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Oct 17 (Reuters) - At least two brokerages downgraded Zions Bancorp (ZION.O) after the bank reported a 75 percent fall in third-quarter profit due to deterioration in real estate, development and construction loans.
The company’s shares, which had shed 14 percent so far this year, fell 13 percent to $35.09 in trading before the bell. They closed at $40.20 Thursday on Nasdaq.
“It was one of the noisier and more challenging quarters that we have seen out of Zions in some time,” said J.P. Morgan Securities analyst Steven Alexopoulos, who downgraded the stock to “neutral” from “overweight.”
The analyst cut his earnings estimates on the bank to $3.36 from $4.21 a share for 2008, and to $3.34 from $4.95 a share for 2009. Including certain anticipated charges, he sees earnings of $2.28 and $3.09 a share for 2008 and 2009, respectively.
“With an economy that seemed to take a turn for the worse over the past several weeks, Zions used the third quarter to batten down the hatches by raising equity capital and boosting the loan loss reserve, which contributed to a meaningful EPS shortfall,” he said.
Separately, Friedman Billings Ramsey downgraded Zions’ stock to “market perform” from “outperform,” saying near-term credit trends and concerns surrounding its securities portfolio are likely to limit upside potential.
Net charge-off trends accelerated again in the third quarter, and concerns for commercial and industrial loan defaults are beginning to slowly emerge, analyst James Abbott said. “We now also believe a dividend cut may be on the table.”
Abbott cut his core earnings-per-share estimates for Zions to $2.88 from $3.90 for 2008 and to $1.23 from $4.54 for 2009. The analyst lowered his price target to $33 from $43 on the stock. (Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Deepak Kannan)