DEC 16, 2013 11:40am ET

Zions Cites Volcker Rule on $387M Charge Tied to CDOs

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Zions Bancorporation, Utah’s biggest lender, said most of its bank and insurance trust-preferred collateralized debt obligation securities and other asset-backed CDOs won’t be allowed under the new Volcker Rule, possibly costing the company about $387 million.

The non-cash charge may be “materially greater or less than the impact estimated,” and the bank is evaluating ways to comply with the new rule that “optimizes shareholder value,” the Salt Lake City-based company said today in a statement. The charge will affect fourth-quarter and full-year results, and Zions plans to update investors in early January, chief financial officer Doyle Arnold said during a conference call.

The charge is more than Zions earned for any calendar year since 2007. The estimated impact was based on conditions as of Sept. 30, and the bank said prices for the securities had improved since then. “The financial condition of the banking companies that issued the underlying trust-preferred securities has improved significantly,” Zions said.

The bank said it’s unclear what effect the divestitures mandated by the Volcker Rule will have on trading prices. The rule approved by federal regulators last week is designed to keep banks from making risky trading bets with their own money that might cause them to collapse.

As a result of the accounting adjustments, Zions’ common equity Tier 1 ratio as of Sept. 30 decreased to about 9.74% from 10.47% using Basel I calculations, the company said.

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