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Thread: Zions Bancorporation (NASDAQ:ZION)

  1. #1
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    Zions Bancorporation (NASDAQ:ZION)

    Zions Bancorporation is a financial holding company. The Company provides banking and related services through its banking and other subsidiaries, primarily in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming. The Company focuses on providing community banking services by its core business lines of small and medium-sized business and corporate banking; commercial and residential development construction and term lending; retail banking; treasury cash management and related products and services; residential mortgage servicing and lending; trust and wealth management; limited capital markets activities, including municipal finance advisory and underwriting, and investment activities.

    Official website:

  2. #2
    I’ve heard about ZION and I am interested in getting information about the promises that it makes what are the opportunities in future and is it safe to invest?

  3. #3
    Quote Originally Posted by poorwinning View Post
    Iíve heard about ZION and I am interested in getting information about the promises that it makes what are the opportunities in future and is it safe to invest?
    Currently the average target price is $29.6 per share (according to Marketwatch), market price is $28.72

    Here is the chart of market price vs price target:

    So it looks like that the upside potential is not that great. However, you might like this article by Michael Boyd at


    • Trades at discount compared to peers in regards to tangible book value.
    • Discount is warranted; many issues still remain for the bank, like return on equity.
    • Investors should be skeptical of entrenched management's ability to properly lead.

    Zions Bancorporation (NASDAQ:ZION) was a big player in the regional bank growth story pre-financial crisis. It aggressively expanded across the Western United States, pushing out high organic growth through loan issuance along with rapid acquisitions of loan portfolios of other banks. During 2007-2009 amidst staggering loan losses, share price was decimated and has never fully recovered as management has had to focus on stemming the bleeding.

    I've always liked the bank's expansion into what were (and some still are) high growth states like Texas and Arizona, but the strategy in hindsight was more akin to throwing darts at a dartboard than careful, strategic expansion. Management's failures during the 2014 stress tests and the cloud of its CDO portfolio still hang around the stock. Of concern to interested shareholders is that the bank's upper management that put the bank in the position it still wallows in today, are still there.

    Total loans have grown, as have consumer deposits for Zions recently. These are all healthy signs for a bank, but a deeper look might turn up something different, so let us take a look.

    Falling Income

    The effects of the lower interest rate environment are apparent, as the bank's interest made on loans its issues have fallen at a 5.50% annual rate from 2011 to 2014. Gross loans have grown over recent periods, but falling interest rates have hurt Zions just like every other bank. Net interest income has managed to remain flat as the bank has tapped its loan loss provision holdings as a source of income and interest expense has collapsed. The retirement of $1.5B in long-term debt over the past two years has definitely helped the bank's interest expenses as well.

    For those unaware of bank's treatment of loan loss provisions, these are basically reserves that management sets aside in the case of bad loans. Unlike other expenses, these provisions reduce earnings (or in the case of actually withdrawing provisions instead of putting anything aside, increase them). In general, loan loss provisions track the broader health of the economy. When bad loans happen, banks are usually slow to react and have to raise provisions once things hit the fan. Likewise, as the economy improves (at least on the surface) banks make relatively little in the way of provisions. This can lead to a tendency for earnings to overshoot to the downside during recessions as banks play catchup and the opposite during economic booms.

    Zion put aside a massive 853M in reserves in 2010 (which cut net interest income for the year in half) and since then has not provisioned much. In fact, the company has pulled a net $100M from those reserves during 2011-2014 which has helped buoy net interest income. You can see the effects of these drawdowns on the total allowances held on the bank's balance sheet referenced above.

    Labor costs continue to be a drag. Analysts have always been harsh on the bank's cost structure, and the company has continued to make strides to cut costs. Regulatory and legal pressures have put pressure on actually reigning in headcount, so this has remained a headwind to meaningfully bringing down these costs rather than just keeping them from ballooning out of control.

    The bank's revenue streams from non-interest sources have been a drag. Compared to other big regional players like Fifth Third (NASDAQ:FITB), Zions inability to attract consumers to non-loan products like credit cards may lead to a lack of stickiness for banking consumers. It's relatively easy to move a bank account - but consumers are less likely to leave if they have a deeper product portfolio (cards, insurance, etc. in addition to the standard checking/savings accounts).

    Valuing banks is never an easy task. Below are a few relative metrics to other community bank players in the space:

    Zions does trade at a discount to Regions Financial (NYSE:RF) and Fifth Third in regards to tangible book value, but the firm has historically done a poor job of actually monetizing its book of business, hence the lower return on equity and actual bank earnings. Zions, to me, is a play on the bank actually being able to turn the ship and actually deeply monetizing its book of business.


    Zions is still recovering from the financial crisis, and today's low interest environment doesn't help its case for short-term performance. Banks as a whole trade at a significant discount compared to the broader market today, so for long-term buy and hold investors there is likely significant value to be had once interest rates rise.

    However, the company has always had a hard time producing results. As seen from a look at the company's balance sheet and income statement, there is still some work to be done to improve returns. Betting on Zions is a bet on management, and unfortunately given the work of Harris Simmons (President, Chairman, and CEO since 1998) and crew, I don't have much confidence. There are names to be picked up in the banking space, but to me Zions is not one of them.

    All images in this piece are publicly available information sourced from Zions' 10-K, with the exception being the CAGR calculations which are my own.
    Last edited by Michael; 05-12-2015 at 05:51 PM.

  4. #4
    Quote Originally Posted by Michael View Post
    Currently the average target price is $29.6 per share (according to Marketwatch), market price is $28.72

    Here is the chart of market price vs price target:

    So it looks like that the upside potential is not that great. However, you might like this article by Michael Boyd at

    Thanks Micheal this is the info I was looking for.

  5. #5
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