ab                                                                                                                       ...
Zions Bancorporation 25 January 2011Table 1: ZION Valuation Summary                                                       ...
Zions Bancorporation 25 January 2011        Table 2: ZION Variance Table        Zions Bancorporation        EARNINGS RESUL...
Table 3: ZION Earnings Model                                                                                              ...
Table 4: ZION Net Interest Margin Model                                                                                   ...
Average Balance Sheet                                                                                                     ...
Table 5:ZION Credit Loss Projections (Summary)                                                                            ...
01 25 11-11 42 27 am
01 25 11-11 42 27 am
01 25 11-11 42 27 am
01 25 11-11 42 27 am
01 25 11-11 42 27 am
01 25 11-11 42 27 am
01 25 11-11 42 27 am
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  1. 1. ab Global Equity Research Americas Banks, Ex-S&L UBS Investment Research 12-month rating Sell Zions Bancorporation Unchanged 12m price target US$17.00 Prior: US$16.00 4Q Miss Due to Credit; Pressures to Persist Price US$23.75 Worse-than-expected credit results drove the 4Q miss RIC: ZION.O BBG: ZION US ZION reported EPS of ($0.62), missing UBSe & cons. estimates of ($0.45) & 25 January 2011 ($0.36), resp. NII came in higher, but credit costs offset. We increase ’11E (to a loss of $0.40 from a loss of $1.00) & ‘12E (to $0.80 from $0.75) due to faster LLR Trading data release and to acc’t for the NII beat. 52-wk range US$30.00-17.49 Market cap. US$3.57bn Credit recovery likely, but pace to disappoint Shares o/s 150m (COM) Credit losses were 5% higher than our estimate. Worse-than-expected term CRE & Free float 94% const. trends offset better results within resi RE. Const recovery will likely Avg. daily volume (000) 3,577 improve losses, but we believe cont’d duress w/in term CRE & resi RE will keep Avg. daily value (m) US$79.8 levels elevated. We are lowering our ’11 (to 160bp from 175bp) & ’12 loss est. (to 80bp from 85bp ) to account for this qtr’s resi RE beat. Fortunately, we believe Balance sheet data 12/11E ZION still has meaningful credit leverage ahead (LLR ratio = 3.9%). Common equity US$4.62bn Lending revs to trend down in the near-term P/BVPS x 1.0 Lending revs trended flat and were 2% above our forecast. Earning asset bals Tier one capital ratio 15.7% exceeded our est. given less dep attrition, and the NIM came in 3bp above as mgmt Forecast returns shifted cash into higher-yielding secs. Cont’d mix-shift will likely enhance the core NIM, but it will unlikely offset the decline in loans. As such, we are forecasting a Forecast price appreciation -28.4% 5% decline in NII for ’11. Forecast dividend yield 0.2% Forecast stock return -28.2% Maintain Sell Rating; expectations remain elevated Market return assumption 5.6% ZION trades at 29x our ’12E vs. our 13x target multiple. Our three-prong valuation Forecast excess return -33.8% methodology (P/E, P/TBV, and DCF) drives our price target to $17 from $16. EPS (UBS, US$) 12/11E 12/10 From To Cons. Actual Q1E (0.44) (0.25) (0.14) (0.72) Q2E (0.45) (0.25) 0.01 (0.84) Q3E (0.09) 0.06 0.16 (0.52) Highlights (US$m) 12/09 12/10 12/11E 12/12E 12/13E Q4E (0.03) 0.04 0.27 (0.62) Revenues 2,072 2,161 2,156 2,282 2,526 12/11E (1.00) (0.40) 0.38 Pre-tax profits (1,609) (452) 161 529 599 12/12E 0.75 0.80 1.91 Net income (1,069) (444) (74) 156 220 EPS (UBS, US$) (8.59) (2.68) (0.40) 0.80 1.10 Performance (US$) Net DPS (UBS, US$) 0.10 0.04 0.04 0.04 0.04 60.0 Stock Price (US$) Rel. S & P 500 140 50.0 120 Profitability & Valuation 5-yr hist av. 12/10 12/11E 12/12E 12/13E 40.0 100 ROE % 2.9 -10.1 -1.6 3.1 4.2 30.0 80 P/Op x 