UPDATE 2-Blackstone, Stifel, others eye Morgan Keegan

* Stifel, Raymond James among rivals eyeing unit

* Blackstone, Carlyle, TPG, Apollo, Warburg interested

* Initial bids for Morgan Keegan due Monday

* Morgan Keegan has book value of about $1.5 bln (Adds details about auction, Raymond James declining comment)

By Paritosh Bansal and Megan Davies

NEW YORK, July 22 (Reuters) - Blackstone Group LP (BX.N), Carlyle Group and Stifel Financial Corp (SF.N) are among the firms expected to submit initial bids on Monday for Morgan Keegan, the brokerage unit of Regions Financial Corp (RF.N), sources familiar with the situation said.

Morgan Keegan has a book value of about $1.5 billion, one source said.

Other potential bidders for the unit include private equity firms TPG Capital LP [TPG.UL], Apollo Global Management LLC (APO.N) and Warburg Pincus LLC [WP.UL], the sources said.

Other buyers besides Stifel among broker-dealers include Raymond James Financial Inc (RJF.N), one source said.

Regions, a bank based in Birmingham, Alabama that has not yet repaid the $3.5 billion bailout money received from the Troubled Asset Relief Program, hired Goldman Sachs Group Inc (GS.N) in June to explore strategic options for Morgan Keegan.

Regions said at that time it agreed to pay $210 million to state and federal regulators to settle allegations Morgan Keegan fraudulently marketed mutual funds. [ID:nN1E75L158]

Regions is hoping to move quickly on the auction. A prolonged sales process can lead to uncertainty among employees and cause departures, eroding the value of the franchise.

Morgan Keegan has about 1,200 brokers in its private client group and also has investment banking and capital markets businesses.

Regions is open to having an arrangement with the buyer of the unit where it could continue to sell retail banking products, such as certificates of deposit, through the brokerage network, the source said.

That is not a precondition to a deal, the source added.

Still, the cross-selling opportunity could mean Regions might not want to sell the business to another bank.

Earlier this week, BB&T Corp (BBT.N) Chief Executive Kelly King said on a conference call his bank had no interest in buying a large broker dealer.

King said he was under the impression Morgan Keegan would be sold to a non-bank buyer.

One option for the business could be a management-led buyout backed by private equity investors, the sources said.

Morgan Keegan generated $1.32 billion of gross revenue in 2010. Morgan Asset Management and Regions Morgan Keegan Trust are not part of the business being sold.

TPG, Blackstone, Apollo and Raymond James declined to comment. Regions and the rest of the potential bidders were not immediately available for comment. (Reporting by Paritosh Bansal and Megan Davies; additional reporting by Joe Rauch; editing by Gerald E. McCormick and Matthew Lewis)