* 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 analyst comment, Regions declining to comment)
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, TPG, Blackstone, Apollo and Raymond James declined to comment. The rest of the potential bidders were not available for comment.
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.
But that is not a precondition to a deal, the source added.
Still, Regions might not want to sell the business to another bank.
"If you sell to a bank or another firm interested in bank business, you're effectively inviting competition into your backyard," said Jefferson Harralson, a bank analyst at Keefe, Bruyette & Woods.
Earlier this week, BB&T Corp (BBT.N) Chief Executive Kelly King said he was under the impression that the Memphis, Tennessee-based brokerage would be sold to a non-bank buyer.
Kelly, who was speaking on a conference call for analysts, said the Winston-Salem, North Carolina-based bank had no interest in buying a large broker-dealer.
One option for the business could be a management-led buyout backed by private equity investors, the sources said.
"Management would like it because it gives them their independence back. This was a successful, independent company for a long time before it was bought," Harralson said.
Regions bought Morgan Keegan in 2001 for $789 million.
For private equity firms, Morgan Keegan could be an attractive purchase and an easy exit down the road. The unit posted a 24 percent increase in net income in the first quarter.
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.
"It's attractive because it has some market share and is successful," Harralson said, adding that a private equity shop could sell it eventually to a bank or in an public float.
"I could see how the private equity acts as a bridge from one bank owning this to another a few years down the line," he said.
The bid deadline for Morgan Keegan is a day before Regions reports its second quarter results on Tuesday. Regions has not posted an annual profit since 2007.
Regions shares closed down 0.5 percent at $6.20 on the New York Stock Exchange. Stifel was up 1.3 percent at $40.37, while Raymond James rose 0.4 percent to $34.12. Blackstone closed up 3.7 percent at $17.63 and Apollo was up 1.4 percent at $16.94. (Reporting by Paritosh Bansal and Megan Davies; additional reporting by Joe Rauch; editing by Gerald E. McCormick, Matthew Lewis and Andre Grenon)