July 28 (Bloomberg) -- Zions Bancorp, Utah’s largest lender, fell in New York trading after selling $525 million of stock today in a secondary sale, more than previously proposed.
Shares of the firm declined 2.1 percent to close at $29.42, the worst performance in the 24-company KBW Bank Index. The offering probably will cut earnings per share by 10 percent next year, assuming underwriters exercise their option to buy an additional $75 million of stock within 30 days, according to David George, a Robert W. Baird & Co. analyst.
The “shares look fully valued based on the near- and intermediate-term earnings outlook,” George, who has a neutral rating on Salt Lake City-based Zions, wrote in a research note.
The value of the sale, underwritten by Deutsche Bank AG and Goldman Sachs Group Inc., is 31 percent more than what Zions proposed in a revised capital plan submitted after it failed the Federal Reserve’s annual stress test this year. The Fed said last week that it didn’t object to Zions’s new plan, which included maintaining a quarterly dividend of 4 cents a share and selling $400 million of stock.
Zions failed the stress test because capital levels fell below required minimums in an adverse economic scenario. Under the revised plan, Zion’s Tier 1 common ratio was 5.1 percent, according to the Fed, which requires a minimum of 5 percent.
Proceeds of the sale will be used for general corporate purposes, Zions said in a statement.
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