Zions Bancorp on Tuesday said it sold the remainder of its
collateralized debt obligation securities, a type of bundled-debt
investment that has plagued the regional lender.
During the second quarter, the Salt Lake City bank sold a total
of $574 million of CDOs for proceeds of $437 million, resulting in
a pretax loss of $137 million. Zions had previously said it had
sold $81 million of CDOs through June 1, which is included in the
$574 million total for the quarter.
The sale represents a moderate improvement relative to the
carrying value as of the end of March, the bank said. Because an
unrealized loss of $149 million was included in reported capital as
of March 31, the exit at a slightly lower loss is modestly
accretive to book value and capital ratios, according to Zions.
Zions struggled to pass recent Federal Reserve stress tests,
which the central bank administers to measure whether institutions
can weather another financial crisis. Zions failed a key portion of
the test in 2014 and barely squeaked through this year, hurt at
least in part by having a large portfolio of CDOs—bundles of
mortgages or other debt that are sold to investors and which
featured prominently in the 2008 financial crisis.
In the months leading up to this year's stress tests, Zions
divested 69% of its CDO holdings and had said it could further
shrink the portfolio. As of March, CDOs represented about 1.3% of
Zion's total assets.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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