6.7 8.0 10.1 7.8 5.8 20.0 60 40 P/BVPS x 1.3 0.9 1.0 0.9 0.9 10.0 20 PE (UBS) x 37.9 -8.1 -59.5 29.7 21.6 0.0 0 01/08 04/08 07/08 10/08 01/09 04/09 07/09 10/09 01/10 04/10 07/10 10/10 01/11 Net dividend yield % 2.2 0.2 0.2 0.2 0.2 Price Target (US$) (LHS) Stock Price (US$) (LHS) Source: Company accounts, Thomson Reuters, UBS estimates. (UBS) valuations are stated before goodwill-related charges and other adjustments for Rel. S & P 500 (RHS) abnormal and economic items at the analysts judgement. Source: UBS Valuations: based on an average share price that year, (E): based on a share price of US$23.75 on 24 Jan 2011 19:42 EST www.ubs.com/investmentresearch Heather Wolf, CFA Elena Kim Joshua Rogers Analyst Associate Analyst Associate Analyst heather.wolf@ubs.com elena.kim@ubs.com joshua.rogers@ubs.com +1-212-713 4290 +1 212 713 4057 +1-212-713 2364 This report has been prepared by UBS Securities LLC ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 10. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
  2. 2. Zions Bancorporation 25 January 2011Table 1: ZION Valuation Summary TheoreticalZION Weighting Valuation($ in MM, except for per share data)TARGET P/TBVAssumption ValueCurrent P/TBV 1.2Price / Tangible Book value 1.0Trough TBV Estimate $19.08Theoretical value implied by Price / Tangible Book va $19 50% $10Discounted Cash FlowAssumption ValueStage 1 (2009 - 2013) Net Income Growth NM B/S Growth 2.0 TCE / TA Target 6.9 Beta 1.8Stage 2 (2014 - 2018) Net Income Growth 10.0 B/S Growth 2.0 TCE / TA Target 8.0 Beta 1.5Theoretical value Implied by DCF $20 25% $5Target P/EAssumption ValueCurrent P/E NM10-year average P/E 13.8Target Sustainable P/E 13.0Year: 20122012 EPS Estimate $0.802012 EPS Estimate (PV) $0.71Avg of theoretical values implied by Target P/E $9 25% $2Price Target $17Source: Company Filings, UBS Estimates UBS 2
  3. 3. Zions Bancorporation 25 January 2011 Table 2: ZION Variance Table Zions Bancorporation EARNINGS RESULTS AND FORECAST ($ M illions, Exce pt As Noted) Actual Estim ate New Old New Old New Old Ne w Old Ne w Old KEY FORECAST VARIABLES: 3Q10 4Q10 4Q10E Variance 2010E 2010E Variance 2011E 2011E Variance 2012E 2012E Variance 2013E 2013E Variance 2014E 2014E Variance EOP Loans $37,887 $37,074 $37,269 -1% $37,074 $37,269 -1% $37,278 $37,594 -1% $37,728 $37,799 0% $38,860 $39,311 -1% $40,414 $41,669 -3% Average Loans $37,864 $37,294 $37,578 -1% $38,157 $38,206 0% $37,162 $37,247 0% $37,559 $37,696 0% $38,294 $38,555 -1% $39,637 $40,490 -2% Average Earning Assets $47,242 $46,849 $46,180 1% $46,863 $46,696 0% $46,380 $44,998 3% $45,462 $44,194 3% $46,094 $45,942 0% $47,992 $48,729 -2% Net Interest Margin (%) 3.84 3.49 3.46 3bp 3.73 3.73 1bp 3.58 3.55 3bp 3.82 3.79 3bp 4.25 4.25 0bp 4.40 4.40 0bp Net Interest Income (FTE) 457.2 412.0 402.8 2% 1,749.1 1,739.9 1% 1,660.8 1,599.1 4% 1,737.1 1,675.4 4% 1,959.0 1,952.5 0% 2,111.6 2,144.1 -2% Loan Loss Provision 184.7 173.2 153.0 13% 852.1 831.9 2% 250.0 392.0 -36% 41.0 19.0 116% 200.0 249.0 -20% 200.0 202.0 -1% Noninterest Revenues 112.7 125.0 127.2 -2% 492.4 494.6 0% 518.2 527.1 -2% 544.7 538.9 1% 567.1 550.0 3% 595.6 562.3 6% Securities Transactions (16.4) (11.7) (15.0) -22% (80.3) (83.6) -4% (23.0) (45.0) -49% 0.0 0.0 NA 0.0 0.0 NA 0.0 0.0 NA Tot. Revenue 553 525 515 2% 2,161 2,151 0% 2,156 2,081 4% 2,282 2,214 3% 2,526 2,503 1% 2,707 2,706 0% Staf f Expenses 207.9 207.3 209.6 -1% 825.3 827.7 0% 829.1 838.9 -1% 837.4 854.0 -2% 854.1 883.8 -3% 878.0 919.2 -4% OREO Expenses 44.3 25.5 42.0 -39% 144.8 161.3 -10% 106.0 127.3 -17% 47.2 64.7 -27% 25.5 35.1 -27% 12.2 16.8 -27% Other Expenses 203.8 210.6 192.2 10% 768.8 750.5 2% 809.5 761.3 6% 826.8 776.5 6% 847.5 802.1 6% 877.2 834.2 5% Total Expenses 456.0 443.4 443.8 0% 1,739.0 1,739.5 0% 1,744.6 1,727.4 1% 1,711.4 1,695.2 1% 1,727.1 1,721.0 0% 1,767.4 1,770.2 0% Pre-Tax Income (FTE) (87.2) (91.4) (81.9) -12% (429.9) (420.5) -2% 