Some time between 2013 and 2015, Zions Bancorp. expects to be earning around $500 million a year. Last quarter it lost $184 million.

Explaining how the company arrives at this future profit, as its management sought to do at its biennial investor day on Thursday, took some doing. Weathering persistent credit losses, maintaining robust demand deposit growth, and permanently reducing its exposure to commercial real estate are all part of the Zions plan. A big capital raise probably isn't.

"We have adopted a somewhat different approach to the capital issue than most," Chief Financial Officer Doyle Arnold told attendees, reiterating the company's reluctance to dilute shareholders. "We recognize that we may be seen as one of the riskier plays out there — so be it."

A significant portion of the presentations were devoted to credit issues, which aren't dissipating as quickly for Zions as for many other regional banks. Its nonperforming assets rose to 5.9% at the end of the year, and it has been struggling with exposure to collateralized debt obligations that cost it $100 million in the fourth quarter and beat down its risk-adjusted net interest margin.

Beyond seeking to limit further losses, however, Zions acknowledged that it would be shifting much of its business away from its traditional focus on commercial real estate loans, and particularly construction. That will likely cause a short-term hit to the company's net interest margin, Zions acknowledged.

"Admittedly we were more concentrated and riskier then than we should have been," Arnold said. "The risk profile is changing for the better."

In the long term, Zions believes it will be able to place more emphasis on its increasingly prominent Texas-based energy lending business and its commercial and industrial portfolio. The number of commercial customers are up 18% since 2007, the company said, fueling optimism for when demand recovers.

Along with changes in the composition of its lending portfolio, Zions is "consciously avoiding" a buildup of low-yielding securities on its balance sheet. When the Federal Reserve ultimately raises interest rates, Arnold said, "we don't want to be caught with underwater securities."

These shifts in its portfolio composition, combined with the bank's decision "not to fight" weak loan demand, should help lower any needs for new capital. By shrinking its balance sheet, Arnold said, his company can raise its Tier One capital above 7%, a level that would put it in line with other regionals. In the meantime, the bank could issue common equity in small quantities as necessary.

"People lose sight of the fact that we have actually raised a lot of capital over the last 18 months," Arnold said. "We tried to find creative ways to get capital on the books without diluting the share count any more than necessary."

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