Zions Bancorp gains in premarket trading after bank posts narrower loss than Street expected

Ahead of the Bell: Zions shares rise premarket

NEW YORK — Shares of Zions Bancorporation gained in premarket trading Tuesday after it posted a narrower loss than Wall Street expected, reflecting an easing of problems in its loan portfolio.

Zions stock gained $1.03, or 5.7 percent, to $18.95 in early trading, from its close in Monday’s regular session at $17.92.

After the closing bell Monday, the Salt Lake City-based regional bank said its loss for the final three months of 2009 narrowed to $176.5 million, or $1.26 per share, from a loss of $498.1 million, or $4.37 per share, in the year-earlier period. That beat the average estimate of analysts polled by Thomson Reuters, who on average expected a loss of $1.64 per share.

The results led Morgan Keegan analyst Robert S. Patten to adjust his forecast for the year to a loss of $2.50 per share, from a loss of $2.60 per share, mostly on the assumption the bank won’t have to set aside as much to cover bad loans.

“Management sounded an optimistic tone during the earnings conference call, suggesting the possibility of a return to profitability during 2010 and showing increasing confidence that peak levels of credit losses were behind ZION,” Patten wrote in a note to clients. That may be too optimistic, he said, suggesting the bank won’t turn a profit until next year.

Patten kept a “Market Perform” rating on the stock.

FBR Capital Markets analyst David Rochester was more upbeat, keeping an “Outperform” rating on the stock and raising his price target to $21 from $19.

Rochester wrote that he also expects the bank to return to profitability next year, but said the bank is “nearing the turning point in credit trends” that should buoy the stock.