In a report published Monday, Compass Point analyst Kevin Barker reiterated a Buy rating on Zions Bancorporation (NASDAQ: ZION), but lowered the price target from $34.00 to $33.00.
In the report, Compass Point noted, “We reiterate our Buy rating and adjust our price target to $33 from $34 due to expectations for a slight slowdown in loan growth from the Texas market. The change in our outlook stems largely from the sharp decline in the price of oil and more specifically its impact on ZION's subsidiary, Amegy of Texas. As of the third quarter, ZION's exposure to the energy sector stood at 8% of total loans.
"Although we do not anticipate credit losses will materialize in the near term due to the hedging practices utilized by participants in the energy sector and the requirements established by ZION for lending to energy-exposed companies, we do expect the decline in oil prices will increase ZION's credit risk from already very low levels (NCOs have been near zero in recent quarters). The increased risk may push ZION to increase provisions. In addition, we are adjusting our C&I loan growth expectations over the next year, thereby decreasing ZION's net interest income growth in FY15 and FY16. Despite these headwinds, we believe ZION remains attractive while trading near 1.1x TBV given the bank screens as the most asset sensitive bank in our coverage and will continue to receive a high earnings multiple as the market prices in the potential for significant earnings growth if the short-end of the yield curve were to move higher. We are also projecting $600mm of preferred stock redemptions in 2015 as ZION reduces its elevated levels of tier 1 equity.”
Zions Bancorporation closed on Friday at $28.56.
Latest Ratings for ZION
| Dec 2014 | Compass Point | Maintains | Buy | |
| Oct 2014 | FBR Capital | |||
| Oct 2014 | DA Davidson | Reiterates | Buy |
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