Zions Bancorp: Financial Winner (Update 1)
Updated with market close information.
NEW YORK (
) --
Zions Bancorporation
(ZION) - Get Report
was the winner among the largest U.S. banking names on Friday, with shares rising another 4% to to close at $19.97.
Friday's gain followed a 4% gain for Zions on Thursday, when the company held its sixth biennial investor day. The shares have now returned 22% year-to-date, after the company's management made a strong case for the franchise's continued viability, capital strength, and efforts to mitigate the pressure on its net interest margin from continued low rates and weak loan demand.
|
The broad indexes were mixed on Friday, following Thursday's Labor Department report that
jobless claims had declined to their lowest level in four years
. Investors were hopeful that Greece would finally be able to secure its second eurozone bailout over the weekend, and European finance ministers were set to meet on Monday.
The
The KBW Bank Index
(I:BKX)
rose 1% to to close at 45.59, with 20 out of 24 index components showing gains for the session.
Zions Bancorporation's shares trade right at tangible book value, according to HighlineFI, and for 13 times the consensus 2012 earnings estimate of $1.45, among analysts polled by Thomson Reuters.
The Salt Lake City lender still owes $1.4 billion in federal bailout funds received through the Troubled Assets Relief Program, or TARP, and KBW analyst Brian Klock said on Friday that during 2012, "TARP repayment could be a positive catalyst with no common raise," which would, of course, relieve a major pressure point for the shares.
Klock has a "Market Perform" rating on Zions, with a $19 price target, saying that the pressure on the company's net interest margin -- the difference between a bank's average yield on loans and investments and its average cost of funds -- "will require ZION to manage its operating leverage very closely."
The company's fourth-quarter net interest margin was 3.86%, declining from 2.99% in the third quarter.
In its presentation to analysts and investors, Zions said its "normalized" operating earnings power would be approximately $439 million, or $2.40 a share. Klock estimates the company will earn $1.50 a share in 2012, followed by EPS of $2.00 in 2013.
Interested in more on Zions Bancorporation? See TheStreet Ratings' report card for this stock.
Shares of
Wells Fargo
(WFC) - Get Report
rose 2% on Friday, to close at $31.09.
The shares have now risen 13% year-to-date, and trade for 1.8 times tangible book value, according to HighlineFI, and 9.5 times the consensus 2012 earnings estimate of $3.20 a share, among analysts polled by Thomson Reuters.
Sterne Agee analyst Todd Hagerman on Friday reiterated his "Buy" rating for Wells Fargo and raised his price target for the shares to $36 from $33, saying that "expectations for positive operating leverage through 2012, combined with WFC's earnings diversity and balance sheet flexibility, favorably position the company to produce an upside earnings surprise in 2012, even against the backdrop of a weak economic environment."
The analyst raised his 2012 earnings estimate for Wells Fargo to $3.20 a share from $3.05, and his 2013 EPS estimate to $3.50 from $3.20.
Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.
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--
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
