Nashville's largest bank, Regions Financial Corp., swung to a $6.2 billion loss during the fourth quarter, the latest sign that the turmoil from real estate losses nationally hasn't run its course.
Regions' stock fell 24 percent Tuesday, part of a general collapse among many bank stocks as the Dow Jones average plummeted 332 points to close below 8,000 on the same day that Barack Obama was sworn in as the nation's 44th president.
Regions said the size of its quarterly loss was a result of the bank's having to write down the value of its banking enterprise because of accounting rules, though its underlying capital ratios remain in an acceptable range.
"This is by far the most difficult credit cycle that we've ever witnessed," Dowd Ritter, Regions' chairman, president and CEO, said during a conference call with analysts.
Without a $6 billion accounting adjustment, Regions still would have lost $245 million, or 35 cents per share, in the fourth quarter, its first quarterly loss in at least 18 years.
Nationally, the dawn of the Obama presidency wasn't enough to boost Wall Street. After hearing the new president's inaugural address at midday, investors went back to unloading stocks.
The Dow Jones industrial average closed at 7,949.09 points, down 4 percent. Broader indexes fell more than 5 percent in Tuesday trading.
At Regions, Ritter issued a statement saying the bank was hurt by "continued declines in housing and residential-related construction project values, as well as rising unemployment."
"Prices of Florida-based properties remain under particular pressure, with the real estate downturn rippling through the economy," he said.
Net loan charge-offs for bad loans nearly doubled from $416 million to $796 million between the third and fourth quarters.
"The losses were higher than expected,'' said Jefferson Harralson, an analyst with investment bank Keefe, Bruyette & Woods in Atlanta. "The banks aren't really designed to be losing money."
Loan portfolio erodesRegions' loan portfolio, like that of other regional banks, continues to deteriorate, especially in Florida, and Regions increased its loan loss provision by $733 million to $1.15 billion in the quarter.
The bank's stock ended trading on the New York Stock Exchange at $4.60 per share, down $1.47 a share on the day.
Analysts say they aren't sure what the rest of the year will bring.
"The management team sounded as if the net losses could continue at least in the near future," Harralson said.
The bank previously cut its quarterly dividend to 10 cents per share, down from 38 cents per share in the first half of 2008.
Ritter said it would take unemployment levels reaching a peak and real estate values bouncing back from a low point before bank earnings improve. The company didn't provide specific guidance on future earnings.
"Although we're encouraged by steps the government has taken to stabilize the housing market and revitalize the economy, there is no quick fix for credit quality issues currently plaguing the financial services industry," Ritter said in a statement. "We fully acknowledge the challenges that we face in 2009."
Bank cuts expensesRegions executives said they were cutting expenses, limiting attendance at conferences and conducting only the most essential training for bank employees to save money.
Regions received a $3.5 billion infusion from the U.S. Treasury under the government's Capital Purchase Program. The program is part of the U.S. Treasury Troubled Asset Relief Program designed to encourage banks to build capital and increase the flow of financing to businesses and consumers.
Other regional and national bank shares also plummeted Tuesday. SunTrust Banks Inc. lost $4.87, or 24 percent, to $15.07 per share; Fifth Third Bancorp shed $1.21 cents, or 22 percent, to close at $4.22; and Citigroup, which reported a loss of $8.29 billion, hit a 17-year low Tuesday, dropping 70 cents a share to close at $2.80.
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