Zions Bancorporation N.a. · NASDAQ:ZION
Zions Bancorporation N.a — Zions Bancorporation — Corporate Update (April 2014)
43 slides from Zions Bancorporation N.a's corporate update, Apr 29, 2014
Slide 1: 2nd Quarter, 2014 Zions Bancorporation Credit Update
2nd Quarter, 2014 Zions Bancorporation Credit Update
Slide 2: Forward-Looking Statements & Peer Group Abbreviations
Forward-Looking Statements & Peer Group Abbreviations This presentation contains statements that relate to the projected or modeled performance or condition of Zions Bancorporation and elements of or affecting such performance or condition, including statements with respect to forecasts, opportuniti
Slide 3: Summary: Capital, credit quality, CDO sales, profitability, outlook
• Capital levels and credit quality are in line with or stronger than peers. • CDO sales have materially reduced risk. • Profitability has improved, but is not yet restored. Zions is well positioned for continued recovery and rising interest rates. • Zions’ DFAST stress test “failure” was the unanti
Slide 4: Capital Levels are In Line to Strong Relative to Peers
Capital Levels are In Line to Strong Relative to Peers Source: SNL Financial as of 4Q13 for peers. Company documents as of 1Q14 for ZION Loss absorbing capital defined to include tangible common equity, Basel III-qualifying non-common Tier 1 equity, and the allowance for credit losses 4 13.2% 8% 9%
Slide 5: Reserve for Loan Losses is Strong Relative to Peers
Reserve for Loan Losses is Strong Relative to Peers Source: SNL Financial as of 4Q13 for peers. Company documents as of 1Q14 for ZION Allowance for Credit Losses includes the Allowance for Loan & Lease Losses and the Allowance for Unfunded Commitments 5 2.1% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% C
Slide 6: Zions' Loan Loss Ratio is Among the Best in the Industry
Zions’ Loan Loss Ratio is Among the Best in the Industry 6 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% ZI O N U B C M A M TB K EY P N C ST I H BA N WF C B B T U SB FI TB B A C JP M R F C Annualized Net Charge-Off Rates As a percentage of loans 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% U B C M A ST I H BA
Slide 7: Net Charge Off Rate Compares Favorably with Peers Through the Cycle
Net Charge Off Rate Compares Favorably with Peers Through the Cycle Net Charge-offs: Through the Cycle, With and Without Construction Loans Source: SNL Financial. Net charge-off ratios annualized. 7 U B M TB CM A P N C ZIO N US B B B T ST I W FC KE Y H B A N R F FIT B JP M B A C C Annualized Average
Slide 8: Summary: Capital, credit quality, CDO sales, profitability, guidance
• Capital levels and credit quality are in line with or stronger than peers. • CDO sales have materially reduced risk. • Profitability has improved, but is not yet restored. Zions is well positioned for continued recovery and rising interest rates. • Zions’ DFAST stress test “failure” was the unanti
Slide 9: CDO Portfolio Composition & Values as of a Year Ago (1Q13)
9 CDO Portfolio Composition & Values as of a Year Ago (1Q13) March 31, 2013 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 27 $774 $694 $560 -$134 Insurance CDOs 22 447 443 331 -112 Other C
Slide 10: CDO Portfolio Composition & Values as of 1Q14
CDO Portfolio Composition & Values as of 1Q14 10 March 31, 2014 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs 23 $655 $590 $486 -$104 Insurance CDOs 2 50 48 46 -2 Other CDOs -- -- -- -- --
Slide 11: CDO Portfolio Composition & Values Change in 1Q14 vs. 4Q13
CDO Portfolio Composition & Values Change in 1Q14 vs. 4Q13 11 Change from December 31, 2013 to March 31, 2014 (Amounts in Millions) # of Tranches Par Amount Amortized Cost Carrying Value Decrease (Increase) in Net Unrealized Losses Recognized in AOCI Performing CDOs Predominantly Bank CDOs -- -$32 -
