Fitch downgrades Regions Financial

Fitch Ratings on Tuesday downgraded the long-term issuer default rating of Regions Financial Corp. and its Regions Bank subsidiary, saying the bank is unlikely to make a profit this year and reported serious deterioriation in the quality of its loans during the first quarter.

Fitch lowered the rating to 'A-' _ six notches below the highest triple-A rating _ from 'A' and removed the company from a negative ratings watch. Fitch said its rating outlook remains negative on Regions, which means further downgrades are possible.

On May 20, the Birmingham, Ala.-based bank said it would raise $1.85 billion by selling 400 million common shares and 250,000 convertible preferred shares. The bank is trying to satisfy the U.S. Treasury Department's demand that it raise $2.5 billion to bolster its cash position after government stress tests determined Regions would require more capital to survive any further weakness in the economy.

Fitch wrote that while it "believes the recent capital raise provides considerable support to Regions Financial's balance sheet, the agency believes the company continues to face elevated risk due to its exposure to problematic markets, including multiple types of real estate exposure in Florida."

Fitch said it expects that Regions Financial will not turn a profit this year because of high borrowing costs.

Regions Financial shares fell 8 cents to close at $4.25.