Financial Winners and Losers: Regions

Financial stocks were trading mixed Thursday, after Goldman Sachs analysts expressed optimism for big banks and caution on regionals.
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Updated from 12:55 p.m. EDT

Financial stocks ended mostly to the down side Thursday, after Goldman Sachs analysts expressed optimism for big banks and caution on regionals, and former

Federal Reserve

Chairman Alan Greenspan offered a sour outlook for the sector.

The

Goldman report upgraded large banks to neutral after recent capital raising and the prospect for gains in the mortgage and capital markets, but expressed concern for regional banks' exposure to commercial and real estate loans. The

NYSE Financial Sector Index

fell 25.27 to 3,798.78.

The biggest loser for the day was

Regions Financial

(RF) - Get Report

, which slid 16.1% to $4.10 on heavy volume. Regions priced 400 million shares of common stock at $4 per share, as it works towards raising the capital that regulators insisted upon after the recent stress tests. The bank is heavily exposed to the Florida region, which has struggled during the recession.

Fifth Third Bancorp

(FITB) - Get Report

dropped 9.9% to $6.95 after announcing a stock offer and debt exchange program following the previous day's market close. Regulators had told the Ohio-based bank that it needed an additional $1.1 billion in capital after submitting to the stress test evaluation. Fifth Third said it was raising $750 million in new common stock and converting $1.1 billion in preferred shares into cash and common.

The Financial Times

said that

Bank of America

(BAC) - Get Report

is aiming to repay $45 billion it received in bailout money from the Troubled Asset Relief Program, or TARP. The report said the bank is on track to raise more than $35 billion in capital by the end of September. However, the bank told

TheStreet.com

that it was

not setting any timetable to pay back TARP

.

The government's stress tests showed earlier this month that BofA would need a capital buffer of $33.9 billion, more than any other bank, to protect against losses if the economy worsened. Earlier this week, BofA said it had raised $13.47 billion by issuing common stock, and together with the sale of its stake in

China Construction Bank

for about $7.3 billion, is more than halfway to reaching its capital raising goal.

Financial stocks were also reacting unfavorably to comments from former Fed Chairman Alan Greenspan, who said late Wednesday that U.S. banks still need to raise large amounts of money and that the financial crisis has yet to end.

"There is still a very large unfunded capital requirement in the commercial banking system in the United States and that's got to be funded," Greenspan said in an interview, according to a

Bloomberg

report. He added that "until the price of homes flattens out we still have a very serious potential mortgage crisis."

Greenspan's comments are a sharp contrast to remarks from Treasury Timothy Geithner. During testimony before the Senate Banking Committee on Wednesday, Geithner said that banks have raised more than $56 billion through new stock or debt issuance since the government's stress tests found that 10 firms would need a combined $75 billion in capital as a buffer.

During an appearance Thursday before the House Financial Services Committee, Geithner repeated his view that the financial system is stabilizing, although there is still work to be done in terms of oversight, regulation and transparency.

BofA shares gave back 8 cents to trade at $11.41. Among other U.S. bank stocks,

JPMorgan Chase

(JPM) - Get Report

gained 35 cents to sell at $34.90, while

Citigroup

(C) - Get Report

was up three cents to $3.72 and

Wells Fargo

(WFC) - Get Report

added 58 cents to bring it to $25.04.

U.K. banks were also under pressure after

Standard & Poor's

downgraded the country's sovereign debt rating to negative from stable.

The Financial Times

said S&P's revision is embarrassing for the British Treasury and will give ammunition to the opposition Conservative party, which argues that the government is presiding over a growing and unstable amount of debt.

Among U.K. bank stocks,

HSBC Holdings

(HBC)

fell 2.3% to $42.64,

Royal Bank of Scotland

(RBS) - Get Report

slid 2.4% to $12.82 and

Barclays

(BCS) - Get Report

went back and forth all day but squeaked out with a gain of six cents to $17.80.

Elsewhere,

Franklin Templeton Investments

has emerged as the leading bidder for

American International Group's

(AIG) - Get Report

asset-management business, according to

The Wall Street Journal

. The AIG Investments unit is expected fetch $500 million, well below the $800 million some suitors proposed paying just two months ago, according to the report. AIG shares were down 1.1% to $1.80.

Separately,

The Wall Street Journal

reported that the Treasury Department would lend an additional $7 billion to GMAC, the financial arm of

General Motors

(GM) - Get Report

. GMAC failed the bank stress test even after already getting $5 billion from the Troubled Asset Relief Program. The Treasury wants the company to raise another $11.5 billion within six months. GM shares jumped 32.4% to $1.92.