Fitch Downgrades Region Financial Over RE Exposure

Fitch Ratings in Chicago has downgraded the long-term issuer default ratings of Birmingham, Ala.-based Regions Financial and its bank subsidiary, Regions Bank, to 'A' from 'A+', reflecting asset quality deterioration, expected earnings pressure, as well as continued economic uncertainty. Fitch said the company has a solid core funding base and good capital position. Problem loans have been mainly centered in the homebuilder, condominium, and home equity (especially Florida second lien home equity) portfolios, which collectively total $9 billion or 9% of the total portfolio. While nonperforming assets are elevated from historical levels, Regions' efforts to actively address its problem assets have helped contain the overall pace and level of deterioration. Although Regions has actively managed its stressed loan portfolios, especially in fourth quarter-2008, Fitch said it expects performance pressures to continue throughout 2009 and it anticipates that it may be difficult for the company to return to profitability in 2009 given the need to address problems elsewhere in its loan book, which could ultimately weaken its recently bolstered capital base.