Nov. 23 (Bloomberg) -- Zions Bancorporation, Utah’s largest lender, rose 13 percent, the most of any company in the KBW Bank Index, after saying it will reduce the value of deferred tax assets and offer to exchange preferred shares for common.

Hedging strategies would allow the bank to cut the asset value by $148 million amid rising interest rates, the Salt Lake City-based lender said today in a regulatory filing. Deferred tax assets are used to reduce future income-tax expenses during profitable periods.

“There had been a concern that they would have to take a valuation allowance against this deferred tax asset,” said Dennis Klaeser, an analyst at Raymond James & Associates. “The potential size of the allowance would be reduced with this transaction.”

Zions has posted four straight quarterly losses and isn’t expected to make money until at least 2011, according to analysts surveyed by Bloomberg. In addition to benefits from the tax change, Zions said the swap of preferred shares may increase tangible common equity, a cushion against loan losses.

Zions rose $1.57 to $14.12 at 4:19 p.m. New York time on the Nasdaq Stock Market. It climbed as high as $14.71 earlier today, and has plunged 42 percent this year.

Zions reported a third-quarter deferred tax asset balance of $688 million, up from $644 million the quarter before, on higher provisions and loan losses, according to company filings.

Zions said it will exchange as many as 5.6 million depository shares, which are tied to preferred shares, for common stock, according to a statement.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

Last Updated: November 23, 2009 16:27 EST