Moody's Investors Service - the credit rating arm of
) - has placed the ratings of
) and its affiliates on review for a likely upgrade. The main
reason behind the possible rise in rating is the company's
plummeting asset concentrations.
Currently, Zions' subordinated debt is rated 'B1.' Moreover, its
main operating bank, Zions First National Bank, has a financial
strength rating of 'D+', which reflects baseline credit assessment
of 'ba1.' The bank's financial strength rating of 'D+' was
affirmed, but its baseline credit assessment of 'ba1' will be
appraised for promotion.
The long-term deposit rating of Zions bank is 'Ba1.' The
short-term Not-Prime ratings of Zions bank and other bank
subsidiaries were also placed on review. The short-term Not-Prime
ratings of Zions were affirmed and are not under review.
Zions' efforts to reduce asset concentration, which has resulted in
lower credit costs and improved profitability, has prompted Moody's
to review its ratings for possible raise. The lower asset
concentration stemmed from reductions in construction lending
portion of its commercial real estate (CRE) portfolio and
improvement in its capital base.
Further, Moody's will evaluate the efforts that Zions will
undertake to ensure that there is no rebuilding of asset
concentrations in its portfolio. In addition, Moody's will assess
steps taken by the company to mitigate the concentration risk
emanating from its high dependence on net interest income. The
review will also focus on Zions' expected long-term performance
compared with its peers, particularly due to its franchise
Moody's has also placed the long-term ratings of
Regions Financial Corp.
) on review. Currently, Regions' holds long-term rating of 'Ba3',
which is three notches below the investment grade. The company's
efforts of de-risking its profile by lessening exposure to risky
commercial real estate and home equity loans, along with
strengthening internal controls, has prompted Moody's to place its
ratings on review.
Further, the company's efforts to reduce nonperforming assets
and tackling the persistent low interest rate environment to keep
the top-line growth intact will be supervised.
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ZIONS BANCORP (ZION): Free Stock Analysis
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If Moody's upgrades Zions' ratings, it will surely boost investors'
confidence in the stock. Nevertheless, we remain concerned about
the prevailing low interest rate environment, sluggish economic
growth, the company's asset-sensitive balance sheet and regulatory
Zions currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Considering the fundamentals, we also
maintain a long-term Neutral' recommendation on the stock.