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Zions stock slip on end-of-year loan worries

The Associated Press

NEW YORK (AP) -- Shares of Zions Bancorp. slipped on Tuesday, after the bank warned that its loan balances would suffer in the current quarter.

In a presentation to investors, Zions said it expected the loans on its books to decline compared to the third quarter, as some borrowers pay down their loans. The bank also expects lower income over the quarter from money it makes by charging interest on loans.

Like other banks, Zions is hamstrung by low interest rates kept down by the Federal Reserve. Though that means that banks pay out less on deposits, it also means they receive less in interest when they make loans.

However, Zions also expects its provision for potential losses to remain very low, and income from non-interest sources— like fees - to be stable or moderately higher in the coming year. It thinks any decline in the loan balance will be short-lived. The bank predicted that loan balances will be stable to moderately higher next year as well.

Still, analysts and investors homed in on the fourth-quarter predictions. Sandler O'Neill analyst R. Scott Siefers lowered his per-share earnings estimates for the remainder of the year and for next year. Zions shares slipped more than 3 percent in afternoon trading.

Zions is headquartered in Salt Lake City and concentrated in western states, especially Utah, Texas and California. By most accounts, it's ranked among the top 20 biggest U.S. banks, but it's usually near the bottom of the list. It's still a regional bank, rather than a mega-bank. For example, Zions had total assets of about $53 million at the end of September. JPMorgan Chase, the biggest bank by assets, had about $2 trillion.

In a note to investors Tuesday, Stifel Nicolaus analyst Chris Mutascio said that while commercial loan growth is slowing down for regional banks, growth should be steadier at mega banks.

"We continue to hear from many of the small/mid-cap banks under our coverage that the large banks are becoming increasingly aggressive/competitive in growing their small and middle market commercial loan books," Mutascio wrote.

Zions' shares fell 70 cents, or 3.4 percent, to $20.01.