the claims of rating agencies and the actual numbers, we know better.
RF, owner of Morgan Keegan Capital Markets, had a change in risk management leadership that sparked ratings agencies to downgrade the stock further. However, we see this change in management as a positive, as it is a strategy by RF to bring stronger and more sensible people into the company.
In a recent read, FIASCO, Frank Partnoy sums up how little credibility ratings agencies really have to offer. Partnoy says it well, and for the following reasons, we give RF our own personal upgrade:
- RF is continuing to see lesser losses as we slowly come out of the recession
- J. Crew Group, Inc. (JCG) is a good example; it was downgraded this morning by ratings agencies to junk bond status on news they're being bought for $3 bil by a PE group, and the stock is up 16% today
- Stronger risk management is in the works
- Though an incredibly risky play, one could also sell dec RF 18 puts at 40 or 45 cents
Watch, learn, and profit from today’s show (here).
Disclosure: Author is long RF common stock; short Dec. 18 puts