Focusing on damage control after the financial crisis, on Dec. 28, Zions Bancorporation (ZION) announced its decision of awarding bonus to its 25 top executives in the form of stock in lieu of cash payments. The decision has been made in order to conform to the regulations under the government’s Troubled Asset Relief Program (TARP). Zions was bailed out by a TARP fund of $1.4 billion in Nov. 2008.

According to the rules set by the federal government, the executives of a beneficiary company have to forgo their hefty bonuses until the company exits the TARP. Therefore, Zions has considered the alternative of awarding shares under the name of “salary stock” to its executives, giving them the right on the company’s common stock. The units of the shares thus granted will be decided according to the market price of these shares at the time of the grant. The right to the shares granted in 2010 will be fully vested when they are awarded.

Zions has been going through tough times given the economic turmoil that has already had a devastating effect on the company’s operations. While strong competition is continuously exerting pressure on deposit pricing, growth in higher cost funding accounts are weighing on net interest margins. Moreover, growth in Zions’ highly exposed commercial real estate market is heading south due to weakness in the residential development and construction activities.

Additionally, the TARP loan liability at a time when the company’s both organic and inorganic growth is indicating weak trends makes the decision of stopping cash bonus payments appear justified. We believe this will provide some stability to Zions’ funds and boost investor confidence before it can explore better opportunities once the economy rebounds. Currently, we recommend an Underperform stance on the stock.

Zacks Investment Research

1. (ZION) Zions Bancorporation Finishes Exchange OfferIn an attempt to enhance its financing position in the capital market, Zions Bancorporation (ZION)...
2. (ZION) Zions Bancorporation Shows Continued LossesZions Bancorporation (ZION) reported a third quarter 2009 net loss applicable to common shareholders of...
3. (YHOO) Yahoo! Losing Top ExecutivesYahoo! Inc. (YHOO) is losing top executives to upcoming media and brand advertising companies. Recent...
4. (ZION) Zions Bancorporation – Bear of the DayGiven the high competitive pressures in the banking industry, we expect continuous deposit pricing pressures...
5. (ZION) Zions Bancorp- Bear of the DayWhile Zions Bancorp (ZION) net interest margin and deposit growth remain satisfactory, credit quality continues...
6. (ZION) Zions Completes New Common Stock OfferingOn August 27, Zions Bancorp (ZION) successfully completed a $250 million offering of new common...

Search Posts by Tag: ZION | Zions BanCorporation | Financial | Regional - Pacific Banks

RSS Feeds by Tag: ZION | Zions BanCorporation | Financial | Regional - Pacific Banks |

Other Posts by: vitalstocks | RSS Feed for this author