161.4 (38.2) 523% 529.4 500.1 6% 599.1 532.5 12% 739.8 734.2 1% FTE Tax Rate (%) 35.2 20.8 45.0 -24pp 23.7 28.5 -5pp 34.4 69.9 -36pp 35.0 40.0 -5pp 35.0 35.0 0pp 35.0 35.0 0pp Net Income (56.5) (72.4) (45.0) 61% (327.9) (300.5) 9% 105.9 (11.5) -1023% 344.1 300.1 15% 389.4 346.2 12% 480.9 477.2 1% Available For Common (89.5) (110.3) (79.9) -30mn (444.0) (413.7) -30mn (73.8) (183.6) 110mn 155.8 144.9 11mn 220.2 212.7 7mn 311.6 343.8 -32mn Op. EARNINGS PER SHARE (F.D.) ($0.52) ($0.62) ($0.45) -39% ($2.68) ($2.49) -8% ($0.40) ($1.00) 60% $0.80 $0.75 6% $1.10 $1.05 4% $1.55 $1.70 -9% GAAP EPS (F.D.) ($0.47) ($0.62) ($0.45) -39% ($2.49) ($2.30) -8% ($0.40) ($1.00) 60% $0.80 $0.75 6% $1.10 $1.05 4% $1.55 $1.70 -9% Book Value Per Share $26.07 $25.11 $25.93 ($0.81) $25.11 $25.93 ($0.81) $24.93 $25.09 ($0.16) $25.62 $25.43 $0.18 $26.67 $26.45 $0.23 $28.19 $28.11 $0.08 Tangible Book Value Per Share $19.81 $19.08 $20.40 ($1.32) $19.08 $20.40 ($1.32) $19.11 $19.78 ($0.66) $20.36 $20.72 ($0.36) $21.53 $21.85 ($0.32) $23.12 $23.58 ($0.46) Dividends Per Share $0.01 $0.01 $0.01 $0.00 $0.04 $0.04 $0.00 $0.04 $0.04 $0.00 $0.04 $0.04 $0.00 $0.04 $0.04 $0.00 $0.04 $0.04 $0.00 Average Fully-Diluted Shares 172.9 178.1 179.2 -1mn 166.0 166.2 0mn 185.1 183.4 2mn 194.9 192.9 2mn 200.6 202.0 -1mn 200.6 202.0 -1mn CAPITAL RATIOS: EOP Common Equity/Assets (%) 9.05 8.99 9.28 -29bp 8.99 9.28 -29bp 9.20 9.58 -38bp 10.36 10.45 -10bp 10.47 10.35 11bp 10.59 10.38 21bp Tang. Common Equity/Assets (%) 7.03 6.98 7.45 -46 6.98 7.45 -46 7.21 7.71 -50 8.41 8.68 -27 8.62 8.71 -9 8.85 8.85 0 Tangible Common Equity/RWA (%) 8.03 7.98 8.53 -55 7.98 8.53 -55 8.24 8.82 -58 9.61 9.94 -33 9.87 9.99 -12 10.14 10.16 -3 Tier 1 Common/RWA (%) 8.66 8.59 8.91 -32 8.59 8.91 -32 8.80 9.17 -36 10.13 10.22 -9 10.32 10.20 11 10.54 10.34 20 Tier 1/RWA (%) 14.15 15.01 14.62 39 15.01 14.62 39 15.73 16.32 -59 14.62 13.63 99 14.67 13.44 123 14.71 13.39 132 PROFITABILITY RATIOS: Return On Assets (%) (0.4) (0.6) (0.4) -21 (0.6) (0.6) -5 0.2 (0.0) 23 0.7 0.6 8 0.8 0.7 9 0.9 0.9 2 Return On Common Equity (%) (7.7) (9.5) (6.8) -271 (10.1) (9.3) -71 (1.6) (4.0) 234 3.1 3.0 19 4.2 4.0 13 5.6 6.2 -58 Return On Tangible Common Equity (%) (9.7) (12.0) (8.4) -353 (12.7) (11.6) -110 (1.6) (4.8) 318 4.5 4.1 37 5.6 5.3 30 7.2 7.7 -53 Operating Expenses/Revenues (%) 80.0 82.6 83.8 -118 77.6 77.8 -27 80.1 81.2 -118 75.0 76.6 -155 68.4 68.8 -40 65.3 65.4 -12 BALANCE SHEET ITEM S: EOP Total Assets $51,048 $51,035 $50,608 1% $51,035 $50,608 1% $50,241 $48,112 4% $49,618 $49,153 1% $51,127 $51,608 -1% $53,412 $54,726 -2% EOP Equity $6,495 $6,647 $6,722 -1% $6,647 $6,722 -1% $7,154 $7,111 1% $6,597 $6,122 8% $6,810 $6,326 8% $7,113 $6,662 7% EOP Pref erred Equity $1,875 $2,057 $2,025 2% $2,057 $2,025 2% $2,532 $2,500 1% $1,459 $983 48% $1,459 $983 48% $1,459 $983 48% EOP Common Equity $4,619 $4,591 $4,697 -2% $4,591 $4,697 -2% $4,622 $4,611 0% $5,139 $5,138 0% $5,351 $5,343 0% $5,654 $5,679 0% EOP Tangible Common Equity $3,510 $3,487 $3,695 -6% $3,487 $3,695 -6% $3,544 $3,634 -2% $4,084 $4,185 -2% $4,320 $4,414 -2% $4,637 $4,763 -3% CREDIT QUALITY INDICATORS: Net Charge-Of f s $236 $251 $238 5% $969 $956 1% $595 $650 -8% $301 $319 -6% $250 $249 0% $200 $202 -1% % Average Loans 2.47 2.67 2.51 16bp 2.54 2.50 4bp 1.60 1.75 -14bp 0.80 0.85 -4bp 0.65 0.65 1bp 0.50 0.50 1bp Nonperf orming Assets $2,293 $1,828 $2,141 -15% $1,828 $2,141 -15% $1,590 $1,940 -18% $1,272 $1,670 -24% $882 $1,270 -31% $583 $851 -31% % EOP Loans + OREO 6.00 4.89 5.69 -80bp 4.89 5.69 -80bp 4.24 5.12 -88bp 3.36 4.39 -104bp 2.26 3.22 -95bp 1.44 2.04 -60bp Nonperf orming Loans $1,586 $1,162 $1,427 -19% $1,162 $1,427 -19% $946 $1,250 -24% $771 $1,113 -31% $539 $890 -39% $378 $623 -39% % EOP Loans (excl. OREO) 4.19 3.13 3.83 -70bp 3.13 3.83 -70bp 2.54 3.33 -79bp 2.04 2.94 -90bp 1.39 2.26 -88bp 0.93 1.50 -56bp Loan Loss Reserve $1,530 $1,440 $1,445 0% $1,440 $1,445 0% $1,095 $1,187 -8% $835 $887 -6% $785 $887 -11% $785 $887 -11% % EOP Loans 4.04 3.89 3.88 1bp 3.89 3.88 1bp 2.94 3.16 -22bp 2.21 2.35 -13bp 2.02 2.26 -24bp 1.94 2.13 -19bp % Nonperf orming Loans 79.02 94.22 80.65 1357 94.22 80.65 1357 81.06 71.83 923 74.93 60.97 1396 100.64 78.53 2211 150.40 115.68 3472 Source: Company Filings, UBS EstimatesUBS 3
