CORRECTED - CORRECTED-UPDATE 1-Bernstein cuts Regions Financial's '08 earnin

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Aug 21 (Reuters) - Bernstein Research cut its 2008 earnings outlook on Regions Financial Corp (RF.N), and said a $2 billion capital raise will position the U.S. southeast regional bank well compared to its peers.

"We present a 'stake in the ground' $2 billion number in this (research) note, but if the operating environment deteriorates more than we anticipate, that could be higher," analyst Kevin St. Pierre said to investors.

St. Pierre cut his earnings estimate for 2008 to $1.35 from $1.46, and 2009 estimate to $1.43 from $1.73, on higher credit losses, driven mainly by home equity, residential construction, and C&I loans.

The current estimates do not assume any capital-raise, with the recent dividend cut allowing Regions to build capital ratios over the next six quarters, he added.

St. Pierre said he remains uncertain as to whether the credit loss estimates are conservative enough given the recent rise in charge-offs and non-performing loans.

The analyst also cut his price target on the stock to $10.75 from $18, expressing doubts about the company's capital adequacy, but said the target still represents potential upside.

If the entire $2 billion were raised as equity capital, at a 40 percent discount to the current share price, the outstanding share count will rise by about 56 percent, the analyst said.

St. Pierre expressed doubts about whether Regions Financial will have enough capital to withstand the current environment, and how much capital might be needed.

The analyst maintains a "market perform" rating on the stock, saying ... "It is difficult to gauge the relative attractiveness of a stock when we are uncertain about the ultimate share count."

Shares of Regions were down 3 percent at $8.30 in early Thursday morning trade on the New York Stock Exchange. (Reporting by Adheesha Sarkar in Bangalore; Editing by Bernard Orr)