Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Regions Plunges After Cut by Moody’s on Managers’ Exit

Nov. 17 (Bloomberg) -- Regions Financial Corp., Alabama’s biggest bank, plunged for a second day after Moody’s Investors Service cut its credit rating again this month, citing the departure of three managers who oversaw risk and souring assets.

The shares fell 6.4 percent to $5.54 at 4:15 p.m. in New York Stock Exchange composite trading after shedding 4.5 percent yesterday, their lowest since January. The firm’s senior debt rating was lowered two notches to Ba3 from Ba1, Moody’s said in a statement late yesterday. Regions’ board wanted personnel changes amid “slow” progress in improving credit quality, the bank’s finance chief, David Turner, said yesterday at a New York investment conference.

“They haven’t given much of an explanation for the departures, and it still doesn’t smell right,” Kevin Fitzsimmons, an analyst at Sandler O’Neill & Partners, said today in a phone interview. “People are going to be wary over the next quarter or two because there’s a sense we don’t know the full story.

Regions last reported an annual profit in 2007, and since the start of last year has written off more than $3 billion in loans, mostly tied to developers, home builders and mortgage borrowers in Georgia and Florida. In the third quarter, charge-offs for uncollectible loans jumped to $759 million from $651 million in the previous three months because of more bad commercial real-estate loans.

Chief Risk Officer Bill Wells resigned and two other executives retired and left the company, Turner said.

‘Serious Concerns’

Their exit, as the bank deals with souring loans, “raises serious concerns regarding the firm’s controls and the path of future asset-quality charges,” Moody’s said, adding that all long-term ratings are on review for possible downgrade. On Nov. 1, Moody’s cut the senior debt rating one level from Baa3.

“It’s never a good time to make changes like this,” Turner, the bank’s fourth finance chief since 2006, said of the departures.

Chief Executive Officer Grayson Hall and directors made the decision because they think “our pace of change needed to pick up,” Turner said. The decision wasn’t imposed by regulators, he said.

“The regulators may not have removed any employee or changed a single loan risk grade, but clearly there are concerns being voiced all over the regulatory community and this is not just self-policing by Regions,” Chris Marinac, an analyst with FIG Partners LLC, said in a report today.

Capital Level

The Birmingham-based lender has yet to repay $3.5 billion in taxpayer funds from the Troubled Asset Relief Program. In cutting the rating on Nov. 1, Moody’s cited a decreasing expectation that the government would again offer Regions and other U.S. local banks emergency support.

The bank doesn’t “see any likely scenario” in which it would have to raise capital to cover losses, Turner said. It has $5 billion in capital exceeding minimum levels to be considered “well capitalized,” he said, plus $3.2 billion in allowance for loan losses.

The firm announced the departures in a statement after the close of trading Nov. 15. Its director of credit risk, Michael Willoughby, retired while the head of problem-asset management, Tom Neely, left, the company said.

Neely declined to comment. Phone numbers for Willoughby and Wells couldn’t be found. Tim Deighton, a spokesman for the company, declined to comment.

Interim Appointees

Wells joined Regions’ predecessor, AmSouth Bancorp, as chief risk officer in 2004, after having the same post at SouthTrust Corp., a Birmingham-based bank acquired by Wachovia Corp. Willoughby, 65, was the company’s chief credit officer from 1997 through 2009, when he was named director of credit risk.

Their responsibilities are being handled on an interim basis by the bank’s head of credit operations, Barb Godin, and the risk analytics chief, John Haley, who will also oversee areas including regulatory affairs and compliance risk, according to the bank’s statement. They will report to Turner until Wells’s successor is appointed, possibly before the end of the year.

To contact the reporter on this story: Nishad Majmudar in New York at nmajmudar@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.