21 de abril de 2008 / 15:37 / en 9 años

UPDATE 4-Colonial Q1 lags Street; to cut dividend, offer stock

(Adds annalysts’ comments, updates share movement)

By Sweta Singh

BANGALORE, April 21 (Reuters) - Colonial BancGroup Inc CNB.N reported quarterly profit far below Wall Street estimates, slashed its dividend by half and set plans to raise capital by offering additional stock, amidst challenging real estate and commercial markets.

Many analysts expect small and medium-sized banks to cut dividends and offer additional stock to improve their capital position as regulatory concerns mount and slump in housing market continues.

Shares of the financial services company fell as much as 14 percent to a 52-week low of $8.55, before recovering some losses to trade down 9 percent at $9.03 in midday trade on the New York Stock Exchange.

“Our decision to reduce our common dividend was not taken lightly,” Chief Executive Robert Lowder said in a statement. “The common stock offering will provide more capital than would be required to remain well capitalized even under very severe credit scenarios.”

Colonial, which operates more than half its branches in Florida, cut its dividend to 9.5 cents a share from 19 cents.

Further dividend cuts in 2008 “can not be ruled out, given the continued rise of losses throughout the sector,” Stifel Nicolaus & Co analyst David Bishop told Reuters.

The dividend reduction will help the regional bank save up to $60 million annually, it said.

Colonial said it has issued $250 million of subordinated debt and also set plans to publicly offer an additional 25 million shares.

PLAGUING FLORIDA MARKET

Banks with heavy exposure in the Florida region have been among the worst hit in the current crisis as real estate prices in the state tumbled and defaults soared amidst the housing meltdown.

“We believe that we have identified the problems and those problems are centered in our residential real estate construction portfolio,” Lowder said.

Residential construction loans, at $3.2 billion, accounted for 20 percent of the bank’s total loan portfolio and 47 percent of its total non-performing assets in the quarter.

About 64 percent, or $169 million, of the non-performing assets were in Florida.

Analysts expect the company’s residential portfolio in Florida to continue to struggle for the rest of 2008.

A turnaround in the Florida market is expected no sooner than the first half of 2009, James Schutz of Sterne Agee & Leach said.

Colonial agressively expanded in the Florida region last year by acquiring Citrus & Chemical Bancorp Inc. for about $219 million and the Miami-based Commercial Bankshares for $317 million.

“There will be a time when Florida will be back.... It is suffering now.... We are the fifth-largest bank in Florida,” Lowder said of the difficult market conditions in Florida.

Colonial BancGroup, based in Montgomery, Alabama, has more than 200 branches in Florida.

EARNINGS LAG

Colonial’s quarterly profit fell short of market expectations as provisions for bad loans soared during the quarter.

The financial services company said first-quarter net income fell 32 percent to $24.8 million, or 16 cents a share, from $36.5 million, or 24 cents in the year ago quarter.

Analysts expected the company to earn 27 cents a share, according to Reuters Estimates.

Provision for loan losses rose to $35.5 million from $2.3 million, but fell from the $93 million recorded in the fourth quarter.

Provisions were largely increased to cater to losses in the Florida market, Wall Street analysts said.

Net charge-offs were $34 million in the quarter, or 0.84 percent annualized of average loans.

Sterne Agee’s Schutz has a “buy” rating on the stock, while Stifel Nicolaus’ Bishop has a “hold” rating on the stock.

Colonial BancGroup’s stock, which competes with Regions Financial Corp (RF.N) and SunTrust Banks Inc (STI.N) has fallen 27 percent since January, compared with a 5.5 percent fall in the broader KBW Regional Bank Index .KRX. (Reporting by Sweta Singh; Editing by Dinesh Nair)

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