Zions Bancorp initiated with an Underperform at Jefferies

Jefferies initiated coverage of Zions Bancorp (ZION) with an Underperform rating and $40 price target The firm initiating coverage of 32 regional and mid-cap banks with a “constructive outlook.” Despite tariff uncertainty, several factors could positively impact banks, including a rebound in loan growth as the U.S. avoids a recession, net interest margin expansion with a steeper yield curve, “resilient” credit metrics, excess capital “to play offense or defense,” and attractive valuations, the analyst tells investors in a research note. Jefferies’ top regional bank top picks are Huntington Bancshares (HBAN), M&T Bank (MTB) and Fifth Third (FITB). The firm’s mid-cap top picks are Flagstar Financial (FLG), Axos Financial (AX) and Western Alliance (WAL). Jefferies says its Underperform on Zions reflects the company’s “below-average” earnings growth outlook, lower capital levels versus peers, and its “vulnerability to credit deterioration” with above-average commercial real estate exposure.