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Shares of Regions Financial Corp. fell on Monday after The Wall Street Journal reported that the bank's board was investigating whether executives delayed disclosures of problem loans during the financial crisis.
THE SPARK: The Journal reported that the bank's audit committee began investigating after the Federal Reserve expressed concerns about past practices in disclosing credit deterioration in its loan portfolio to investors and regulators. The newspaper cited court documents in a lawsuit brought last year by two pension funds that own Regions stock, and people familiar with the matter. The Journal did not identify its sources further.
A spokeswoman for the Birmingham, Ala.-based bank declined to comment to The Associated Press on The Journal's report.
The newspaper also reported that civil charges brought last year by the Securities and Exchange Commission were likely to result in Regions paying about $200 million in a settlement, according to the people the report cited. The case involves allegations that Regions' investment bank unit defrauded investors in subprime securities.
THE BIG PICTURE: Regions was among several banks that received government bailout money as soured loans piled up during the financial crisis. Regulators have recently increased scrutiny of the methods banks use to classify loans, including whether loans at risk of default are disclosed promptly.
THE ANALYSIS: Analyst Erik Oja of Standard & Poor's Equity Research on Monday downgraded his rating of Regions Financial to "Sell" from "Hold" and cut his price target for the stock to $5 from $8. Oja wrote in a research report that shares of Regions Financial "will trade below tangible book value until there is further clarity" about the unconfirmed investigation and the potential for a $200 settlement expense, an amount that he called "beyond our expectations."
SHARE ACTION: Shares of Regions Financial fell 13 cents, or about 2.1 percent, to $6.01 in afternoon trading while the broader markets edged higher. The stock has traded in a 52-week range of $5.12 to $8.09.