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Zions' (ZION) Ratings Upgraded by Moody's, Outlook Stable

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Zions Bancorporation, National Association’s (ZION - Free Report) ratings and assessments have been upgraded by Moody’s Investors Service, a division of Moody’s Corporation (MCO - Free Report) . Following the ratings upgrade, the rating review (which commenced on Nov 30, 2021) on Zions has been concluded and the company has been given a stable outlook.

Zions’ stand-alone baseline credit assessment (BCA) has been upgraded to a3 from baa1, its long-term deposit rating has been changed to A1 from A2, and its long-term issuer rating has been upgraded to Baa1 from Baa2. However, the bank’s short-term deposit ratings and short-term counterparty risk ratings have been affirmed at P-1 and P-2, respectively.

Rationale Behind the Ratings Upgrade and Stable Outlook

Zions’ credit risk profile has improved, which Moody’s believes is sustainable. Moreover, Zions has sound capitalization and a solid funding profile. On the basis of these positives, the company’s ratings have been upgraded.

From the start of the coronavirus pandemic in 2020, Zions has maintained strong asset quality performance. This can be seen from the bank’s low-problem loans to gross loans ratios of 0.9% on Dec 31, 2021, and net charge-offs of one basis point for full-year 2021.

Notably, the company’s financial profile has profited from enhancements to its risk management over the past several years. This has resulted in lower concentrations and a stronger balance sheet for Zions.

The bank has also built a centralized enterprise risk management function under its chief risk officer and expanded its risk staff, established more robust risk limits and risk oversight committees at the corporate and affiliate levels, and made board oversight more comprehensive. Per Moody's, these risk management enhancements support a sustained improvement in ZION’s asset risk profile.

For the past several years, Zions’ commercial real estate (CRE) loan portfolio has been equal to just twice its Moody’s tangible common equity (TCE). Additionally, the bank has shown conservatism in its loan growth in recent years.

Zions’ sound capitalization was another reason for the ratings upgrade. Its capitalization is currently above the median of other large U.S. regional banks, with a common equity tier 1 (CET1) capital ratio of 10.2% as of Dec 31, 2021.

The bank also has a solid funding profile. It benefits from ample core deposit funding and a large pool of liquid assets, which results in minimal market funding reliance and limited refinancing risk, protecting Zions against market shocks.

Moody’s believes that Zions’ credit profile will remain unchanged over the next 12-18 months. It is also of the opinion that the bank will maintain a CET1 capital ratio above the median for large U.S. regional bank peers. Because of these reasons, Zions has been given a stable outlook.

When Can the Ratings be Upgraded Further?

Currently, given the latest ratings upgrade and stable outlook, Zions’ ratings are not likely to be upgraded further over the next 12-18 months. However, the company’s ratings could be upgraded if it diversifies its business mix, thereby reducing its CRE concentration; improves its core profitability; and maintains low credit costs and better-than-peer average capitalization.

What Can Lead to a Rating Downgrade?

Zions’ ratings could be downgraded if its asset concentrations are rebuilt, or capitalization declines significantly.

Price Performance & Zacks Rank

Zions’s shares have rallied 10.2% in the past year compared with 4% growth of the industry.


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Currently, Zions carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Rating Action by Moody’s on Other Firms

In December 2021, Moody’s affirmed the ratings of Associated Banc-Corp (ASB - Free Report) and its banking subsidiary Associated Bank, N.A. Their outlook was re-affirmed at negative by the rating agency.

Associated Banc-Corp’s stand-alone BCA was affirmed at a3, while its issuer rating for long-term senior unsecured notes was affirmed at Baa1.

Last month, Washington Federal, Inc. (WAFD - Free Report) and its federally insured savings and loan association subsidiary WaFd Bank’s ratings were affirmed by Moody’s. However, the rating outlook on both Washington Federal and WaFd Bank was downgraded to negative from stable.

Washington Federal and WaFd Bank’s issuer ratings were affirmed at Baa1. WaFd Bank has a long-term deposit rating of A1, while its short-term deposit rating is Prime-1. The bank’s BCA was affirmed at a3.

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