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Zions Says Federal Reserve Estimates Worse Than Projected

Zions Bancorporation (ZION) said it fell below the main capital threshold in the Federal Reserve’s stress test because of greater real estate losses and risk-weighted assets, and lower revenue estimates.

The central bank determined the bank had “significantly higher” commercial real estate losses, the Salt Lake City-based lender said today in a statement. Regulators also found that the bank would have lower pretax, pre-provision net revenue under economic distress, according to the statement.

Zions said that its submission to the Fed came before the sale of some collateralized debt obligations, a transaction that “resulted in a substantial reduction in risk.” The bank, Utah’s largest, said it will resubmit a capital plan to the central bank.

Zions was the only lender among 30 that came in below the minimum capital level in results released today by the central bank. The Fed runs an annual two-part stress test required under the Dodd-Frank Act to ensure banks have enough capital and cash to withstand shocks that may threaten their survival.

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Dan Reichl, David Scheer

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