The third-quarter lossw narrowed to $47.3 million before preferred dividends were paid, or 47 cents per common share, from $155.3 million, or $1.43, a year earlier, the Salt Lake City-based company said today in a statement. Zions last reported a profit in the third period of 2008. The average estimate of 26 analysts surveyed by Bloomberg was for a loss of 50 cents a share.
“There is some balance-sheet shrinkage but as long as it’s not alarming they can keep the top-line strength,” Brian Klock, a KBW Inc. analyst based in San Francisco, said in a phone interview before results were announced. Total loans declined to $37.7 billion from $38.1 billion in the second quarter, the lender said in the statement.
Zions has gained 66.4 percent this year, making it the fifth-best performer overall in the S&P 500 as concern eased about loan losses. The lender is tied to commercial real estate markets in some of the states hardest-hit in the financial crisis, Klock said.
“Overall, we are encouraged by the trends exhibited in our third quarter results,” Chief Executive Officer Harris H. Simmons, 56, said in the statement. “Asset quality metrics improved across all major fronts and we generally expect continued improvement into the fourth quarter and beyond.”
Zions said net charge-offs declined to $235.7 million from $255.2 million in the second quarter. The lender set aside $184.7 million in the quarter to cover those losses, leaving the allowance for credit losses at $1.6 billion.
Noninterest expense increased to $456 million, including $11.6 million for costs associated with a total-return swap executed with Deutsche Bank AG, from $430.4 million in the second quarter, Zions said.
The swap, announced in July, transferred the risk of $1.16 billion of bonds backed by bank-issued trust-preferred securities to Deutsche Bank and allowed Zions to increase capital levels.
The lender has yet to repay $1.4 billion in government bailout funds. Simmons has said the company needs to break even or be “somewhat” profitable before repaying the government.
In September, Simmons said about commercial real estate, “we don’t see any indication it will get a lot worse.” The Moody’s/REAL Commercial Property Price Index, which measures real-estate values, is 43 percent below its 2007 peak, Moody’s Investors Service said last month.
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