UPDATE: Fitch: Zions Bancorp (ZION) Plans Resubmission of Capital Plan to Fed; Ratings May be Affected
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Price: $42.17 +1.01%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 4.1%
EPS Growth %: -100.0%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 4.1%
EPS Growth %: -100.0%
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(Updated - March 24, 2014 1:58 PM EDT)
Zions Bancorporation (Nasdaq: ZION) recently failed the Dodd-Frank Act Stress Tests (DFAST) conducted by the Federal Reserve. In the severely adverse stress test scenario, ZION's ending Tier 1 common equity ratio was 3.6%, well below the 5.0% threshold for passing the test set by regulators. ZION plans to submit a new capital plan soon that will include actions including reduction of risk or increases in capital that brings the company's overall ratios inline or higher than stress test minimums.
Fitch does not believe that ZION's ratings, currently 'BBB-/F3' will be impacted by this development, but it is possible that the Rating Outlook could be revised to Stable from Positive largely predicated on management's response to this development.
The DFAST stress tests in particular for ZIONs forecasted $2.5 billion of loan losses, with the largest component being $1.5bn of losses on ZION's large commercial real estate (CRE) portfolio. Additionally the stress test showed relatively flat pre-provision net revenue (PPNR), which provided less of a cushion to absorb the loan losses noted above. Lastly, the increase in risk-weighted assets (RWA) also increased the denominator in the Tier 1 capital ratio calculation.
Fitch would expect ZION's new capital plan and actions to provide sufficient cushion to at minimum absorb the above assumptions. Fitch believes it is also possible that any efforts by ZION to return capital to shareholders may be delayed by another year as a result of this development.
Zions Bancorporation (Nasdaq: ZION) recently failed the Dodd-Frank Act Stress Tests (DFAST) conducted by the Federal Reserve. In the severely adverse stress test scenario, ZION's ending Tier 1 common equity ratio was 3.6%, well below the 5.0% threshold for passing the test set by regulators. ZION plans to submit a new capital plan soon that will include actions including reduction of risk or increases in capital that brings the company's overall ratios inline or higher than stress test minimums.
Fitch does not believe that ZION's ratings, currently 'BBB-/F3' will be impacted by this development, but it is possible that the Rating Outlook could be revised to Stable from Positive largely predicated on management's response to this development.
The DFAST stress tests in particular for ZIONs forecasted $2.5 billion of loan losses, with the largest component being $1.5bn of losses on ZION's large commercial real estate (CRE) portfolio. Additionally the stress test showed relatively flat pre-provision net revenue (PPNR), which provided less of a cushion to absorb the loan losses noted above. Lastly, the increase in risk-weighted assets (RWA) also increased the denominator in the Tier 1 capital ratio calculation.
Fitch would expect ZION's new capital plan and actions to provide sufficient cushion to at minimum absorb the above assumptions. Fitch believes it is also possible that any efforts by ZION to return capital to shareholders may be delayed by another year as a result of this development.
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