DBRS Places Regions Financial Corporation Ratings Under Review with Negative Implications

DBRS has today placed the long-term ratings of Regions Financial Corporation and the long and short-term ratings of its operating bank subsidiaries (collectively Regions or the Company), including Region’s Issuer & Senior Debt rating of A, Under Review with Negative Implications. At the same time, Region’s R-1 (low) Short-Term Instruments and FDIC-guaranteed debt ratings are confirmed with a Stable trend.

The review reflects DBRS’s concerns that Regions continues to struggle with steep asset quality deterioration and credit costs that continue to weigh on its performance and have produced net losses in two of the past three quarters. Credit losses on the Company’s home equity and commercial real estate construction loan portfolios have produced the highest losses while troubled commercial real estate loans increased dramatically in the second quarter. While Regions has already charged-off a substantial amount of loans in this credit cycle, DBRS believes that significant amounts of potential losses likely remain embedded in the Company’s loan portfolios, as signaled by the 47% quarterly increase in non-performing assets. DBRS also considers that reserve coverage at 67% of non-performing assets (not including restructured loans) may be insufficient to address potential losses, given this deterioration.

DBRS’s review will focus on Regions’ asset quality and financial performance. Additionally, the review will also consider the Company’s plans for reserve build, loan workouts, and capital actions, as well as reviewing its financial projections for the near- to medium-term.

DBRS notes that the review could potentially result in a one notch downgrade, if the review of current performance and near- to medium-term trends reveals performance and metrics more appropriate for the next lower rating range: A (low). Conversely, confirmation of the current ratings could result, if the performance and plans are deemed appropriate for the Company’s current rating level. DBRS expects to conclude the review within 90 days.

Regions Financial Corporation, a diversified financial services corporation headquartered in Birmingham, Alabama, reported $143 billion in consolidated assets as of June 30, 2009.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.