Why this regional bank's stock should rebound, after loan losses triggered an 'asymmetrical' selloff

By Steve Gelsi

A BofA analyst upgraded Zions Bancorp's stock because he believes the loan losses were an isolated event and shouldn't be treated as a sign of something bigger

Zions Bancorp is headquartered in Salt Lake City, Utah.

The recent sharp selloff in Zions Bancorp's stock already more than captures any credit risk associated with loan losses, but it neglects the overall quality of the bank's financials, an analyst said Thursday.

BofA Securities' Brandon Berman said Wall Street's reaction to the Salt Lake City-based bank's (ZION) disclosure last week of $50 million in losses booked on two commercial loans was overly harsh, because while that did raise some red flags, they weren't signs of hidden, bigger problems.

"While last week's fraud-related loan write-down does paint Zions' risk management in poor light, we don't believe it represents systemic issues nor should it undermine the progress management has made since the global financial crisis [of 2008]," Berman wrote in a note to clients.

Zions' stock is currently valued well below historical averages, based on the ratio of its price to expected earnings per share, Berman said. At the same time, the bank is projected to grow a widely followed measure of core net asset value at a much faster pace than its regional-bank peers.

The shares tumbled 13.1% on Oct. 16 after the bank disclosed loan losses in its third quarter. That triggered a selloff in the regional-bank sector, with the SPDR S&P Regional Banking exchange-traded fund KRE dropping 6.2%.

Investors were already on edge about loan losses after JPMorgan Chase & Co. (JPM) Chief Executive Jamie Dimon likened them to cockroaches - if there's one, there's probably more - in the wake of recent losses resulting from the failures of auto lender Tricolor and auto-parts seller First Brands. The Zions disclosure seemed to confirm their fears.

Meanwhile, BofA's Berman said the stock's selloff represented an "asymmetrical reaction" by investors, because he believes the bank's losses were isolated events.

Days after the loss disclosure, Zions issued a bullish outlook for net revenue and reported stronger-than-expected third-quarter earnings, with no additional loan-loss problems. The bank also said it was conducting a review of its risk management by an outside party, according to a FactSet transcript.

While Zions' stock has bounced 4.8% this week, it had dropped 12.8% over the previous two weeks. While Berman isn't bullish on the stock, he's no longer bearish, as he raised his rating to neutral. His new price target of $62, up from $59, implies about 19% upside from current levels.

He acknowledged, however, that the external review of its risk management may act as an overhang on the stock for the next three to six months.

Also read: 'Zero parallels with 2008': The regional-bank crisis is a buying opportunity, says Citi

Including Thursday's moves, Zions Bancorp's stock has lost 4.2% in 2025, while the SPDR regional bank ETF has edged up 0.1% and the S&P 500 SPX has gained 14.7%.

-Steve Gelsi

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10-23-25 1529ET