UPDATE 2-S&P cuts Regions Financial rating to junk

* S&P downgrades Regions Financial to junk status

* Says company’s loan losses will hurt capital, profits

* Shares down 2 pct
(Adds byline, company comment, details on CDS and bond price
movements, details on Moody’s ratings cut)

By Joe Rauch

CHARLOTTE, N.C., Nov 23 (BestGrowthStock) – Regions Financial
Corp’s (RF.N: ) credit rating was cut to junk status for the
second time in less than a month on Tuesday, amid concerns the
bank’s soured loan portfolio will crimp its future earnings and
capital.

Standard & Poor’s Ratings Services downgraded the
Birmingham, Alabama-based bank one notch to BB+/B from
BBB-/A-3, on worries its commercial real estate loan losses
will remain elevated through the next several quarters,
particularly in the bank’s battered Southeastern U.S. markets.

“We think the company’s financial flexibility has decreased
somewhat in recent weeks, which could hurt its ability to
access the debt and equity markets on favorable terms,” said
Robert Hansen, a S&P credit analyst in a prepared statement
announcing the downgrade.

A Regions spokeswoman declined to comment on the
downgrade.

The announcement followed two cuts earlier this month by
Moody’s Investor Services Inc, which first cut Regions’ rating
to junk status on November 1, and followed it with another cut
on November 16.

Regions, unlike some of its key Southeastern rivals,
continues to post large real-estate related loan losses. Many
of its competitors, like Atlanta-based SunTrust Banks Inc
(STI.N: ), posted third quarter profit (Read more your timing to make a profit.)s despite struggling with
similar real-estate related loan problems in 2008 and 2009.

In October, regions reported a $207 million third quarter
net loss, roughly double what analysts had projected as net
charge-offs increased by 12 percent.

Last week, the bank’s chief risk officer and other senior
risk managers departed, in a wholesale shake-up of the unit.

Regions shares declined 2 percent on Tuesday, or 11 cents,
to $5.24 on the New York Stock Exchange.

Regions’ bond yield spreads widened 29 basis points in
Tuesday trading, with trades as high as 656 basis points over
Treasuries, according to TradeWeb, a Thomson Reuters service.
The bank’s bonds traded at their widest spread on November 19
of 708 basis points, days after the bank announced the risk
management shake-up.
(Reporting by Joe Rauch; Additional reporting by Ciara Linnane
in New York and Andrea Johnson in Bradenton, Florida; Editing
by Diane Craft)

UPDATE 2-S&P cuts Regions Financial rating to junk