Regions, Fifth Third plan stock offerings-WEB ONLY

Regions Financial Corp. said today it will raise $1.85 billion in new capital through the public sale of 400 million common shares and 250,000 convertible preferred shares, as the regional bank looks to satisfy the U.S. Treasury’s demand that it raise $2.5 billion to shore up its cash position.

Birmingham, Ala.-based Regions, which has about 30 branches and 325 employees in the Indianapolis-area, said underwriters have a 30-day option to purchase up to an additional 60 million common shares and 37,500 of the 10-percent Series B mandatory convertible preferred shares.

The sales are expected to close May 27. The common stock offering is priced at $4 each, an 18-percent discount to the shares’ closing price yesterday of $4.89.

“We’re pleased to have completed a substantial portion of our capital plan so quickly and successfully,” said Regions CEO Dowd Ritter. “The result of today’s offering is an even stronger capital structure.”

The government ran “stress tests” on 19 banks that had received bailout funds. Regions was one of 10 banks found to require more capital to survive any further economic downturn. The banks have until June 8 to develop a plan and have it approved by their regulators.
Other regional banks found to need a bigger capital cushion were SunTrust Banks Inc. of Atlanta; KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; and PNC Financial Services Group Inc. of Pittsburgh.

Also yesterday, Fifth Third said it will sell no more than $750 million in common stock as part of the company’s commitment to add a $1.1 billion capital buffer.

Fifth Third, which has about 50 branches and 725 employees in the Indianapolis area, is also planning sales of some non-strategic assets to meet its Treasury requirement.

Regions has said it hopes to repay a $3.5 billion investment from the government as soon as possible. Regions, which operates nearly 2,000 branches in the Southeast and Midwest, has suffered like other banks under the weight of rising loan losses. Its large mortgage and commercial real estate portfolios in some of the more distressed areas of the country, like Florida, have been especially troublesome.

But the bank recently reported a surprising first-quarter profit, driven by strong mortgage banking revenue and deposit growth. However, loan losses were shown to have continued to increase as consumers struggled to pay off their debts.
Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are serving as joint book-running managers for Regions’ common and preferred stock offerings, and Morgan Keegan & Co. Inc. is lead manager for the offerings.