New York, May 18, 2009 -- Moody's Investors Service downgraded the ratings of Regions Financial
Corporation (senior to Baa3 from A3) and its subsidiaries, including
its lead bank, Regions Bank (bank financial strength to D+
from C+, long term deposits to Baa1 from A2, and short-term
deposits to Prime-2 from Prime-1). Regions'
hybrid securities, including its preferred shelf (to (P)B1 from
(P)Baa2), trust preferreds (to Ba2 from Baa1), and bank level
preferred (to Ba2 from Baa1) remain on review for possible downgrade.
Following these rating actions, other than the aforementioned hybrid
securities that remain on review, Moody's outlook on Regions
and its subsidiaries is negative.
These actions had no impact on the FDIC guaranteed debt issued by Regions
Bank, which remains at Aaa with a stable outlook.
The downgrade reflects Moody's view that Regions' is likely
to report losses at least through 2009 and likely into 2010 as a result
of rising credit costs. Moody's believes these losses will
largely be attributable to its concentrations in residential home builder
and home equity loans, particularly in Florida. Consequently,
Regions' capital position will come under pressure in the near to
medium term.
Regions' CRE portfolio represents 2.8 times tangible common equity
(TCE), with approximately one-half comprised of construction
and land -- asset categories that are experiencing significant deterioration.
Moody's further noted Regions' concentration in home equity, which
equals approximately 1.8 times TCE. These portfolios have
been a primary factor behind the near doubling of Regions' nonperforming
assets over the past year. Nonperforming assets (including 90+)
as a percentage of TCE plus reserves were 35% at March 31,
2009. Moody's loss expectations on these portfolios have increased
and the rating agency expects further deterioration in these portfolios
as the credit cycle unfolds.
Although Regions entered this period with relatively sound capital ratios
-- at March 31, 2009, Tier 1 risk-based was 10.41%
and Moody's adjusted tangible common equity (TCE) ratio was 7.77%
- Moody's believes Regions' capital position is likely
to be increasingly challenged by the substantial credit costs it faces.
Moody's negative outlook on Regions considers the possibility that
in a more pronounced economic downturn than is currently expected,
the company's performance might be negatively impacted, not
only from asset quality deterioration, but also from pressure on
businesses dependent on the level of asset prices, such as trust
and investment management. That could weaken earnings and add to
the downward pressure on Regions' capital base.
The review of Regions' hybrid securities reflects Moody's
opinion that the probability of a missed dividend or interest payment
on these securities has increased because Regions must raise capital in
response to the outcome of the U.S. government's stress
test. During its review, Moody's will focus on the
following: (a) the likelihood that Regions can successfully raise
capital from its own resources -- including through common equity
issuance, asset sales, and internal capital generation;
(b) the likelihood that Regions will need to suspend payments on its preferred
or hybrid securities in order to increase the success of any exchange
offers, (c) the likelihood that Regions will require additional
capital from the U.S. government, including the conversion
of any additional TARP preferred or the need to take additional U.S.
government capital, and (d) the expected loss on each security if
the company were to eliminate payments on the security. Moody's
expects to conclude the review in several weeks.
The rating agency added that Regions' bank-level debt and
deposit ratings were only lowered two notches versus the three notch downgrade
to the company's BFSR because of the likelihood of systemic support
for Regions in a period of financial distress. Moody's believes
that given Regions' leading deposit market shares in Alabama,
Mississippi and Arkansas, as well as its solid market shares in
the company's other markets, the bank would benefit from systemic
support in a period of financial distress. However, systemic
support is less beneficial for holding company creditors, in Moody's
view. Therefore, the notching between the holding company's
and bank's long-term ratings has widened.
Moody's last rating action on Regions was on May 5, 2009,
when the ratings were placed under review for possible downgrade.
The principal methodologies used in rating this issuer were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology" (March 2007), which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating this issuer can also
be found in the Credit Policy & Methodologies directory.