  4. 4. Table 3: ZION Earnings Model Zions Bancorporation 25 January 2011 Zions Bancorporation EARNINGS RESULTS AND FORECAST ($ Millions, Except As Noted) Forecast Forecast KEY FORECAST VARIABLES: 1Q10 2Q10 3Q10 4Q10 1Q11E 2Q11E 3Q11E 4Q11E 1Q12E 2Q12E 3Q12E 4Q12E 2009 2010E 2011E 2012E 2013E 2014E 2015E 4Q/3Q 4Q/4Q 10E/09 11E/10E 12E/11E 13E/12E 14E/13E 15E/14E EOP Loans $39,313 $38,354 $37,887 $37,074 $37,074 $37,111 $37,185 $37,278 $37,390 $37,502 $37,615 $37,728 $40,535 $37,074 $37,278 $37,728 $38,860 $40,414 $42,435 (2.1) (8.5) (8.5) 0.6 1.2 3.0 4.0 5.0 Average Loans 39,883 38,813 37,864 37,294 37,074 37,093 37,148 37,232 37,334 37,446 37,559 37,671 41,663 38,157 37,162 37,559 38,294 39,637 41,424 (1.5) (8.9) (8.4) (2.6) 1.1 2.0 3.5 4.5 Average Earning Assets 46,405 46,956 47,242 46,849 46,784 46,492 46,123 46,018 46,011 45,400 44,957 45,257 48,928 46,863 46,380 45,462 46,094 47,992 50,556 (0.8) (2.7) (4.2) (1.0) (2.0) 1.4 4.1 5.3 Net Interest Margin (%) 4.03 3.58 3.84 3.49 3.72 3.41 3.66 3.53 3.79 3.76 3.85 3.78 3.93 3.73 3.58 3.82 4.25 4.40 4.50 (9.1) (8.4) (19) (15) 24 43 15 10 Net Interest Income (FTE) 461.0 419.0 457.2 412.0 429.7 395.6 425.8 409.8 440.0 430.2 435.8 431.2 1,921.0 1,749.1 1,660.8 1,737.1 1,959.0 2,111.6 2,275.0 (9.9) (10.9) (8.9) (5.0) 4.6 12.8 7.8 7.7 Loan Loss Provision 265.6 228.7 184.7 173.2 115.0 85.0 30.0 20.0 13.0 3.0 10.0 15.0 2,016.9 852.1 250.0 41.0 200.0 200.0 165.0 (6.2) (55.7) (57.8) (70.7) (83.6) 387.8 0.0 (17.5) Noninterest Revenues 126.3 128.4 112.7 125.0 128.7 128.4 130.6 130.5 135.2 135.3 136.9 137.3 625.1 492.4 518.2 544.7 567.1 595.6 627.6 10.9 (21.6) (21.2) 5.2 5.1 4.1 5.0 5.4 Securities Transactions (33.2) (19.0) (16.4) (11.7) (10.0) (8.0) (5.0) 0.0 0.0 0.0 0.0 0.0 (474.0) (80.3) (23.0) 0.0 0.0 0.0 0.0 - - - - - - - - Tot. Revenue 554 528 553 525 548 516 551 540 575 566 573 568 2,072 2,161 2,156 2,282 2,526 2,707 2,903 (5.1) 2.3 4.3 (0.2) 5.8 10.7 7.2 7.2 Staff Expenses 204.3 205.8 207.9 207.3 208.3 206.2 206.2 208.3 208.3 208.3 208.3 212.5 818.8 825.3 829.1 837.4 854.1 878.0 908.8 (0.3) 0.2 0.8 0.5 1.0 2.0 2.8 3.5 OREO Expenses 32.6 42.4 44.3 25.5 34.2 27.0 25.7 19.1 14.4 13.0 10.4 9.4 110.8 144.8 106.0 47.2 25.5 12.2 6.4 (42.5) (33.5) 30.7 (26.8) (55.4) (46.1) (52.0) (47.5) Other Expenses 172.2 182.1 203.8 210.6 201.1 201.1 202.1 205.2 205.2 205.2 207.2 209.3 714.8 768.8 809.5 826.8 847.5 877.2 910.5 3.3 6.2 7.6 5.3 2.1 2.5 3.5 3.8 Total Expenses 409.2 430.4 456.0 443.4 443.6 434.4 434.1 432.6 427.9 426.4 426.0 431.2 1,644.4 1,739.0 1,744.6 1,711.4 1,727.1 1,767.4 1,825.7 (2.8) 0.0 5.7 0.3 (1.9) 0.9 2.3 3.3 Pre-Tax Income (FTE) (120.7) (130.7) (87.2) (91.4) (10.3) (3.4) 87.4 87.7 134.3 136.2 136.8 122.3 (1,589.2) (429.9) 161.4 529.4 599.1 739.8 912.0 (4.7) 71.5 72.9 137.5 228.1 13.2 23.5 23.3 FTE Tax Rate (%) 29.0 13.2 35.2 20.8 45.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 39.1 23.7 34.4 35.0 35.0 35.0 35.0 (1,449) (1,833.7) (1,538) 1,063 64 (0) 0 0 Net Income (85.6) (113.4) (56.5) (72.4) (5.6) (2.2) 56.8 57.0 87.3 88.5 88.9 79.5 (967.7) (327.9) 105.9 344.1 389.4 480.9 592.8 (28.1) 63.0 66.1 132.3 224.9 13.2 23.5 23.3 Available For Common (109.0) (135.2) (89.5) (110.3) (46.5) (45.5) 10.4 7.8 35.1 34.6 48.7 37.4 (1,068.6) (444.0) (73.8) 155.8 220.2 311.6 423.6 (23.2) 49.6 58.4 83.4 311.1 41.3 41.5 35.9 Op. EARNINGS PER SHARE (F.D.) ($0.72) ($0.84) ($0.52) ($0.62) ($0.25) ($0.25) $0.06 $0.04 $0.19 $0.18 $0.24 $0.19 ($8.59) ($2.68) ($0.40) $0.80 $1.10 $1.55 $2.11 (19.6) 60.4 68.9 85.1 300.5 37.3 41.5 35.9 