Zions Bancorp has big loss

NEW YORK (Reuters) - Zions Bancorp (ZION.O) on Monday posted a big quarterly loss because of a write-down and commercial real estate losses, prompting Moody's Investors Service to downgrade it deep into "junk" status and warn that the large western U.S. bank could become undercapitalized.

The results reflect the deterioration in the banking sector since 2007 as asset values tumble, and as the troubled economy and housing market cause broad credit weakness.

They also came just three days after Nevada State Bank of Las Vegas, a unit of Zions, said it agreed to take over the banking business of Great Basin Bank of Nevada in Elko, which was closed by federal regulators. Zions took $1.4 billion of federal bailout money.

Zions, based in Salt Lake City, said its first quarter net loss applicable to common shareholders was $832.2 million, or $7.29 per share, and compared with a profit of $104.3 million, or 97 cents, a year earlier.

Results included a $634 million charge, or $5.55 per share, to write down goodwill from the 2005 purchase of Amegy Bank of Texas, reflecting that state's economy and bank sector.

Goodwill typically arises in acquisitions and represents the value of intangibles such as reputation and brand-name recognition.

Zions said nonperforming assets climbed 55 percent in the first quarter to $1.77 billion from $1.14 billion at year end, mainly for commercial real estate loans in Nevada, Arizona and Texas, and commercial and industrial loans in Utah.

Results also reflected $249.4 million of write-downs and losses on investment securities, many of which carried "double-A" and even "triple-A" credit ratings.

Moody's slashed Zions' senior debt rating eight notches to "B2," its fifth-highest junk grade, from "A3," a medium investment grade. It also assigned a "negative" outlook, indicating that another cut is possible within two years.