NEW YORK (AP) — Fitch Ratings on Tuesday cut debt ratings for Zions Bancorp and its subsidiary banks, warning that continuing economic challenges will hamper the regional bank's efforts to strengthen its recession-battered loan portfolio.
Fitch cut Zion's long-term issuer default rating to "BBB" from "A-", reducing the rating a notch to the lowest of four levels in investment-grade territory.
The Salt Lake City-based bank's short-term rating was downgraded a notch to "F2" from "F1".
Fitch assigned a negative outlook for the ratings, signaling the possibility of a further downgrade.
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Shares of Zion fell 70 cents, or about 5.7 percent, to $11.54 in afternoon trading. The stock has traded in a 52-week range of $5.90 to $54.90.
Fitch said Zions has "continued to contend with asset quality issues," primarily from its exposure to construction and land development projects hurt by the real estate slump, and its relatively large holdings of collateralized debt obligations. CDOs are complex financial instruments that combine various slices of debt.
Fitch acknowledged in a news release that Zions has been addressing the quality of its loans, but added, "continued economic headwinds have limited the company's ability to reduce" soured loans and other bad assets.