Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Zions Bancorp. (ZION - Analyst Report), which is one of the premier financial services companies in the U.S., is recently faced with the pressure of the revised Volcker Rule released last week. As per the rule, most of Zions’ bank and insurance trust preferred collateralized debt obligation (CDO) securities and other asset-backed CDO securities come under the category of restricted investment and thus cannot be held until they mature.

Zions has to divest these disallowed investments by Jul 21, 2013. The deadline would be extended to Jul 21, 2017 if the bank fails to meet it.

Though Zions does not plan any immediate material divesture, it intends to convert the CDOs from “Held to Maturity" into "Available for Sale” during the fourth quarter 2013. This will entail a one-time after tax cost of $387 million.

Zions has a significant portfolio of CDO securities. In the recent past, with the overall improvement in the market, the trading prices of these securities were increasing and going forward could have driven the company’s growth. The recent development, therefore, is a setback for Zions, wherein it has to bear one-time non-cash charges as well as damages to its capital ratios.

Notably, Zions’ common equity Tier 1 ratio under Basel I rules will decline by 73 bps from the reported figure as of Sep 30, 2013. Tangible common equity ratio will fall 6 bps to 7.84%.

The intraday price movement reflected depreciation in the stock price after the news release. However, the company’s shares later gathered momentum and closed at $28.56. This marked slight improvement from prior day closing figure of $28.47.

The initial market reaction was mixed and indicates nothing conclusive. However, we may expect the Zions’ share price to tread downwards as the Volcker Rule will likely drag its fourth-quarter earnings.

The financial crisis of 2008 saw the collapse of large banks, bankruptcy and economic turmoil. To prevent such an occurrence in the future, regulatory authorities have started to closely monitor various financial organizations and their activities.

Though Volcker Rule will hurt earnings as well as shareholder returns in the short term, from a broad perspective, it will enhance investors’ security and drive the economy toward sustainable growth.

Currently, Zions carries a Zacks Rank #3 (Hold). Better-ranked West banks include BofI Holding, Inc. (BOFI - Snapshot Report), Preferred Bank (PFBC - Snapshot Report) and Sierra Bancorp (BSRR - Snapshot Report). All these stocks have a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%