Regions Financial plans $1.25 billion stock offer

By Jonathan Stempel

NEW YORK (Reuters) - Regions Financial Corp (RF.N: Quote, Profile, Research) said it plans to sell $1.25 billion of stock, half of the sum that U.S. regulators ordered the large Southeast regional bank to raise to withstand a potentially deep recession.

The Birmingham, Alabama-based lender is publicly offering $1 billion of common stock and $250 million of preferred shares automatically convertible into common stock.

It also proposed to exchange as many as 138 million common shares for some trust preferred securities at a discount to face value, according to regulatory filings.

Regions was one of 19 large banks to undergo government "stress tests," and was one of 10 told to raise capital. Its $2.5 billion shortfall is roughly two-thirds of Regions' market value, which was $3.8 billion on Tuesday, and the offerings would heavily dilute the investments of current shareholders.

The bank announced its offerings after several rivals conducted big stock sales this month, including $13.5 billion by Bank of America Corp (BAC.N: Quote, Profile, Research).

Treasury Secretary Timothy Geithner told the Senate Banking Committee the 19 banks have raised or set plans to raise more than $56 billion, including $34 billion of equity capital.

"Some of the companies that weren't necessarily operating in a position of strength are trying to strike a balance between diluting their shares and raising enough capital," said Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP in New York. "That requires looking at other levers."

Regions has $142 billion of assets and 1,900 branches in 16 U.S. states across the South, Midwest and Texas. Its capital shortfall was among the largest identified by the government relative to the bank's size and market value.