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Standard & Poor's Ratings Services on Friday raised its outlook on Regions Financial Corp. and subsidiary Regions Bank, saying it expects the company will remain profitable this year and next as loan performance improves.
The ratings firm upgraded its outlook on Regions and its unit to "Stable" from "Negative."
It also affirmed its "BB+/B" counterparty credit rating on Regions Financial and its "BBB-/A-3" rating on Regions Bank.
S&P said the Birmingham, Ala.-based company's profitability in recent quarters has modestly exceeded expectations.
The lender's results have been buoyed by improved loan performance, gains on securities sales and a small level of reserve releases, S&P said.
S&P credit analyst Robert Hansen forecasts that Regions will see its loan-loss provisions diminish as loan performance continues to improve.
Those factors and the potential sale of Morgan Keegan increase the likelihood that Regions will redeem its preferred shares sold to the Treasury under the Troubled Asset Relief Program, S&P said.
Last month, Regions reported a surprise profit for the second quarter, reversing a loss in last year's quarter, as the bank set aside less cash to cover loan losses.
The bank said its credit costs declined to the lowest level in two years. Its provision for loan losses -- money set aside to cover souring loans -- dropped nearly 39 percent from last year and 17 percent from the first quarter.
Net charge-offs, or loans written off as uncollectible, declined 9 percent from the first quarter.
Shares of Regions Financial ended the regular trading session down 24 cents, or 4.5 percent, to $5.10 on Friday.