UPDATE 1-RESEARCH ALERT-FBR upgrades Regions Financial

(Recasts; adds details, share movement)

Sept 8 (Reuters) - Friedman Billings Ramsey upgraded Regions Financial Corp (RF.N) to "market perform" from "underperform," citing near-term benefits from the U.S. government's bailout of mortgage giants Freddie Mac (FRE.N) and Fannie Mae (FNM.N).

The brokerage, however, feels the company may need to raise capital should credit market deteriorate more than expected.

Shares of the Birmingham, Alabama-based company were trading up nearly 15 percent at $12.75 Monday on the New York Stock Exchange. They touched a high of $14.05 earlier in the day.

The brokerage, which raised its price target on the stock by $2 to $12, said it sees earnings growth from reduced provision expenses and mortgage refinancing and origination activities.

It also expects Regions to benefit from increased activity at its investment banking unit Morgan Keegan's fixed income platform. (Reporting by Anurag Kotoky in Bangalore; Editing by Amitha Rajan)