Zions Bancorporation (ZION) has reopened their Series A preferred via a dutch auction.
The details of the offering (from the prospectus) are:
|Security||Series A Preferred Stock (original issue 12/06)|
|Rate||The greater of (1) 0.520% above three-month LIBOR on the related LIBOR determination date or (2) 4.000%.|
|Auction Range||Minimum price of $21.50 (in increments of $0.01) and up to and including the maximum price of $23.25 per depositary share|
|Optional Redemption||5 years|
|Use of Proceeds||To pay in part the redemption price in of the Series C Preferred Stock|
Using the existing Series A the following prices yield (no pun intended) the following results:
|Price||Current Yield||Stripped Yield|
In my opinion, this is not anything close to value for Zions bank exposure. What might be preferable in the banking space? Lets take a look:
|JPM Series O||Ba1/BBB||9/1/2017||$23.50||5.85%||7.48%|
|USB Series H||Baa1/BBB+||7/15/2018||$22.98||5.60%||7.15%|
|BBT Series G||Baa2/BBB-||6/1/2018||$22.93||5.67%||7.46%|
|WFC Series Q||Baa3/BBB+||9/15/2023||$24.74||5.91%||6.00%|
Would you rather own Zions, JP Morgan (JPM), USBank (USB), BB&T (BBT) or Wells Fargo (WFC)? In my opinion, I would rather own any of the other banks before Zions. Not that Zions is necessarily a bad bank (they have a stronger T1 common and total capital ratio), just that the others are healthier and higher credit quality.
|Bank||Leverage Ratio||T1 Common||Tot Capital||ROA||ROE|
Bottom Line: I would pass on the Zions Series A preferred. My top pick from the above preferreds is the WFCPrQ as it has decent yields, a higher rating (yes, I realize the inherent value in a rating is low) and a stronger business profile.