Regions Financial Corp. (RF), Comerica Inc. (CMA) and ZION Bancorporation (ZION) reported losses in the quarter primarily due to continued strain in their loan portfolios, as the commercial sector continues to droop in the prolonged recession.

Along with continued losses in their residential mortgage, home equity and consumer loan portfolios, these banks are also showing continued distress in their residential and commercial development loans, as well as commercial real estate loans.

Large-cap center banks and brokerage firms like Goldman Sachs (GS), Bank of America (BAC) and JPMorgan Chase (JPM) were able to somewhat offset weak credit metrics by strong results in their investment banking and mortgage refinancing divisions.

Regional banks, however, are much more directly connected to the state of the economy and the interest rate spreads. Weak demand for lending as a result of a shaky economy can severely affect their profitability as borrowers, thereby increasing nonperforming assets.

The mounting credit concerns suggest that a majority of the regional banks reporting their earnings in the coming week will report losses. Banks reporting this week are Fifth Third Bancorp (FITB), Huntington Bancshares Inc. (HBAN), PNC Financial Services Inc. (PNC), SunTrust Banks, Inc. (STI), KeyCorp (KEY) and US Bancorp (USB).

Though commercial loan losses are seen as the final stage of a downtrend in a credit cycle, it still remains to be seen just how severe it turns out to be.

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Here are highlights from Wednesday's Analyst Blog:

UTX Revenues Down 12+%

UTX Corp. (UTX) released Q1-09 results today. Revenues of $12.2 billion were down 12.2% from $14.0 billion last year (which, in turn, was adjusted upward by $257 million at Pratt & Whitney) for collaborative arrangements per EITF Issue no. 07-1.

Of the 12+% decline, 6% reflected adverse foreign currency translation, 5% was organic and the remaining 1% was the net result of divestitures. With respect to the Revenues of UTX's six segments, Otis descended 12.8% to $2.7 billion, Carrier cooled off significantly by 27.0% to $2.5 billion, Fire & Security declined alarmingly by 19.5% to $1.2 billion, Pratt & Whitney sputtered by 8.2% to $3.2 billion, and Hamilton Sundstrand lost power by 5.5% to $1.4 billion, while Sikorsky, as predicted, soared dramatically by 30.4% to over $1.3 billion.

Comerica Hurt by Loan Losses

Comerica Inc. (CMA) reported its 1Q09 results this morning. The operating loss of $0.16 per diluted share was substantially worse than estimates, as the results were hurt by a sharp rise in provisions as well as a contraction in the net interest margin.

Credit metrics deteriorated further during the quarter. Impressive growth in deposits, expense control and an enhanced capital position were the positives for the quarter.

Brinker Customer Traffic Down

Brinker International (EAT) reported earnings today for fiscal 3Q09 ending March 25, adding more color to its preliminary results posted on April 6.

In line with its earlier release, the international casual dining operator said that earnings before one-time items jumped to $0.45 per share in FY 3Q09 from $0.33 in FY 3Q08. The year-ago earnings exclude Macaroni Grill, which was sold in December 2008.

Regions Better Than Expected

Prior to market open, Regions Financial Corp. (RF) reported its earnings for 1Q09. Core results were a loss of $0.14 per share, versus $0.55 per share.

Better-than-expected results reflected lower-than-expected provisions as net interest margin remained under pressure, as well as non-interest income. Though net charge-offs improved sequentially, other credit quality metrics continued to negatively expand.

Forest Labs Reports Q4 & FY09

This morning, Forest Laboratories, Inc. (FRX) reported financial results for the period ending March 31, 2009. Revenue for the fiscal fourth quarter 2009 came in $965.5 million, down 3% from the same period in 2008 and 4% lower than our estimate of $1,005 million.

Sales were below our forecast due to lower-than-anticipated sales of Lexapro which ended the quarter at $549 million, down 5% from the fourth quarter 2008 and below our $585 million forecast. Sales for the fiscal year ending March 31, 2009 came in at $3,923 million, up 2% from 2008.

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The difference from our expectations reflected a higher-than-expected provision for losses (from the accelerated disposition of problem assets), impairment of MSRs [mortgage servicing rights], the effects of preferred stock issuance (via the Treasury's Capital Purchase Program), and lower-than expected service charge on deposits and Trust income, which were somewhat offset by the tax settlement benefit covered for tax years 1999-2006.

Credit quality metrics also continued the negative expansion from the credit crisis. Prior to the conference call, we are preliminarily maintaining our FY09 earnings expectation at $0.80 per share. We are also lowering our price target to $4.90 per share, but and maintaining our Hold recommendation on the shares of RF given the intraday price of $5.00 per share.

Read the full analyst report on RF
 

The company announced that it acquired a $6 billion non-cash goodwill writedown on the back of the falling value of its banking and Treasury operations.

Regions' quarterly loss came at $9.01 a share from the previous year's profit of $70.6 million, or 10 cents. Excluding goodwill charge, the company's loss stood at $244.3 million or 35 cents a share, which was a steeper loss than the consensus expected. In the same period a year ago, Regions had earned a profit of $164.6 million, or 24 cents.

The Birmingham-based shed nearly three-quarters of its market value over the past year.

Regions is a Zacks #3 Rank ("Hold") company.