Morgan Keegan: Fixes Show It Has a Future with Regions

Article excerpt

Byline: Paul Davis

Senior managers at Morgan Keegan & Co. argue that their restructuring moves last week are a break with the past - and a sign that the securities unit still has a future with its parent company, Regions Financial Corp.

Morgan Keegan combined its fixed-income and equities businesses into a single investment banking division, undoing a model that had lasted for more than 40 years. In doing so, they said investment banking would become a bigger part of the business mix as the Memphis firm seeks to move beyond litigation tied to its mutual fund operations, revenue declines and other lingering issues.

Speculation has persisted that Regions, which is trying to overcome credit quality and other problems unrelated to Morgan Keegan's, might sell the problematic securities unit.

But Robert Baird, a longtime Morgan Keegan executive who was named president of the investment banking division, said Regions was actively involved in the changes, though affording the independent-minded unit some autonomy.

"Regions has confidence in our team," Baird said in an interview.

Morgan Keegan's executive committee got "the encouragement and blessing" of Regions' senior management, including that of O.B. Grayson Hall, who is to become chief executive of the Birmingham, Ala., company next week, Baird said. "We have been allowed to operate in a way that we feel works best for all parties," he said.

Analysts have long wondered whether Morgan Keegan could thrive under Regions' ownership, which began nine years ago. Such concerns intensified in 2006, when C. Dowd Ritter became Regions' CEO and again in 2008 when Morgan Keegan CEO G. Douglas Edwards abruptly resigned.

Analysts such as Christopher Marinac at FIG Partners LLC have suggested that Regions could divest the unit if it needs to gain capital to leave the Troubled Asset Relief Program. All the while, Ritter and now Hall have touted the unit's prospects for helping Regions rebound.

"We continue to gain confidence in our ability to grow our business at Morgan Keegan and to deliver consistent and improving profitability," Hall said in January.

The parent and subsidiary have managed to coexist despite a rocky operating environment Regions lost $1.03 billion in 2009 due largely to rising credit costs. Morgan Keegan earned $90 million last year, but its revenue fell 4%, with declines in most business segments. …