The housing market’s decline is affecting the bottom line at banks nationwide, but the situation has dealt Regions a double-whammy in the shape of fallout from its Morgan Keegan mutual fund investments. The financial giant is facing a number of lawsuits with investors saying they were promised low-risk funds but were instead invested in funds based on risky subprime mortgages. Investors are claiming losses of up to 53 percent.

Now, financial analysts are advising Regions to conserve capital by eliminating dividends that would normally be paid to stockholders, cutting off a source of income for thousands of stockholders, The News reports.

The situation is made even gloomier because stockholders expected 2008 to be a banner year as the result of the November 2006 merger of Regions with AmSouth. The merger combined two of the largest banks in the state and gave Regions Financial Corp. a 16-state reach.

Although the bank is considered well-capitalized and financially sound, Regions’ loan loss fund has grown to $1.4 billion, which is 1.49 percent of net loans, The News reports. This is an increase from 1.45 percent in 2007, which the News says analysts consider a significant jump.

SOURCE: Morgan Keegan Investment Fraud › Regions hit by double whammy

Currently, the News reports, Regions’ 38-cent quarterly dividend yields around 11 percent. The paper said banks are reducing dividends across the industry, largely due to the crisis in the housing market, as losses from home loans continue to climb.

SOURCE: Morgan Keegan Investment Fraud › Predicted Regions dividend drop