NEW YORK (

TheStreet

) --

Regions Financial

(RF) - Get Report

was the loser among the largest U.S. banks on Tuesday, with shares sliding 5% to close at $3.59.

The Birmingham, Ala., lender has been trying to sell its

Morgan Keegan

brokerage subsidiary, reportedly seeking $1 billion for the unit.

Reuters

reported late Monday that with the sale dragging since Regions announced in June that it would "explore potential strategic alternatives" for the unit, 10 Morgan Keegan advisors have left the firm, taking at least $694 million in assets under management with them.

Selling Morgan Keegan is a key piece in an effort by Regions to repay $3.5 billion in government bailout funds received through the Troubled Assets Relief Program, or TARP, in 2008.

The broad indexes were mixed following bankruptcy filings by

American Airlines

and its parent company

AMR

(AMR)

. The world's largest air carrier has been unable to come to terms on a union contract with its pilots for five years.

The news out of Europe was also mixed. Italy completed ¿7.5 billion in debt auctions, paying 7.89% on ¿3.5 billion in three-year notes, which was the highest rate paid since September 1996, and compared to a rate of 4.93% on similar debt auctioned just last month, according to

Bloomberg

.

Moody's Investor Service said

ratings downgrades were likely

for 87 European banks, as the various solutions being discussed to resolve the eurozone debt crisis "have the common objective of reducing very significantly the support provided to creditors and leave subordinated debt holders particularly exposed to exclusion from any support received."

The

KBW Bank Index

(I:BKX)

declined 1% to close at 35.63.

Shares of

Morgan Stanley

(MS) - Get Report

were down 4% to close at $13.31, following a

Wall Street Journal

report that the company, along with Bank of America and five other companies were negotiating with

MBIA

(MBI) - Get Report

to end a dispute over the bond insurer's 2009 restructuring.

Bank of America

(BAC) - Get Report

closed at $5.08, recovering from its intraday low of $5.04, which was the stock's lowest level since the dog days of March 2009.

Large banks seeing 2% declines included

First Niagara Financial Group

(FNFG)

, which closed at $8.44;

JPMorgan Chase

(JPM) - Get Report

, at $28.56; and

Goldman Sachs

(GS) - Get Report

, closing at $88.81.

Tuesday's sector winner was

KeyCorp

(KEY) - Get Report

, with shares rising 2% to close at $6.96.

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--

Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here:

Philip van Doorn

.

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http://twitter.com/PhilipvanDoorn

.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.