5 Bank Stocks Ready to Rise With the Housing Recovery: UBS

5. Zions Bancorporation

Shares of Zions Bancorporation (ZION) of Salt Lake City closed at $19.96 Tuesday, returning 23% year-to-date, following a 33% decline during 2011.

The shares trade for just under tangible book value, according to Thomson Reuters Bank Insight, and for 11.5 times the consensus 2013 earnings estimate of $1.74. The consensus 2014 EPS estimate is $1.94.

Zions ranked highest in UBS' "bank footprint ranking" for year-over-year home price increases in its market footprint, with a growth rate of 8.03%, "using a weighted average growth rate as a function of deposits per MSA."

Zions on Tuesday saw its shares slide 4% after CFO Doyle Arnold said at an investor conference that the company could report other-than-temporary-impairment, or OTTI, charges of "around $20 million pretax" during the fourth quarter, on "that rather large CDO portfolio that we have," according to a transcript provided by Thomson Reuters.

Zions reported OTTI charges of $2.7 million, or a penny a share, during the third quarter, and reported holding $2.088 billion in collateralized debt obligations, measured by amortized cost, as of Sept. 30, with a carrying value of $1.231 billion, with unrealized losses of $857 million.

The company has been recording smaller OTTI charges than what Arnold expects for the fourth quarter, as trust preferred securities held by the CDOs are prepaid, because the Collins Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 excludes most trust preferred equity from banks' regulatory Tier 1 capital.

The updated fourth-quarter guidance also included $10 million in gains on "CDOs previously written down," and a 2% to 3% decline in core net interest income from the third quarter, with declining loan balances and rate pressure as loans renew at lower rates.

UBS analyst Stephen Scinicariello has a neutral rating on Zions Bancorporation, with a price target of $21.50, saying on Oct. 22 after the company reported its third-quarter results, that the completion of the redemption of the government-held preferred shares for bailout assistance received through the Troubled Assets Relief Program, or TARP, was "a critical step to the de-layering of ZION's high cost capital and funding structure."

Scinicariello is in front of the consensus, estimating that Zions will earn $1.83 a share in 2013, followed by 2014 EPS of $2.20.

Interested in more on Zions Bancorporation? See TheStreet Ratings' report card for this stock.

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