While Zions Bancorp (ZION) net interest margin and deposit growth remain satisfactory, credit quality continues to deteriorate, necessitating high levels of loss provisions.

The company has been successful in enhancing capital ratios and making efforts on the cost control front, but the credit ratings agencies appear to be unimpressed. Ongoing weakness in the southwestern residential real estate markets, where the company has a significant exposure, continues to hurt the results.

Based on our concerns for further credit deterioration, particularly in the construction portfolio, we are maintaining our Underperform recommendation on the stock.

Zacks Investment Research
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