DealZone

A week ago, when the Fed and Treasury mesmerized the financial world with the results of “stress tests” and capital-raising targets for banks, nobody spent much time asking “what if they can’t raise the money?” There was a sense that authorities had washed away enough uncertainty in the sector to satisfy investors. In short order, healthier institutions started raising capital. Those that didn’t need any stepped up efforts to rid themselves of onerous state support.

Bank of America shares are on a tear after the bank raised nearly $13.5 billion through a stock sale. Along with money it raised by selling part of its stake in China Construction Bank, this put Bank of America about half way to filling its stress-test gap.

But when Regions Financial, a large U.S. Southeast regional bank that was stress-tested, announced plans this morning to raise $1.25 billion through stock offerings — also about half of what federal regulators told it to raise — investors balked, sending its stock down more than 8 percent.

Just goes to show that not everybody can fail a stress test and impress shareholders with massive ownership dilution. Regions’ trouble may be that aside from selling stock, it has far less to offer than bigger banks in terms of asset sales to make shareholders feel better about doubling down. If nothing else, the market reaction could put a scent in the air that might interest an acquisition-minded lender needing exposure in the U.S. Southeast. If such a creature exists, it might find many more stressed-out lambs in the U.S. financial pasture.