GAAP EPS (F.D.) ($0.57) ($0.84) ($0.47) ($0.62) ($0.25) ($0.25) $0.06 $0.04 $0.19 $0.18 $0.24 $0.19 ($9.93) ($2.49) ($0.40) $0.80 $1.10 $1.55 $2.11 (33.0) 50.9 75.0 84.0 300.5 37.3 41.5 35.9 Book Value Per Share $26.98 $26.62 $26.07 $25.11 $25.11 $24.85 $24.90 $24.93 $25.11 $25.21 $25.44 $25.62 $27.97 $25.11 $24.93 $25.62 $26.67 $28.19 $30.10 (3.7) (10.2) (10.2) (0.7) 2.7 4.1 5.7 6.8 Tangible Book Value Per Share $19.98 $20.18 $19.81 $19.08 $19.19 $18.97 $19.05 $19.11 $19.33 $19.89 $20.15 $20.36 $20.47 $19.08 $19.11 $20.36 $21.53 $23.12 $25.03 (3.7) (6.8) (6.8) 0.2 6.5 5.8 7.4 8.3 Dividends Per Share $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.10 $0.04 $0.04 $0.04 $0.04 $0.04 $0.20 0.0 0.0 (60.0) 0.0 0.0 0.0 0.0 400.0 Average Fully-Diluted Shares 151.1 161.8 172.9 178.1 184.1 185.4 185.4 185.4 185.4 193.0 200.6 200.6 124.4 166.0 185.1 194.9 200.6 200.6 200.6 3.0 27.3 33.4 11.5 5.3 2.9 0.0 0.0 CAPITAL RATIOS: EOP Common Equity/Assets (%) 8.36 8.85 9.05 8.99 9.14 9.13 9.20 9.20 9.28 10.32 10.35 10.36 8.23 8.99 9.20 10.36 10.47 10.59 10.73 (5) 76.5 76 20 116 11 12 15 Tang. Common Equity/Assets (%) 6.33 6.86 7.03 6.98 7.14 7.13 7.19 7.21 7.30 8.32 8.38 8.41 6.16 6.98 7.21 8.41 8.62 8.85 9.09 (4) 82.6 83 22 120 21 23 24 Tangible Common Equity/RWA (%) 6.56 7.34 8.03 7.98 8.16 8.14 8.22 8.24 8.34 9.50 9.58 9.61 5.99 7.98 8.24 9.61 9.87 10.14 10.42 (5) 198.4 198 26 137 25 27 28 Tier 1 Common/RWA (%) 7.14 7.91 8.66 8.59 8.76 8.73 8.80 8.80 8.89 10.06 10.11 10.13 6.73 8.59 8.80 10.13 10.32 10.54 10.80 (6) 186.5 186 21 133 19 22 26 Tier 1 /RWA (%) 11.19 13.76 14.15 15.01 14.68 15.05 15.38 15.73 15.99 14.20 14.40 14.62 10.53 15.01 15.73 14.62 14.67 14.71 14.76 86 448.0 448 72 (111) 5 4 5 PROFITABILITY RATIOS: Return On Assets (%) (0.7) (0.9) (0.4) (0.6) (0.0) (0.0) 0.4 0.5 0.7 0.7 0.7 0.6 (1.8) (0.6) 0.2 0.7 0.8 0.9 1.1 (13) 89.6 115 84 48 8 15 16 Return On Common Equity (%) (10.7) (12.4) (7.7) (9.5) (4.1) (4.0) 0.9 0.7 3.0 2.8 3.8 2.9 (24.8) (10.1) (1.6) 3.1 4.2 5.6 7.2 (180) 1,142.4 1,476 844 476 103 147 158 Return On Tangible Common Equity (%) (14.2) (16.7) (10.2) (12.5) (5.4) (5.2) 1.2 0.9 3.9 3.6 4.8 3.7 (32.8) (13.1) (2.1) 4.0 5.2 6.9 8.8 (234) 1,608.6 1,979 1,100 606 121 173 182 Operating Expenses/Revenues (%) 69.7 78.6 80.0 82.6 79.4 82.9 78.0 80.1 74.4 75.4 74.4 75.9 64.6 77.6 80.1 75.0 68.4 65.3 62.9 254 1,129.9 1,300 248 (506) (663) (308) (239) BALANCE SHEET ITEMS: EOP Total Assets $51,713 $52,147 $51,048 $51,035 $50,924 $50,451 $50,185 $50,241 $50,172 $49,019 $49,286 $49,618 $51,123 $51,035 $50,241 $49,618 $51,127 $53,412 $56,256 (0.0) (0.2) (0.2) (1.6) (1.2) 3.0 4.5 5.3 EOP Equity 5,857 6,421 6,495 6,647 6,786 6,889 6,998 7,154 7,257 6,348 6,465 6,597 5,710 6,647 7,154 6,597 6,810 7,113 7,497 2.4 16.4 16.4 7.6 (7.8) 3.2 4.5 5.4 EOP Preferred Equity 1,532 1,807 1,875 2,057 2,132 2,282 2,382 2,532 2,602 1,292 1,362 1,459 1,503 2,057 2,532 1,459 1,459 1,459 1,459 9.7 36.9 36.9 23.1 (42.4) 0.0 0.0 0.0 EOP Common Equity 4,325 4,614 4,619 4,591 4,655 4,607 4,616 4,622 4,655 5,057 5,103 5,139 4,207 4,591 4,622 5,139 5,351 5,654 6,038 (0.6) 9.1 9.1 0.7 11.2 4.1 5.7 6.8 EOP Tangible Common Equity 3,203 3,499 3,510 3,487 3,558 3,517 3,532 3,544 3,583 3,990 4,043 4,084 3,079 3,487 3,544 4,084 4,320 4,637 5,020 (0.6) 13.3 13.3 1.6 15.2 5.8 7.4 8.3 CREDIT QUALITY INDICATORS: Net Charge-Offs $227 $255 $236 $251 $215 $175 $110 $95 $88 $78 $70 $65 $1,175 $969 $595 $301 $250 $200 $165 6.5 (14.8) (17.5) (38.6) (49.4) (16.9) (20.0) (17.5) % Average Loans 2.31 2.64 2.47 2.67 2.35 1.89 1.17 1.01 0.94 0.83 0.74 0.68 2.82 2.54 1.60 0.80 0.65 0.50 0.40 20.0 (18.3) (28.1) (93.8) (80.0) (14.9) (14.8) (10.6) Nonperforming Assets $2,785 $2,547 $2,293 $1,828 $1,766 $1,708 $1,650 $1,590 $1,503 $1,421 $1,344 $1,272 $2,769 $1,828 $1,590 $1,272 $882 $583 $371 (20.3) (34.0) (34.0) (13.0) (20.0) (30.6) (33.9) (36.5) % EOP Loans + OREO 7.01 6.57 6.00 