Slide 12: Summary: Capital, credit quality, CDO sales, profitability, outlook
• Capital levels and credit quality are in line with or stronger than peers. • CDO sales have materially reduced risk. • Profitability has improved, but is not yet restored. Zions is well positioned for continued recovery and rising interest rates. • Zions’ DFAST stress test “failure” was the unanti
Slide 13: Profitability Improvement in 2013 Driven by Capital Actions
Profitability Improvement in 2013 Driven by Capital Actions, Partially Offset by a Decline in Net Interest Income 13 (In millions) 1. ROAA and reserve release adjusted ROAA based on net income available to common. Source: SNL Financial and Company documents. * Net Income normalized for one-time debt
Slide 14: Loan Growth Remains a Positive Driver
90 100 110 120 130 140 4Q 1 0 1Q 1 1 2Q 1 1 3Q 1 1 4Q 1 1 1Q 1 2 2Q 1 2 3Q 1 2 4Q 1 2 1Q 1 3 2 Q1 3 3Q 1 3 4Q 1 3 1Q 1 4 Strong Growth in Overall Commitments 4Q10=100 Unused Commitments Gross Loans Loans ex FDIC + NRE (runoff portfolios) Loan Growth Remains a Positive Driver 14 Source: Company docum
Slide 15: Significant High Cost Debt Reductions Should be Achieved in 2014-2015
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% $0 $50 $100 $150 $200 $250 $300 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 Senior Debt Sub Debt ROTCE (Right) Significant High Cost Debt Reductions Should be Achieved in 2014 -2015 Effective GAAP Interest Cost In High Cost Debt Maturity Profile; Return on Tangible
Slide 16: Net interest income is considerably stronger than most peers
Source: SNL Financial as of 4Q13 for peers, company documents as of 1Q14 for ZION Risk adjusted NIM calculated as net interest income less net charge-offs divided by average earning assets. 16 Net interest income, although still under pressure, is considerably stronger than most peers 3.3% B B T M T
Slide 17: Loan Portfolio Skewed Towards Smaller Loans, Growth from Larger Credits
Loan Portfolio is Skewed Heavily Towards Smaller Loans, but Growth has come From Larger Credits in Recent History 17 Small Loans < $5M Commitment Middle Market & Large Loans > $5M Commitment Source: Company Documents; Loans Held For Investment, excluding FDIC-Supported Loans. Production defined as n
Slide 18: Smaller Loan Yields Are Only Slightly Lower Than Overall Portfolio Yield
4.12% 3.35% 0% 1% 2% 3% 4% 5% 6% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Smaller Loans vs. Larger Loans Small Production Coupon Mid & Large Production Coupon Smaller Loan Yields Are Only Slightly Lower Than the Overall Portfolio Yield A shift to smaller business loans would have a favorable imp
Slide 19: However, Small Business Optimism is Still Soft
30 35 40 45 50 55 60 65 80 85 90 95 100 105 110 Ja n -0 8 A p r- 0 8 Ju l- 0 8 O ct -0 8 Ja n -0 9 A p r- 0 9 Ju l- 0 9 O ct -0 9 Ja n -1 0 A p r- 1 0 Ju l- 1 0 O ct -1 0 Ja n -1 1 A p r- 1 1 Ju l- 1 1 O ct -1 1 Ja n -1 2 A p r- 1 2 Ju l- 1 2 O ct -1 2 Ja n -1 3 A p r- 1 3 Ju l- 1 3 O ct -1 3 Ja n -
Slide 20: Drivers of Profitability: Fee Income Initiative
Drivers of Profitability: Fee Income Initiative • Zions has proportionately low fee income relative to peers • Long term fixes through organic growth, not major M&A • Areas Targeted for Growth: • Treasury Management • Business Credit Cards • Wealth Management • Mortgage • Growth focused within Zions
Slide 21: Balance Sheet Remains Significantly Asset Sensitive
-5% 0% 5% 10% 15% 20% 25% 30% - 100 bps 0 bps +100 bps +200 bps +300 bps C h an ge in N e t In terest In co m e Net Interest Income Sensitivity NII Slow NII Fast Balance Sheet Remains Significantly Asset Sensitive; Zions is Positioned for Recovery and Rising Rates 21 Zions estimates net interest inc
