Zions Bancorporation stock revives

SALT LAKE CITY — Zions Bancorporation, one of last year's worst-performing stocks, leads the Standard & Poor's 500 Index in 2010 with a 78 percent gain as investors bet the Utah lender can minimize credit losses and new stock offerings.

Shares of Salt Lake City-based Zions are outpacing the next-best S&P 500 stock, oilfield-services firm Smith International Inc., by about 20 percentage points through Tuesday's close. The index has climbed 5.3 percent this year, with regional banks advancing 28 percent.

Chief Executive Officer Harris Simmons has faced down analysts calling for Zions to raise as much as $1 billion to shore up its balance sheet and repay $1.4 billion in bailout funds. Simmons has tried to avoid diluting shareholders by selling smaller blocks of stock and restructuring debt, a tactic that reflects "management with skin in the game," according to David Jackson, an analyst at Penn Capital Management.

"They were patient with raising capital, and they continue to be patient, and that's turned out to be an intelligent strategy," said Jackson, who helps manage $4.7 billion. Philadelphia-based Penn Capital and holds about 1.2 million Zions shares.

Zions operates in 10 Western and Southwestern states and ranks among the top 15 U.S. commercial banks by deposits. The stock rose 21 cents to $22.82 Tuesday.

The bank has posted five straight quarterly losses and isn't expected to become profitable again until 2011, according to analysts surveyed by Bloomberg.

"People have been chastising them for not raising a bunch of capital," said Jay Willadsen, a Boston-based analyst at Lee Munder Capital Group, which oversees about $4.7 billion and held about 1.3 million Zions shares through December. "The big difference is the Simmons family owns a lot of stock and is more cognizant of dilution."

Zions fell to $6.48 on March 6, 2009, a day after UBS AG analysts said the company would be one of those most affected by the Federal Deposit Insurance Corp.'s plan to charge banks a one-time fee to replenish its deposit-insurance fund. A $1 billion capital raise at that price would have increased shares outstanding by more than 154 million.

"The decision today is a different decision than it was in 2009," Zions spokesman James Abbott said in an interview. "We are certainly happy that it has worked out as well as it has."

With about a third of its loan portfolio in commercial real estate, Zions is trying to stem losses as falling rents and waning occupancies damp demand. About $1 billion, or 51 percent, of Zions' $2 billion in non-accruing loans were in commercial property in the fourth quarter.