Standard & Poor's Ratings Services downgraded Regions Financial Corp. to the verge of junk territory, saying it expects continued weakness from the bank this year.

The one-notch cut to BBB- "reflects our expectation that Regions' profitability levels should continue to be muted during 2010 given certain troubled loan exposures." In addition, credit stress tests suggest that capital ratios could remain pressured.

S&P — which downgraded Regions in November — went on to say Thursday that credit performance may weaken further in 2010 because of significant loan exposures to commercial real-estate, consumer and commercial segments, which could experience higher-than-anticipated losses. As such, the ratings outlook remains negative, meaning further downgrade isn't out of the question.

Regions in January said its fourth-quarter loss narrowed significantly amid a $6 billion year-earlier write-down as loan-loss provisions and non-performing assets continued to grow.

Shares of Regions were up a penny to $7.30 in recent trading. The stock is up 38% so far this year.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.