Zions Bancorp shares fall on 3Q report

Zions Bancorp shares fall after 3rd-quarter report shows continuing credit problems

• On 12:38 pm EDT, Tuesday October 20, 2009

SALT LAKE CITY (AP) -- Shares of Zions Bancorp tumbled Tuesday, a day after the bank holding company reported a wider-than-expected quarterly loss driven by continuing problems from soured loans.

Shares of Zions Bancorp fell $1.43, or 7.8 percent, to $16.90 in midday trading, after the bank's third-quarter report following Monday's market close. Zions Bancorp posted a net loss of $179.5 million, or $1.41 per share for the three months ended Sept. 30. In the year-ago period, Salt Lake City-based Zions Bancorp posted a profit of nearly $33.4 million, or 31 cents per share.

For the latest period, analysts surveyed by Thomson Reuters had forecast a narrower loss of $1.24 per share, on average.

In a research report Tuesday, Stifel Nicolaus & Co. analyst Brian Zabora said Zions' wider-than-expected loss was largely the result of a loan-loss provision that came in higher than forecast, as well as higher impairment charges.

Zabora had estimated the loss provision would come in at $504 million, compared with the $565.9 million that Zions reported. The provision is down from $762.7 million in this year's second quarter, but is up from $156.6 million in the year-ago period.

Zabora wrote that he expects credit costs "will remain elevated during the next several quarters." Nearly all banks have been facing mounting loan losses as more customers fall behind on repaying debt amid rising unemployment and the ongoing recession.

Zabora, who maintained a "Hold" rating on the stock, said he expects higher credit costs and lower net interest income will worsen the company's profit outlook. He increased his forecast of the company's full-year loss to $10.26 per share, from his earlier estimate of $9.94, and boosted his loss estimate for 2010 to $1.40 from 90 cents per share.

Zabora's outlook is sunnier than most analysts'. On average, they expect a 2009 loss of $10.29 per share, and a 2010 loss of $1.79 per share, according to Thomson.

In the latest quarter, Zions said net lease and loan charge offs, or loans written off as not being repaid, rose to $381.3 million, compared with $347.5 million in this year's second quarter and $95.3 million in the year-ago period.

One bright spot for Zions was its government-brokered acquisition of a failed California-based institution, Vineyard Bank, which resulted in a pretax acquisition gain of $146.2 million. Zabora had forecast a gain of $100 million from the acquisition.

The Vineyard acquisition helped lift Zions' average total deposits for the third quarter 16 percent compared with a year ago, to $43.3 billion.

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