Zions Bancorporation Re-opens Series A Preferred - Fuggetaboutit

Jul.29.13 | About: Zions Bancorporation (ZION)

Zions Bancorporation (NASDAQ:ZION) has reopened their Series A preferred via a dutch auction.

The details of the offering (from the prospectus) are:

Issuer Zions Bancorporation
Security Series A Preferred Stock (original issue 12/06)
Ticker ZBPRA
Rate The greater of (1) 0.520% above three-month LIBOR on the related LIBOR determination date or (2) 4.000%.
Rating B1/BB
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
Conversion Option No
Use of Proceeds To pay in part the redemption price in of the Series C Preferred Stock
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Using the existing Series A the following prices yield (no pun intended) the following results:

Price Current Yield Stripped Yield
$23.20 (current) 4.31% 4.32%
$21.50 4.65% 4.66%
23.25 4.30% 4.31%
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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:

Issue Rating Redemption Date Price CY YTC
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%
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Would you rather own Zions, JP Morgan (NYSE:JPM), USBank (NYSE:USB), BB&T (NYSE:BBT) or Wells Fargo (NYSE: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
Zion 11.8x 10.05% 15.96% 0.67% 4.92%
JPM 7.1x 10.40% 14.10% 0.92% 10.72%
BBT 8.2x 9.40% 14.10% 1.10% 7.62%
USB 9.2x 9.20% 11.10% 1.63% 16.41%
WFC 9.6x 10.73% 15.06% 1.49% 13.89%
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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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.