Regions Financial Leads Bank Stocks Higher on Analysts’ Upgrade

Regions Financial Corp., Alabama’s largest lender, led financial stocks higher after Deutsche Bank AG said the firm could benefit from rising interest rates and upgraded the stock.

Regions, based in Birmingham, climbed 2 percent to $10.06 at 12:39 p.m. in New York, the best performer in the 24-company KBW Bank Index. Financial services firms in the Standard & Poor’s 500 Index rose 0.2 percent, the only industry sector to show a gain other than telecommunications.

Deutsche Bank analysts led by Matthew O’Connor upgraded the shares to buy from hold on Jan. 3, saying the bank is most “levered to rising interest rates.” U.S. regional lenders are poised to see additional gains amid signs that the economy is improving, said Peter Winter, a BMO Capital Markets analyst.

“If you get better economic data, it should lead to somewhat stronger performance for all the regional banks,” Winter said in a phone interview.

An improving job market prompted the Federal Reserve to announce last month it would trim its monthly bond purchases to $75 billion from $85 billion. The jobless rate fell to 7 percent in November, a five-year low, as employers added a greater-than-forecasted 203,000 workers to payrolls.

Regions, led by Chief Executive Officer Grayson Hall, reported a third-quarter drop in profit amid elevated expenses and a decline in mortgage financings. While that’s contributed to the bank’s underperformance the past few months, Regions is now “transitioning to a revenue growth story,” Winter said.

SunTrust Banks Inc. also advanced after Barclays Plc raised its outlook to equalweight from underweight. Shares of Atlanta-based SunTrust gained 1.4 percent to $37.07, the most since Dec. 19. Cleveland-based KeyCorp rose 1.3 percent to $13.49.

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