Moody’s trims Zions

Moody’s Investors Service said it lowered its ratings for Zions Bancorporation NA’s issuer rating to Baa2 from Baa1 and its local-currency preferred stock non-cumulative rating to Ba1 (hyb) from Baa3 (hyb). The agency also revised the outlook to stable from ratings under review ending the review it started on March 13.

“The downgrade of Zions' ratings reflect the deterioration in the bank's capital as measured by Moody's and increased reliance on market funding, limiting the bank's financial flexibility in an increasingly challenging banking environment. In addition, Zions has a significant amount of unrealized losses on both its available-for-sale (AFS) and held-to-maturity (HTM) securities portfolios, amounting to 55% of its Moody's calculated tangible common equity (TCE) at Dec. 31, 2022.

“Moody's expects the bank to be more reliant on short-term and higher cost wholesale funding to avoid crystalizing securities losses. This could, in turn, negatively impact profitability, capital retention and curb financial flexibility in an increasingly challenging banking environment,” the agency said in a press release.

The stable outlook mirrors the view that Zions’ challenges will be counterbalanced by it rebuilding its capitalization and liquidity while guarding its better-than-peer asset quality, Moody’s said.

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