NEW YORK — Regions Financial Corp. swung to a surprise second-quarter profit, its third in a row, as the lender benefited again from shrinking loan-loss provisions and improved credit quality.
Separately, the Birmingham, Ala.-based lender confirmed on a conference call with analysts that its own audit committee was conducting a review of how the bank handled souring loans in the financial crisis. The review, and inquiries from government agencies, focus on 2009 loan-loss accruals, Chief Executive Grayson Hall said on the call.
The bank has faced a civil lawsuit on the practices, with allegations executives delayed the disclosure of souring loans. The board's investigation had come to light in court documents last month, and was reported in The Wall Street Journal.
Hall said the inquiries wouldn't have any impact on present financial statements.
The board's investigation into accounting was one of the issues plaguing Regions in recent months, as it also settled a lawsuit by the Securities and Exchange Commission over activity at its brokerage unit Morgan Keegan. After the settlement, Morgan Keegan was put up for sale amid a strategic review.
Speaking of the review, Hall on Tuesday said he wasn't in a "position to give that clarity," but called Morgan Keegan a "valuable franchise." He said Regions would prefer to maintain "some type of strategic alliance."
For the quarter's performance, however, earnings topped expectations and shares rose Tuesday, up 3% to $6.39 in recent trading.
Like its peers, Regions has seen results improve recently amid a stronger credit environment. Still, progress on loan growth remains a challenge. Tuesday, Regions said its ending loan balance declined 0.2% from the first quarter, as a decline in its investor real-estate portfolio offset credit-card purchase and middle-market commercial and industrial growth.
Regions reported a profit of $109 million, compared with a year-earlier loss of $277 million, or 23 cents a share. After preferred dividends, the per-share profit was 4 cents a share, versus a year-earlier loss of 28 cents a share, and above the 1-cent profit analysts polled by Thomson Reuters expected.
Revenue edged up 0.6% to $1.62 billion below the $1.64 billion analysts expected.
Loan-loss provisions were reduced to $398 million from $651 million a year earlier. Net charge-offs, or loans lenders don't think are collectible, were 2.71% of average loans, compared with 2.99% a year ago.
Regions has struggled with its real-estate exposure in battered Southern markets, many of which were hurt further in the aftermath of last year's Gulf of Mexico oil spill.
