Standard & Poor's Ratings Services put Regions Financial Corp.'s credit rating into junk territory Tuesday with a one-notch downgrade on the expectation that losses will persist longer that expected.
The Birmingham, Ala., lender has posted repeated losses as it continues to struggle with real estate exposure in beaten-down southern markets, many of which were hurt further in the aftermath of April's Gulf of Mexico oil spill.
Last month Regions reported its bottom line improved as it set aside less to cover loan losses.
S&P said it also forecasts continued near-term pressure on Regions' capital ratios, which it sees as aggressive considering Regions' high commercial real estate exposure and unfavorable geographic concentrations.
"Furthermore, we think the company's financial flexibility has decreased somewhat in recent weeks, which could hurt its ability to access the debt and equity markets on favorable terms," said analyst Robert Hansen.
S&P lowered Regions to BB+/B from BBB-/A-3, and the outlook is negative, meaning a further downgrade is possible.
Last week Fitch Ratings cut Regions to the brink of junk territory, citing its recent announcement that its chief risk officer and other risk executives departed, among other concerns about Regions' recent financial performance.