Zions: Financial Loser

NEW YORK ( TheStreet) -- Zions Bancorporation ( ZION) was the winner among the largest U.S. financial names on Monday, with shares sliding 4% to close at $20.06.

The broad indexes were mixed, as investors digested some mediocre, but stale, housing data, a strong earnings report from AT&T ( T), and IBM's ( IBM) announcement that it would increase its quarterly dividend by a dime to 85 cents and authorized $7 billion in share buybacks. Big Blue's shares rose 1% to close at $200.00.

AT&T reported first-quarter earnings of $3.6 billion, or 60 cents a share, beating the consensus estimate of a 57-cent profit, among analysts polled by Thomson Reuters. The company's first-quarter revenue of $31.82 billion increased 2% year-over-year, but was just shy of the consensus estimate of $31.85 million. AT&T's shares rose 4% to close at $31.72.

Standard & Poor's reported that its S&P/Case-Shiller Home Price Indices "showed annual declines of 3.6% and 3.5% for the 10- and 20-City Composites, respectively," in February, which was "an improvement over the annual rates posted for the month of January, -4.1% and -3.9%, respectively."

On a brighter note, S&P said that five of the 20 surveyed metropolitan areas "saw positive annual returns, including "Denver, Detroit, Miami, Minneapolis and Phoenix."

The KBW Bank Index ( I:BKX) rose 1% to close at 47.83, with all 24 index components -- except for Zions -- seeing gains.

Zions Bancorporation late on Monday reported first-quarter net income available to common shareholders of $25.5 million, or 14 cents a share, compared to $44.4 million, or 24 cents a share in the first quarter, and $14.8 million, or eight cents a share, in the first quarter of 2011.

Excluding "the noncash effects of the discount amortization on conversion of subordinated debt and additional accretion (net of expense) on acquired loans ($15.0 million, $0.08 per share), and the accelerated amortization of discount on the $700 million redemption of Troubled Asset Relief Program ("TARP") preferred stock ($19.6 million, $0.11 per share) in the first quarter," Zions said its net operating earnings were $60.1 million or 33 cents a share, beating the consensus EPS estimate of 25 cents.

Zions on March 28 repaid the government $700 million in TARP money, and plans to repay the remaining $700 million during the second half of this year.

KBW analyst Brian Klock said late on Monday that excluding other-than-temporary impairments on securities and "FDIC items," the company's "Core EPS was 23c."

Klock rates Zions "Market Perform," with a $22 price target, and said the company's net interest margin "was lower sequentially, but in-line with expectation and while management had indicated large loan run-off in early January, soft originations were not enough to overcome that run-off and loans declined 5% annualized."

Zions reported a first-quarter net interest margin of 3.73%, declining from 3.86% the previous quarter, and 3.76% a year earlier. First-quarter net interest income totaled $442.3 million, declining from $461.9 million in the fourth quarter, but increasing from $423.9 million, in the first quarter of 2011.

Klock estimates that Zions will earn $1.33 a share for all of 2012, followed by 2013 EPS of $1.75.

FBR analyst Paul Miller rates Zions "Outperform," also with a $22 price target, estimating that the company will earn $1.12 a share this year, followed by EPS of $1.85 in 2013. The analyst said on Monday that "this quarter beat estimates from an operating perspective due a decent decline in credit-related expenses; however, management commented that NIM will continue to be under pressure despite expectations for modest loan growth through the end of the year."

Miller said that the shares were "trading in line with peers on FY13 earnings," and that "If the company continues to see market credit improvement or recovers some of the value of its investments in collateralized debit obligations already marked down to 48% of par, we could see both increased forward earnings estimates and multiple expansion."

ZIons Bancorporation's shares have now returned 23% year-to-date, following a 33% decline during 2011.

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The shares trade for just above their reported March 31 tangible book value of $19.39, and for 11 times the consensus 2013 earnings estimate of $1.85 a share. The consensus 2012 EPS estimate is $1.40.

Interested in more on Zions Bancorporation? 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.