4.89 4.73 4.57 4.41 4.24 4.00 3.77 3.56 3.36 6.77 4.89 4.24 3.36 2.26 1.44 0.87 (110.4) (187.5) (187.5) (65.3) (88.2) (109.2) (82.3) (56.9) Nonperforming Loans $2,031 $1,794 $1,582 $1,162 $1,103 $1,048 $996 $946 $899 $854 $811 $771 $2,081 $1,162 $946 $771 $539 $378 $227 (26.6) (44.2) (44.2) (18.5) (18.5) (30.0) (30.0) (40.0) % EOP Loans (excl. OREO) 5.17 4.68 4.17 3.13 2.98 2.82 2.68 2.54 2.40 2.28 2.16 2.04 5.13 3.13 2.54 2.04 1.39 0.93 0.53 (104.2) (200.0) (200.0) (59.5) (49.5) (65.4) (45.4) (40.0) Loan Loss Reserve $1,582 $1,564 $1,530 $1,440 $1,340 $1,250 $1,170 $1,095 $1,020 $945 $885 $835 $1,433 $1,440 $1,095 $835 $785 $785 $785 (5.9) (5.9) 0.5 (24.0) (23.7) (6.0) 0.0 0.0 % EOP Loans 4.02 4.08 4.04 3.89 3.62 3.37 3.15 2.94 2.73 2.52 2.35 2.21 3.78 3.89 2.94 2.21 2.02 1.94 1.85 (15.3) 10.7 10.7 (94.7) (72.4) (19.3) (7.8) (9.3) % Nonperforming Loans 66.70 73.28 79.02 94.22 90.46 86.96 84.00 81.06 79.23 77.02 75.69 74.93 64.36 94.22 81.06 74.93 100.64 150.40 239.62 1,520.1 2,986.2 2,986.2 (1,316.3) (612.4) 2,570.7 4,976.5 8,921.3 Source: Company Filings, UBS EstimatesUBS 4
  5. 5. Table 4: ZION Net Interest Margin Model Zions Bancorporation 25 January 2011 ZION (1) (1) (2) (2) Volume Inputs 3Q10 4Q10 2011E 2012E Growth Inputs Loan growth (20%) (6%) (0%) 1% NPL growth (38%) (59%) (6%) (1%) Noninterest bearing deposit growth 40% (5%) (1%) (1%) Interest bearing core deposit growth (10%) (1%) (2%) (2%) Shareholders Equity growth 46% 0% 7% (0%) Ratios Loan/Deposit 91% 91% 92% 95% NPL/Loans 5.96% 4.00% 3.79% 3.72% Cash & Cash Equiv./Earn. Asset 11.0% 10.7% 9.2% 8.4% Inv. Sec./Earn. Asset 8.7% 9.5% 10.5% 9.0% (1) (1) (2) (2) Rate Inputs 3Q10 4Q10 2011E 2012E Date 9/30/2010 12/31/2010 12/31/2011 12/31/2012 Loans % of Fixed Rate Loans - Total 27% NA 27% 27% C&I (Fixed Rate) % of Fixed Rate Loans in C&I NA NA 30% 30% Duration of Fixed Rate C&I Loans NA NA 2.3 2.3 Reinvestment Risk in Fixed Rate C&I NA NA 1.00% 0.50% C&I (Variable Rate) Years to Reprice Variable Rate C&I NA NA 2.3 2.3 Yield Compression on Variable Rate C&I NA NA 1.00% 0.50% CRE % of Fixed Rate Loans in CRE NA NA 30% 30% Duration of Fixed Rate CRE Loans NA NA 5.0 5.0 Reinvestment Risk in CRE NA NA 0.50% 0.40% Resi RE % of Fixed Rate Loans in Resi RE NA NA 35% 35% Duration of Fixed Rate Resi RE Loans NA NA 7.0 7.0 Reinvestment Risk in Resi RE NA NA 0.50% 0.40% Other Cons / Auto % of Fixed Rate Loans in Cons NA NA 5% 5% Duration of Fixed Rate Cons Loans NA NA 1.5 1.5 Reinvestment Risk in Cons NA NA 0.10% 0.00% Investment Securities % of Agency RMBS 9% 9% 9% 9% RMBS Duration of Agency RMBS Securities Portfolio NA 3.0 3.0 3.0 Agency RMBS Securities Reinvestment Risk (%) NA 0.00% 0.00% 0.00% Other Securities Duration of Other Securities Portfolio NA 6.0 6.0 6.0 Other Securities Reinvestment Risk (%) NA 1.25% 1.25% 1.00% Deposits Interest Bearing Core Deposit Rate (%) 0.54% 0.48% 0.45% 0.40% CD Rate (%) 1.07% 1.00% 0.90% 1.00% Other Liabilities Other Interest-bearing liabilities rate (%) 7.28% 7.24% 7.30% 7.50% (1) Current growth trends reflect QoQ annualized rates (2) 2011E & 2012E growth trends reflect YoY ratesUBS 5
  6. 6. Average Balance Sheet Zions Bancorporation 25 January 2011 3Q10 4Q10E 2011E 2012E Interest Interest Avg Bal Yield/Rate Avg Bal Yield/Rate Avg Bal Interest Inc/Exp Yield/Rate Avg Bal Interest Inc/Exp Yield/Rate Inc/Exp Inc/Exp Cash and Cash Equivalents 5,193 4 0.27% 5,023 3 0.27% 4,267 12 0.27% 3,802 10 0.27% Agency RMBS 356 3 2.98% 386 3 2.98% 421 13 2.98% 354 11 2.98% Other Investment Securities 3,769 28 2.98% 4,085 31 3.00% 4,447 124 2.79% 3,743 98 2.63% Total Investment Securities 9,318 35 1.47% 9,494 37 1.56% 9,135 148 1.62% 7,898 119 1.51% Performing loans 35,607 552 6.15% 35,801 542 6.00% 35,754 2084 5.83% 36,161 2083 5.76% NPL 2,258 0 0.00% 1,493 0 0.00% 1,409 0 0.00% 1,398 0 0.00% Total Loans 37,864 552 5.78% 37,294 542 5.76% 37,162 2084 5.61% 