Region's Morgan Keegan Sale to Impact 4Q Earnings

NEW YORK ( TheStreet) -- Regions Financials' ( RF) sale of its Morgan Keegan brokerage unit for $930 million to Raymond James Financial ( RJF) achieves two goals: getting the bank closer to repaying billions in bailout funds and ensuring that the disappointing sale price remains a 2011 story.

Regions plans to record an impairment in a range of $575 million to $745 million in its fourth quarter of 2011 that is tied to the "goodwill" of Morgan Keegan even though the sale was announced Wednesday. Regions will report earnings on Jan. 24, and expects to lose as much as $633 million -- or up to 50 cents a share -- in the fourth quarter of 2011 because of the goodwill charge, according to a company statement.

Regions will now start its 2012 with a clean slate because of the accounting method. Proceeds from the sale can be used to pay back the Troubled Asset Relief Program (TARP) and the loss of Morgan Keegan will not show up in its 2012 earnings.

"I am very pleased that we were able to reach an agreement that benefits our shareholders and helps us focus on our core banking business while also allowing us to continue providing a full range of products and services seamlessly to our customers," said Regions CEO Grayson Hall in a statement announcing the deal.

With the purchase of Memphis, Tn., -based Morgan Keegan, Raymond James will take on an investment banking and brokerage business with 1,200 financial advisers to add to its existing 5,400 brokers, creating a big presence in the southeast and one of the biggest non-Wall Street domiciled wealth management and investment banking businesses.

"While our preference is generally organic growth, we have used strategic mergers to grow throughout our history when the timing and pricing are right and, most importantly, when there is a strong cultural fit and clear path for integration," said Raymond James CEO Paul C. Reilly in a statement. The Morgan Keegan purchase is Raymond James's biggest ever acquisition, according to Bloomberg data. In the third quarter, Morgan Keegan earned $26 million in profit.

While the sale helps the Alabama -based bank build capital, it falls short of previous bid reports.

Previously, Stifel Financial ( SF) and private equity firm's The Blackstone Group ( BX), Apollo Global Management ( APO), The Carlyle Group and TPG Capital had been reported as interested bidding up to $1.5 billion for the brokerage.

For more on Regions Financial, see 10 regional bank stocks to watch in 2012 .

Regions Financial shares fell nearly 40% in 2011.

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After receiving $3.5 billion from the Treasury's TARP program in 2008, Regions Financial has struggled to earn the profits and raise the capital to repay emergency funds.

Regions bought Morgan Keegan for $789 million in 2001 and will retain its Morgan Asset Management and Regions Morgan Keegan Trust units in its wealth management division after the deal closes.

-- Written by Antoine Gara in New York