Regions Financial Corp., the 10th-biggest U.S. commercial bank by deposits, was upgraded two levels by Moody’s Investors Service as the ratings firm cited the lender’s improved asset quality.
The lender is “in a better position to weather another real estate cycle” after write-offs and overdue loans have declined, Moody’s said today in a statement as it raised the senior debt of Birmingham, Alabama-based Regions to Ba1, one step below investment grade, from Ba3. The bank bolstered risk management by reorganizing committees and diversifying assets, according to the statement.
Real estate construction loans almost doubled from the end of 2005 through 2007 under then-Chief Executive Officer Dowd Ritter. The firm, now led by CEO Grayson Hall, posted $262 million in write-offs in the third quarter, an 88 percent drop from the same period in 2010. The bank is putting more emphasis on consumer loans, Hall, 55, has said.
“The effectiveness of Regions’s risk management, including in containing concentrations, will be a key driver of any future positive rating actions,” Moody’s said in the statement.
Hall, since succeeding Ritter in 2010, has sought a return to what he calls “sustainable profitability.” The bank has reported an operating profit every quarter since the end of 2010 after reporting six straight losses.
“Regions still faces earnings pressure in the current protracted low interest rate environment that could lead the bank to take on additional risks either in its securities portfolios or by diversifying into other business segments,” Moody’s said in the statement.
Regions rose 2.4 percent to $6.86 at 1:49 p.m. in New York. The shares have surged about 60 percent this year, the second-best performance in the 24-company KBW Bank Index.