S&P alters Zions outlook to negative

S&P said it revised its outlook on Zions Bancorporation NA to negative from stable and affirmed the BBB+ issuer credit rating on the bank.

“The outlook revision to negative primarily reflects Zions' substantial customer deposit outflows in recent quarters that have constrained funding metrics and the net interest margin (NIM)–which we expect could continue amid difficult operating conditions for regional banks.

“For example, total core customer deposits (excluding brokered deposits) in first-quarter 2023 declined by nearly 10% from the prior quarter, by our calculation, hurt by a nearly 17% drop in uninsured deposits. We believe the bank's commercial concentrations and high, though declining, proportion of uninsured deposits have increased deposit pressures amid the tougher competition for deposits,” the agency said in a statement.

The weaker outlook indicates a downgrade is possible if pressure on deposits and margins, “if financial performance deteriorate below that of similarly rated regional bank peers,” S&P said.

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