Zions Bancorp was the hottest bank stock on Wall Street Friday, a day after it presented a forceful case to investors and analysts that it has enough capital to repay $1.4 billion in bailout funds it received through the Troubled Asset Relief Program.
Shares of the Salt Lake City-based regional banking company rose as much as 4.9 percent before settling back to a 3.7 percent gain, closing at $19.86. The stock was up a similar 3.5 percent Thursday. So far this year, Zions’ shares are up 22 percent in value.
At a meeting in Salt Lake City on Thursday, Zions laid out its case that after running several stress tests on its finances, the company believes it is healthy and would survive in good shape another fierce downturn such as the Great Recession. Zions indicated that it is ready to repay TARP if it passes a similar stress test ordered in January by the Federal Reserve. The Fed is expected to release those results in mid-March.
The presentation appeared to impress Zions’ audience.
"Management made it clear that they are in no hurry to repay the TARP, especially if the Fed would require some large ... raise [of fresh capital]. But management believes that they have raised enough capital and are in a stronger credit position today, and they are ready to repay the TARP this year," Brian Klock, a bank analyst with Keefe Bruyette and Woods, said Friday.
James Abbott, who runs investor relations for Zions, said the story presented at the meeting was not something analysts had heard before. He said the results of its stress test matched what it presented to the Fed in a 1,992-page document last month, evaluating "every element of the bank in at least four different scenarios," he said.
"We would like to repay TARP, but it is contingent upon passing the [Fed’s] stress test," Abbott said. "From a capital perspective, we screen pretty well, relative to all our peers. We screen at or above the average in all of the capital ratios, and over time our [loan] loss rates have been less than our peers, even though we were in some of the worst geographies [like] Arizona and Nevada."
The stock’s performance on Friday suggests many analysts were swayed by the presentation, he said.
As of Sept. 30, 390 financial institutions remained in TARP, according to the General Accountability Office.
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