TEXT-S&P: Regions Financial Corp ratings unaffected by results

Oct 23 - Standard & Poor's Ratings Services today said its ratings and
outlook on Regions Financial Corp. (BBB-/Stable/A-3) are not affected by
the company's third-quarter results, which we view as mixed but only slightly
below our expectations.

Regions reported net income of $312 million from continuing operations, up
from $280 million in the second quarter. Pretax, preprovision income declined
modestly from the previous quarter, largely because of a lower net interest
margin (NIM) and higher noninterest expenses. Specifically, the NIM fell by 8
basis points from the second quarter to 3.08%, comparable to the declines many
other large regional banks experienced. We expect that the NIM could decline
further in 2013, although lower deposit costs in the near term should mitigate
the decline.

Loan loss provisions were very low and reserve releases were again
substantial, but we expect loan loss provisions to rebound toward a more
normal level in 2013. Credit quality was mixed, in our view. Nonaccrual loans,
restructured loans, and Business Services criticized loans declined, but
inflows of nonperforming loans rose by $148 million from the second quarter,
and net charge-offs were comparable to levels experienced in the second
quarter. Our assessment of Regions' risk position remains "moderate" given the
still-high total nonperforming assets (NPAs), which include a large amount of
restructured loans, based on our calculations. We expect credit quality to
improve in 2013 and 2014, but we think it could be gradual given the bank's
very large exposures in the southeast.

Loan balances declined again sequentially, largely because of further declines
in investor commercial real estate (CRE) loan balances, a trend we expect to
continue. Capital ratios continued to improve in the third quarter because of
earnings retention and a contraction in earning assets. Our assessment of the
company's capital and earnings is "adequate," largely based on our projected
risk-adjusted capital (RAC) ratio for the company. We expect the ratio to
approach nearly 10% by the end of 2013. Despite mixed results in the third
quarter, the outlook is stable because we expect financial performance to
improve only gradually over the next two years.

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