37,559 2083 5.55% Other Earning Assets 59 1 4.50% 61 1 3.56% 61 2 3.56% 61 2 3.56% Total Earning Assets 47,242 #N/A 587 4.93% 46,849 #N/A 579 4.91% 46,358 2235 4.82% 45,518 2205 4.84% Other Assets 4,537 4,458 4,458 4,458 Total Assets 51,779 51,307 50,816 49,976 Interest bearing core deposits 21,771 30 0.54% 21,718 26 0.48% 21,325 96 0.45% 20,880 84 0.40% CDs 6,130 17 1.07% 5,845 15 1.00% 5,367 48 0.90% 5,159 52 1.00% Total interest-bearing deposits 27,901 46 0.66% 27,563 41 0.59% 26,692 144 0.54% 26,039 135 0.52% Other Interest-bearing liabilities 3,069 56 7.28% 2,969 54 7.24% 2,969 217 7.30% 2,969 223 7.50% Total interest-bearing liab & deps 30,970 #N/A 103 1.31% 30,532 #N/A 95 1.24% 29,660 361 1.22% 29,008 358 1.23% Noninterest bearing deposits 13,787 13,607 13,498 13,336 Other liabilities 601 601 601 601 Stockholders equity 6,421 6,567 7,057 7,032 Total liab & stockholders equity 51,779 51,307 50,816 49,976 NII/NIM 485 4.07% 484 4.10% 1874 4.04% 1847 4.06% 0% Loan Detail 3Q10 4Q10E 2011E 2012E Interest Interest Avg Bal Yield/Rate Avg Bal Yield/Rate Avg Bal Interest Inc/Exp Yield/Rate Avg Bal Interest Inc/Exp Yield/Rate Inc/Exp Inc/Exp Commercial and Industrial 9,388 9,647 9,888 10,482 Leasing 401 412 465 486 Total C&I Loans 9,790 10,059 10,354 10,968 Construction and land development 4,200 3,582 3,313 3,313 Construction and other consumer real estate 365 344 319 319 Term 7,539 7,614 7,461 7,325 Owner Occupied 8,333 8,251 8,086 7,939 Total CRE Loans 20,437 19,791 19,180 18,896 1-4 family residential 3,504 3,514 3,584 3,763 Home equity credit line 2,154 2,151 2,172 2,216 Total Resi RE Loans 5,658 5,665 5,756 5,979 Bankcard and other revolving plans 287 298 295 309 Other 271 234 248 260 Foreign Loans 84 - - - Total Other Cons/ Auto Loans 641 532 543 569 Total net loans held for investment ex. FDIC 36,525 515 5.60% 36,047 505 5.56% 35,833 1,973 5.51% 36,412 1,994 5.48% FDIC-Supported Loans 1,150 35 11.93% 1,034 34 13.08% 931 93 10.00% 838 75 9.00% Loans Held for Sale 189 2 4.67% 213 2 4.49% 399 18 4.49% 309 14 4.49% Total Loans 37,864 552 5.79% 37,294 542 5.76% 37,162 2,084 5.61% 37,559 2,083 5.55% Source: Company Filings, UBS EstimatesUBS 6
  7. 7. Table 5:ZION Credit Loss Projections (Summary) Zions Bancorporation 25 January 2011 Zions Bancorpora 2008 Losses 2009 Loss Forecast 2010E Loss Forecast NCO NCO NCO 2008E % of NPL 2009 % of NPL 2010 % of NPL Loan Category 2008 Balance Freq. Severity Rate $ Losses 2009 Balance Freq. Severity Rate Losses ($) 2010 Balance Freq. Severity Rate $ Losses Growth Loans (%) Growth Loans (%) Growth Loans (%) (bp) (bp) (bp) Residential R/E 6% $6,209,824 15% 1.5% 19% 0.6% 29 $18,269 4% $6,489,941 16% 2.9% 52% 2.1% 151 $97,813 -3% $6,307,956 16.5% 2.7% 52% 2.8% 138 $87,000 Revolving 26% $1,947,183 5% 0.4% 22% 0.1% 9 $1,705 15% $2,237,345 5% 0.9% 77% 0.4% 70 $15,576 0% $2,260,102 5.9% 1.6% 70% 0.7% 112 $25,247 First lien -1% $3,860,669 9% 2.0% 19% 0.8% 37 $14,331 0% $3,905,900 9% 3.8% 45% 3.2% 171 $66,639 -5% $3,756,403 9.8% 3.3% 45% 4.1% 145 $54,454 Second lien 3% $401,973 1% 2.5% 22% 1.2% 56 $2,233 -16% $346,696 1% 5.3% 86% 2.2% 450 $15,598 -17% $291,451 0.8% 3.0% 85% 2.3% 250 $7,300 Commercial R/E 11% $22,628,005 55% 4.0% 30% 2.2% 119 $268,953 1% $23,168,441 56% 8.1% 42% 6.9% 337 $781,331 -11% $20,897,664 54.8% 6.9% 42% 7.3% 307 $641,344 Construction 1% $8,907,130 22% 8.8% 32% 4.5% 282 $251,204 -21% $7,386,488 18% 17.1% 50% 14.4% 848 $626,098 -38% $4,739,204 12.4% 15.9% 48% 15.4% 755 $357,825 Multifamily 24% $661,049 2% 2.6% 56% 1.1% 146 $9,684 31% $872,318 2% 6.2% 21% 5.4% 128 $11,162 4% $911,303 2.4% 3.5% 34% 4.5% 162 $14,794 Nonfarm, nonresl 18% $12,907,566 31% 0.8% 7% 0.7% 3 $7,581 14% $14,724,408 35% 3.8% 26% 2.7% 138 $144,208 1% $15,055,676 39.5% 4.3% 35% 4.8% 253 $267,133 Farmland 3% $152,260 0% 4.0% 8% 2.9% 32 $484 22% $185,228 0% 15.0% 0% 16.7% -7 ($137) 3% $191,481 0.5% 4.7% 5% 14.8% 83 $1,592 Foreign property NA $0 0% NA 0% NA - $0 NA $0 0% 0.0% 0% NA NA $0 NA $0 0.0% 0.0% 0% NA NA $0 C&I 15% $11,206,002 27% 2.4% 32% 1.0% 75 $83,700 -7% $10,541,083 25% 4.0% 62% 2.6% 248 $260,955 -8% $9,785,969 25.6% 3.0% 69% 2.8% 217 $212,389 Credit Cards 3% $114,184 0% 2.9% 100% 0.2% 286 $3,271 0% $117,513 0% 5.3% 95% 0.3% 503 $5,906 5% $126,769 0.3% 5.8% 100% 0.0% 580 $7,353 Other Consumer -8% $655,094 2% 2.8% 100% 0.4% 278 $18,228 -13% $584,727 1% 5.3% 85% 0.8% 453 $26,463 -18% $487,370 1.3% 3.0% 85% 1.1% 253 $12,347 Leases 1% $411,336 1% 2.0% 14% 1.3% 28 $1,134 -7% $382,051 1% 1.1% 47% 1.8% 52 $1,984 -5% $365,764 1.0% 4.0% 50% 3.3% 201 $7,353 Agricultural Loans 3% $200,252 0% 1.0% 0% 0.1% 5 $106 -1% $198,628 0% 1.5% 15% 1.9% 22 $445 -9% $182,329 0.5% 4.5% 15% 5.2% 67 $1,215 Total 11% $41,424,696 100% 3.1% 31% 1.60% 95 $393,661 -1% $41,482,382 100% 6.1% 46% 4.9% 283 $1,174,897 -9% $38,153,821 100% 5.1% 47% 5.2% 254 $969,000 Zions 2011E Loss Forecast 2012E Loss Forecast NCO NCO 2011E 2011E % of NPL 2012E 2012E % of NPL Loan Category Freq. Severity Rate $ Losses Freq. Severity Rate $ Losses Growth Balance Loans (%) Growth Balance Loans (%) (bp) (bp) Residential R/E 0% $6,332,734 17% 2.4% 54% 2.3% 127 $80,488 3% $6,526,581 17% 1.9% 46% 1.7% 85 $55,284 Revolving 0% $2,269,953 6% 1.5% 75% 0.7% 114 $25,797 1% $2,302,196 6% 0.8% 70% 0.4% 52 $11,977 First lien 1% $3,803,760 10% 2.9% 45% 3.2% 130 $49,526 4% $3,967,947 11% 2.5% 40% 2.4% 98 $38,830 Second lien -12% $259,021 1% 2.4% 85% 2.7% 199 $5,165 -2% $256,439 1% 2.2% 80% 1.2% 175 $4,478 Commercial R/E -7% $19,537,309 53% 4.5% 38% 5.9% 184 $360,414 -3% $19,107,371 51% 2.5% 36% 5.2% 89 $170,475 Construction -23% $3,739,439 10% 8.9% 42% 10.5% 372 $139,019 -7% $3,486,433 9% 3.4% 40.3% 5.8% 138 $48,125 Multifamily -2% $903,552 2% 4.1% 36% 5.0% 149 $13,468 -1% $898,222 2% 3.5% 35% 5.9% 119 $10,646 Nonfarm, nonresl -3% $14,703,633 40% 3.5% 36% 5.3% 147 $201,592 -2% $14,527,698 39% 2.3% 34% 6.0% 92 $108,402 Farmland -2% $190,685 1% 4.7% 30% 9.4% 332 $6,335 1% $195,019 1% 6.0% 30% 7.7% 169 $3,301 Foreign property NA $0 0% 0.0% 0% NA NA $0 NA $0 0% 0.0% 0% NA NA $0 C&I 3% $10,105,684 27% 2.0% 65% 1.5% 129 $130,346 5% $10,683,104 28% 0.9% 65% 0.7% 55 $59,175 Credit Cards 0% $129,247 0% 4.5% 100% 0.0% 450 $5,816 1% $132,656 0% 3.0% 100% 0.0% 295 $3,913 Other Consumer 2% $500,444 1% 2.5% 85% 0.8% 212 $10,589 3% $519,907 1% 2.0% 90% 0.4% 181 $9,397 Leases 1% $372,950 1% 3.5% 40% 3.4% 138 $5,155 4% $388,891 1% 2.0% 15% 3.0% 30 $1,152 Agricultural Loans -1% $181,722 0% 3.5% 10% 5.2% 36 $648 5% $190,468 1% 3.0% 5% 4.8% 15 $280 Total -3% $37,160,091 100% 3.4% 45% 3.9% 160 $593,456 1% $37,548,979 100% 1.9% 42% 3.2% 80 $299,676 Cumulative Loss Forecasts (2008 - 2012) Cumulative Loss Forecasts (2009 - 2010) Loss Severity NCO NCO Loan Category Cumulative Freq. (%) $ Losses Cumulative Freq. (%) LS (%) $ Losses (%) Rate (bp) Rate (bp) Residential R/E 10.7% 36% 385 $258,553 5.4% 36% 222 $143,990 Revolving 5.0% 70% 349 $80,301 2.5% 68% 181 $40,823 First lien 13.4% 41% 543 $223,779 6.9% 39% 310 $121,093 Second lien 14.0% 72% 1011 $34,773 7.7% 72% 660 $22,898 Commercial R/E 23.3% 41% 959 $2,222,517 13.6% 38% 614 $1,422,675 Construction 34.3% 47% 1597 $1,422,271 25.0% 43% 1332 $983,923 Multifamily 18.6% 36% 660 $59,754 9.4% 29% 285 $25,956 Nonfarm, nonresl 14.2% 34% 490 $728,917 7.9% 32% 273 $411,341 Farmland 31.1% 19% 594 $11,574 18.4% 4% 76 $1,455 Foreign property NA NA NA $0 NA NA NA $0 C&I 10.4% 59% 617 $746,565 6.6% 58% 449 $473,344 Credit Cards 20.0% 99% 1979 $26,259 10.7% 0% 1046 $13,259 Other Consumer 12.6% 89% 1120 $77,024 7.8% 85% 664 $38,810 Leases 10.9% 35% 386 $16,778 4.9% 40% 244 $9,337 Agricultural Loans 12.0% 11% 130 $2,693 5.6% 14% 84 $1,660 Total 18.0% 44% 800 $3,350,388 10.4% 42% 507 $2,103,074 Source: Company Filings, UBS EstimatesUBS 7

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