Slide 22: Third Party Analysis Ranks Zions Near Top of Asset Sensitive Banks
Third Party Analysis Ranks Zions Near Top of Asset Sensitive Banks 22 Source: Raymond James Research, June 2013
Slide 23: Zions has one of the Smallest Securities Portfolios vs. Peers
Zions has one of the Smallest Securities (and MBS) Portfolios vs. its Peers — Avoiding Negative Convexity Risk Source: SNL Financial as of 4Q13 for peers, company documents as of 1Q14 for ZION MBS securities include resi mortgage pass-through investments that are not guaranteed by the U.S. Governmen
Slide 24: Zions Has Not Traded Long-Term Capital Risk for Short-Term Profitability
Zions Has Not Traded Long-Term Capital Risk for Short-Term Profitability 24 -30% -25% -20% -15% -10% -5% 0% +1% +2% +3% Decl ine i n T an gi b le Com m on E qu it y Fr om MBS Ex p osu re Parallel Shift in Interest Rates Mortgage-Backed Securities Impact on Tangible Common Equity U.S. Commercial Bank
Slide 25: Summary: Capital, credit quality, CDO sales, profitability, outlook
• Capital levels and credit quality are in line with or stronger than peers. • CDO sales have materially reduced risk. • Profitability has improved, but is not yet restored. Zions is well positioned for continued recovery and rising interest rates. • Zions’ DFAST stress test “failure” was the unanti
Slide 26: Significant Variances Between Zions and Federal Reserve Models
Significant Variances Between Zions and Federal Reserve Models There were two major variances between Zions’ Projections in its 2014 Comprehensive Capital Adequacy and Review (CCAR) Submission and the Federal Reserves’ Projections for Zions in that same hypothetical scenario and when compared to the
Slide 27: Federal Reserve Projected Much Higher Stress Loan Losses than Zions Experienced
The Federal Reserve Projected Much Higher Stress Loan Losses than Zions Experienced in the Recent Severe Recession 27 4.3% 4.8% 6.6% 0% 1% 2% 3% 4% 5% 6% 7% ZION Mix- Adjusted Actual Worst 9Q ZION Projected CCAR Submission ZION Projected by Federal Reserve Zions’ mix-adjustment shown in the appendix
Slide 28: Fed-Projected Total Net Loan Loss Rates Not Materially Worse than Peers
Zions’ Total Net Loan Loss Rates Projected by Federal Reserve Were Not Materially Worse than Peers 28 Source: Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results 0% 2% 4% 6% 8% 10% 12% 14% B B T ST I C M A H B A N U B KE Y P N C M TB FI TB B A C ZI O N W FC R F U SB JP M
Slide 29: Fed-Projected Stress C&I Loan Loss Rates Somewhat Worse for Zions
Federal Reserve Projected Stress C&I Net Loan Loss Rates Were Somewhat Worse for Zions than Peers 29 Source: Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results 0% 2% 4% 6% 8% 10% 12% 14% C M A B A C KE Y U B M TB B B T ST I H B A N C FIT B R F P N C W FC ZI O N JP M U S
Slide 30: Fed-Projected Stress CRE Loan Loss Rates In Line with Peers
Federal Reserve Projected Stress Commercial Real Estate Net Loan Loss Rates For Zions was In Line with Peers 30 Source: Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results 0% 2% 4% 6% 8% 10% 12% 14% ST I B B T JP M H B A N M TB C M A W FC ZI O N KE Y B A C FIT B P N C U
Slide 31: Fed-Projected Stress Mortgage Loan Loss Rates Materially Better for Zions
Federal Reserve Projected Stress Mortgage Net Loan Loss Rates Were Materially Better for Zions than for Peers. 31 Source: Dodd-Frank Act Stress Test 2014: Supervisory Stress Test Methodology and Results 0% 2% 4% 6% 8% 10% 12% 14% ZI O N P N C B B T U SB U B M TB H B A N KE Y C M A ST I B A C FIT B R
Slide 32: Fed-Projected Stress PPNR Materially Worse than Recent Recession
Federal Reserve Projected Stress Pre-Provision Net Revenue (PPNR, annualized) was Materially Worse than Recent Recession 32 In Billions Source: Company Documents *2013 PPNR adjusted for Non-Recurring Debt Extinguishment Expense and Securities Impairment Charges • PPNR is defined as net revenue befor
