New York, November 02, 2016 -- Moody's Investors Service upgraded certain ratings of Zions Bancorporation
(Zions) and its bank subsidiary, ZB, N.A. Zions'
senior unsecured rating was upgraded to (P)Baa3 from (P)Ba1 and the noncumulative
preferred stock was upgraded to Ba2 (hyb) from Ba3 (hyb). At ZB,
N.A., the standalone baseline credit assessment (BCA)
was upgraded to baa2 from baa3, the long-term deposit rating
was upgraded to A3 from Baa1, the issuer rating was upgraded to
Baa3 from Ba1, and the counterparty risk assessment (CR assessment)
was upgraded to Baa1 (cr) from Baa2 (cr). The bank's Prime-2
short-term deposit rating and Prime-2 (cr) short-term
CR assessment were affirmed. Following the upgrade, the rating
outlook is stable.
Issuer: Amegy Corporation
..The following action has been taken:
.... Issuer Rating, Upgraded to Baa3
from Ba1
....Outlook, Changed To Stable From
Positive
Issuer: ZB, N.A.
..The following action has been taken:
.... Adjusted Baseline Credit Assessment,
Upgraded to baa2 from baa3
.... Baseline Credit Assessment, Upgraded
to baa2 from baa3
.... Counterparty Risk Assessment, Upgraded
to Baa1(cr) from Baa2(cr)
.... Issuer Rating, Upgraded to Baa3
from Ba1
.... Long Term Deposit Rating, Upgraded
to A3 from Baa1
.... Short Term Counterparty Risk Assessment,
Affirmed P-2(cr)
.... Short Term Deposit Rating, Affirmed
P-2
....Outlook, Changed To Stable From
Positive
Issuer: Zions Bancorporation
..The following action has been taken:
....Pref. Stock Non-cumulative
Preferred Stock, Upgraded to Ba2 (hyb) from Ba3 (hyb)
....Senior Unsecured MTN Program, Upgraded
to (P)Baa3 from (P)Ba1
....Other Short Term, Upgraded to (P)P-3
from (P)NP
....Outlook, Changed To Stable From
No Outlook
RATINGS RATIONALE
Zions' stronger financial profile, particularly in the areas
of asset risk and profitability, prompted Moody's upgrade.
Zions has materially reduced its former asset concentrations, which
should lessen future earnings volatility and makes it better able to defend
its current strong asset quality performance. These improvements
benefit Zions' credit profile that is also supported by strong funding
and solid capital ratios. These credit attributes help offset the
bank's above-average energy exposure.
Regarding asset concentrations, Zions' commercial real estate
(CRE) concentration has been reduced to about twice its tangible common
equity and is more skewed towards income producing property. This
positively contrasts to its historic peak concentration of six times its
tangible common equity, of which more than half was construction.
Additionally, it no longer holds investments in trust preferred
CDOs, which it sold last year.
Moody's upgraded Zions despite its above average direct energy exposure,
equal to approximately 40% of its tangible common equity,
compared to the 10-15% median of US regional banks.
Although it has material energy exposure, its capital position is
resilient under Moody's moderate and severe stress scenarios because
of its higher starting capital position and reserves above 8% of
energy loans. Despite the higher nonaccruals and net-charge-offs
from energy, Zions' asset quality metrics remain comparatively
good because of strong performance in its non-energy portfolio.
Zions' total problem loans (nonaccruals, 90+ days past
due, and accruing troubled debt restructured loans) were 1.9%
of loans as of 30 September 2016, compared to the median of 2.3%
for US banks with BCAs of baa2. Its annualized net-charge-offs
in the third quarter were also low at 0.28%.
This asset quality performance underpins Zions' strong balance sheet
with minimal market funding, good liquid assets, and a healthy
capital position. As a percentage of tangible banking assets,
its market funds are low at just over 1% and its liquid assets
are 22%, which is also a good level. Zions reported
a common equity Tier 1 ratio of 12% at third quarter-end.
These financial improvements illustrate Zions' better risk management,
but the agency noted that the enhancements to risk management were implemented
relatively late compared to many large regional bank peers and they have
not been fully tested through an economic cycle.
What Could Change the Rating - Up
Ratings could be upgraded if Moody's concludes that Zions' risk
management has been sufficiently enhanced and integrated within its strategic
decision-making to control its CRE and energy exposure and maintain
its good asset quality, while reducing potential earnings volatility.
Moody's noted that average CRE has grown approximately 11%
over the last year and was the highest growth segment within Zions'
loan book, which grew only 6%. Improved profitability
as a result of better cost management would also support a higher rating.
What Could Change the Rating - Down
A downgrade of the BCA is possible if there is a rebuilding of asset concentrations,
a significant decline in capital or a meaningful reversal of improvements
in asset quality.
The principal methodology used in these ratings was "Banks" published
in January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rita Sahu
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
