Zions Comes Up Short on Bank Stress Tests: The Dividend Can Wait
Zions Bancorporation (NASDAQ: ZION) was the one large bank which did not meet the criteria of the latest stress tests that the banks were rallying ahead of. What is interesting is that this was not baked into the cake because…
News wires that were given access to the Federal Reserve data showed that Zions Bancorp fell short on the minimum capital levels. At the low point of a theoretical recession, Zion’s Tier 1 common ratio would be only 3.5%. The Fed wanted to see 5% as a base under that scenario.
Keep in mind that under the severe recession guidelines, it is a scenario where unemployment hits 11.25% and where GDP would be down 5%. Another focal point was for housing prices to be down by 25%.
Zions has a yield of 0.5% with a $0.04 per quarter dividend for its common stock. Even when you consider that this was raised from only $0.01 per share per quarter in 2013, this 0.5% yield is just too low to attract many investors.
Zions will reportedly resubmits its capital plans to the Federal Reserve in April. Zions was trading down 1.5% at $32.50 in the after-hours, against a 52-week range of $23.10 to $33.33.
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Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.