Slide 33: Fed-Projected Stress PPNR for Zions is Materially Lower than Peers
0% 20% 40% 60% 80% 100% 120% STI RF USB MTB KEY BBT JPM BAC PNC FITB HBAN WFC CMA UB C ZION, As Reported ZION, Adjusted Federal Reserve Projected Stress PPNR for Zions is Materially Lower than for Peers 33 ZION, Adjusted reflects elimination of non-recurring debt extinguishment costs and securities
Slide 34: With CDO Sales and Peer Median PPNR, Zions Would Pass Stress Test
3.6% 0.7% 2.1% 6.4% 0% 1% 2% 3% 4% 5% 6% 7% Federal Reserve Tier 1 Common / Risk-Weighted Assets CDO Sales Adj. PPNR % to Peer Median (79% of 2013 Actual) Ending Tier 1 Common / RWA After CDO Sales, and with Peer Median PPNR, Zions Would “Pass” Dodd-Frank Act Stress Test with No Additional Capital 3
Slide 35: Additional Common Equity of Approximately $400 million May be Needed
3.6% 0.7% 0.9% 5.2% 0% 1% 2% 3% 4% 5% 6% 7% Federal Reserve Tier 1 Common / Risk-Weighted Assets CDO Sales Capital Raise Ending Tier 1 Common / RWA If No Change in the Federal Reserve Projections for Zions in its Resubmitted Capital Plan, Additional Common Equity of Approximately $400 million May be
Slide 36: Summary: Capital, credit quality, CDO sales, profitability, outlook
• Capital levels and credit quality are in line with or stronger than peers. • CDO sales have materially reduced risk. • Profitability has improved, but is not yet restored. Zions is well positioned for continued recovery and rising interest rates. • Zions’ DFAST stress test “failure” was the unanti
Slide 37: One-Year Outlook Summary Relative to 1Q14 Results
Topic Outlook Comment Loan Balances Slightly to Moderately Increasing • Prepayments remain volatile, making net loan growth difficult to forecast Net Interest Income Stable • FDIC Covered Loan income likely to experience further decline • Excluding interest income from covered loans, NII likely mode
Slide 38: Appendix
Appendix 38 ZIONS BANCORPORATION
Slide 39: A Collection of Great Banks
Bank Headquarters Offices Assets % of Total Zions Bank Salt Lake City 126 $19B 34% CB&T San Diego 97 $11B 20% Amegy Houston 84 $13B 23% NBA Phoenix 71 $5B 9% NSB Las Vegas 50 $4B 7% Vectra Denver 39 $3B 5% Commerce Bank - WA Seattle 1 < $1B 1% Commerce Bank - OR Portland 1 < $1B 1% Zions Bancorporat
Slide 40: Awards: Nationally Recognized for Excellence
Awards: Nationally Recognized for Excellence • Twelve (12) Greenwich Excellence Awards in Small Business and Middle Market Banking (2013) • Including: Excellence: Overall Satisfaction Excellence: Likelihood to Recommend Excellence: Treasury Management Excellence: Financial Stability Only 11
Slide 41: Stronger Economic Growth than Overall U.S.
Job Creation: Jobs grew in Zions' footprint by 13.5% during the last 10 years, a full 8 percentage points better than U.S. nonfarm payroll growth GDP Growth: GDP growth in our footprint exceeded nominal U.S. GDP by an average of 1.3 percentage points per year (compounded) over the last ten years
Slide 42: Appendix: Zions' Loan Portfolio Mix-Adjustment
Appendix: Zions’ Loan Portfolio Mix-Adjustment 42 • Green bars show loan balance at the sub-type level as a percentage of total loans in 2008 Q4 • Red bars show loan balance at the sub-type level as a percentage of total loans in 2013 Q3 • Zions experienced its highest loan loss rates within the loa
Slide 43: Commercial Real Estate Net Loan Loss Rates
4.6% 5.9% 8.3% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% ZION Mix- Adjusted Actual Worst 9Q ZION Projected CCAR Submission ZION Projected by Federal Reserve Commercial Real Estate Net Loan Loss Rates 43 Zions’ mix-adjustment shown in the appendix on slide 42 Source: SNL Financial Dodd-Frank Act Stress Test 2014