Zions Bancorporation (ZION)

ZION's 3Q08 operating earnings of $0.51 per diluted share were substantially below our estimate as well as consensus. The earnings for the quarter were mostly impacted by the sharp increase in provisions coupled with impairment and valuation losses on securities.

Ongoing weakness in the Southwestern residential real estate markets, where the company has significant exposure, continues to hurt the results. Though loan and deposit growth were satisfactory, NIM declined further during the quarter.

After reviewing the results, we have lowered our EPS estimates, based on our concerns for further credit deterioration and dilutive effect of the capital raise. We are maintaining our Sell recommendation on the shares of ZION.