Regions Financial Corp., struggling to turn a profit and so far unable to repay its government bailout loan, has a new headache: securities litigation.
The Birmingham, Ala., bank has been beset by massive losses from toxic commercial real-estate bets. Now it must contend with federal and state charges that brokerage subsidiary Morgan Keegan & Co. and two employees committed fraud in the pricing of several bond funds.
Those accusations add to a growing pile of legal action from investors and regulators, which could eventually cost the bank upwards of $1 billion at a time when it, like other regional banks, has been struggling with losses related to the financial crisis.
Federal and state regulators said they are seeking to recoup approximately $2 billion investors allegedly lost through fraudulent and reckless business practices. Mississippi, Alabama, Kentucky and South Carolina regulators joined the Financial Industry Regulatory Authority in filing fraud charges.
The fraud charges are "a serious event," said Chris Marinac, managing principal at FIG Partners, a bank-research firm in Atlanta. "The exposure" to eventual costs "could be all over the map," he said. "There's no telling what a judge and jury will do." He said the litigation could be one catalyst that eventually pushes Regions to sell itself.
No comments:
Post a Comment