Miller Tabak + Co. Analyst Thomas S. Mitchell views Zions Bancorporation (ZION) as a potential acquiree with an attractive geographic service area, despite the company’s struggles resulting from legacy commercial real estate and investments in bank trust preferred certificates.
“We think they have a great franchise. It basically runs from Texas to Washington State…we think that their whole geographic service area is more attractive than the rest of the United States over any long-term periods you think about that it will grow maybe 2% to 3% faster in terms of incomes and jobs, local GDP versus the total United States,” Mitchell said.
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The negativity surrounding Zions’ legacy investments has affected the company’s valuation, yet Mitchell believes this is a solid franchise with significant potential to be acquired.
“They are one of those banks that has had some legacy commercial real estate and some legacy investments in bank trust preferred certificates that have created a negative backwash that they’ve been struggling to get out of and that affects the valuation. We think it’s a premier franchise selling at relatively close to book value and selling at a relatively low valuation to its deposit base, and we think that they have significant potential to define themselves as a target,” Mitchell said.
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