Issuer: AmSouth Bancorporation
..Downgrades:
....Subordinate Regular Bond/Debenture,
Downgraded to Ba1 from Baa1
..Outlook Actions:
....Outlook, Changed To Negative From
Rating Under Review
Issuer: AmSouth Bank
..Downgrades:
....Subordinate Regular Bond/Debenture,
Downgraded to Baa2 from A3
..Outlook Actions:
....Outlook, Changed To Negative From
Rating Under Review
Issuer: Regions Asset Management Company, Inc.
..Downgrades:
....Preferred Stock Preferred Stock,
Downgraded to Ba2 from Baa1
Issuer: Regions Bank
..Downgrades:
.... Bank Financial Strength Rating,
Downgraded to D+ from C+
.... Issuer Rating, Downgraded to Baa1
from A2
.... OSO Rating, Downgraded to P-2
from P-1
.... Deposit Rating, Downgraded to P-2
from P-1
....OSO Senior Unsecured OSO Rating,
Downgraded to Baa1 from A2
....Multiple Seniority Bank Note Program,
Downgraded to a range of Baa2 to P-2 from a range of A3 to P-1
....Subordinate Regular Bond/Debenture,
Downgraded to Baa2 from A3
....Senior Unsecured Deposit Rating,
Downgraded to Baa1 from A2
..Outlook Actions:
....Outlook, Changed To Negative From
Rating Under Review
Issuer: Regions Financial Corporation
..Downgrades:
.... Issuer Rating, Downgraded to a
range of Baa3 to P-3 from a range of A3 to P-2
....Multiple Seniority Shelf, Downgraded
to a range of (P)B1 to (P)Baa3 from a range of (P)Baa2 to (P)A3
....Multiple Seniority Shelf, Downgraded
to a range of (P)B1 to (P)Baa3 from a range of (P)Baa2 to (P)A3
....Multiple Seniority Shelf, Downgraded
to a range of (P)B1 to (P)Baa3 from a range of (P)Baa2 to (P)A3
....Subordinate Regular Bond/Debenture,
Downgraded to Ba1 from Baa1
....Subordinate Shelf, Downgraded to
(P)Ba1 from (P)Baa1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from A3
Issuer: Regions Financing Trust II
..Downgrades:
....Preferred Stock Preferred Stock,
Downgraded to Ba2 from Baa1
....Preferred Stock Shelf, Downgraded
to (P)Ba2 from (P)Baa1
Issuer: Regions Financing Trust III
..Downgrades:
....Preferred Stock Preferred Stock,
Downgraded to Ba2 from Baa1
....Preferred Stock Shelf, Downgraded
to (P)Ba2 from (P)Baa1
Issuer: Regions Financing Trust IV
..Downgrades:
....Preferred Stock Shelf, Downgraded
to (P)Ba2 from (P)Baa1
Issuer: Regions Financing Trust V
..Downgrades:
....Preferred Stock Shelf, Downgraded
to (P)Ba2 from (P)Baa1
Issuer: Regions Financing Trust VI
..Downgrades:
....Preferred Stock Shelf, Downgraded
to (P)Ba2 from (P)Baa1
Issuer: Union Planters Bank, National Association
..Downgrades:
....Subordinate Regular Bond/Debenture,
Downgraded to Baa2 from A3
..Outlook Actions:
....Outlook, Changed To Negative From
Rating Under Review
Issuer: Union Planters Corporation
..Downgrades:
....Subordinate Regular Bond/Debenture,
Downgraded to Ba1 from Baa1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Baa3 from A3
..Outlook Actions:
....Outlook, Changed To Negative From
Rating Under Review
Issuer: Union Planters Preferred Funding Corp.
..Downgrades:
....Preferred Stock Preferred Stock,
Downgraded to Ba2 from Baa1
New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Gregory Frank
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades Regions (Senior to Baa3)
