New York, December 17, 2012 -- Moody's Investors Service upgraded the long-term ratings of Zions
Bancorporation and its subsidiaries. Zions Bancorporation was upgraded
to Ba2 from B1 for subordinated debt. Its lead bank, Zions
First National Bank, was upgraded to Baa3 from Ba1 for long-term
deposits and to Prime-3 from Not-Prime for short-term
deposits. The standalone bank financial strength rating was affirmed
at D+, but its baseline credit assessment was raised to baa3
from ba1. The holding company's short-term rating
was affirmed at Not-Prime. Following the upgrade,
the rating outlook is stable.
This concludes the review for upgrade that began on October 3, 2012.
RATINGS RATIONALE
The upgrades were the result of Zions' improved balance sheet and
Moody's view that the firm's commercial real estate (CRE)
concentration will not return to the much higher levels it carried prior
to the financial crisis. Nonetheless, although Zions'
CRE concentration is reduced Moody's expects it to remain elevated,
constraining further rating upgrades.
Moody's noted that Zions' balance sheet has strengthened with
its improved asset quality and capital metrics and continued good liquidity.
Nonperforming assets (NPAs including nonaccruals, 90+ days
past due, OREO, and accruing troubled debt restructurings)
were $1.3 billion, or 23% of tangible common
equity (TCE) and reserves at September 30, 2012. This is
less than half of the peak amount reached in late 2009. Zions'
TCE as a percentage of risk-weighted assets of 11.4%
at September 30, 2012 is considerably higher because of capital
issuance. Additionally, Zions has ample core deposit funding
and limited extension risk in its investment portfolio, which will
be a benefit when interest rates rise.
In addition to CRE, Moody's added that Zions still maintains
a sizeable concentration risk through its investment in trust preferred
CDOs, which is highly correlated with the performance of CRE.
The risk of managing these investments was highlighted by the higher impairment
charge to be taken in the fourth quarter of 2012, which was the
result of changes in valuation assumptions prompted by bank regulators.
Despite the upgrade, Moody's views Zions' business mix
as narrow because of its CRE focus and reliance on net interest income.
With sluggish loan demand and intense competition, diversification
away from CRE is expected to be difficult. Similarly, building
sustainable fee generating businesses is likely to be a long-term
effort.
The last rating action on Zions was on October 3, 2012 when the
ratings were placed on review for upgrade.
The principal methodology used in this rating was Moody's Consolidated
Global Bank Rating Methodology published in June 2012. Please see
the Credit Policy page on www.moodys.com for a copy of this
methodology.
Zions Bancorporation headquartered in Salt Lake City, Utah reported
total assets of $53.1 billion as of September 30,
2012.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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
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parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
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for information on (A) MCO's major shareholders (above 5%) and
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Rita Sahu
Vice President - Senior Analyst
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 Franklyn 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
Moody's upgrades Zions Bancorporation (subordinate to Ba2); outlook is stable
