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Zions Bancorp is taking a breather from buying more failed banks, at least until it absorbs four acquisitions made in the past year, including three in the past six months.
The holding company must clean up the nonperforming assets it took on by purchasing the banks in California and Nevada with assistance from the Federal Deposit Insurance Corp., Zions spokesman James Abbott said Wednesday.
"It would be the equivalent of buying a house that is in serious need of gutting and remodeling," Abbott said.
"It's a very challenging situation to be in. [The banks] are very economically valuable transactions for us, but nonetheless put a strain on the resources of the company, each one. So we have to be careful of that."
Abbott was at a Barclays Capital conference in New York earlier this week with Zions chief financial officer Doyle Arnold, when the subject of future acquisitions of troubled banks came up. Arnold mentioned then that Zions will probably sit on the sidelines for a while.
Speaking at the conference, Arnold said the company may buy one or more failed Texas banks if given the opportunity next year. Zions already operates Amegy Bank of Texas, with $12 billion in assets and $9 billion in deposits. The Salt Lake City-based banking company owns eight bank subsidiaries that operate in 10 Western states. Its Zions Bank is the biggest bank with headquarters in Utah.
Arnold said bank problems in Texas are just beginning and a number of failed banks may become available. Even so, Zions won't be a buyer for at least six months, he said.
Arnold also said it's doubtful Zions will need to raise additional capital unless the economy deteriorates significantly. Several economists, including Federal Reserve Chairman Ben Bernanke, are predicting the recession has ended.
Even so, three investment firms have said recently that Zions may need to raise as much as $1 billion in new capital. Their predictions are based on a worst-case scenario that includes a further slide in home prices of 10 percent and a rise in U.S. unemployment to 10.5 percent.
Abbott said it's possible unemployment will get that high, but a further steep decline in home prices isn't likely.
Housing prices appear to be stabilizing in Nevada and are beginning to move upward in other big real estate markets where Zions subsidiaries operate, he said.
Wall Street appeared to cheer Arnold's remarks. Zions stock has increased 18 percent since Monday. Shares closed at $19.31 Wednesday, up $1.19, or 6.6 percent.
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