Zions Bancorp. of Salt Lake City is combining acquisitions and an Internet strategy to boost profitability and its share price.
The company recently unveiled its most ambitious deal, a merger with crosstown rival First Security Corp., that is expected to close in the fourth quarter. The combined company would take the First Security name.
Meanwhile, Zions also recently began offering a "digital certificate" service on the Internet that verifies a customer's signature to safeguard transactions.
Zions has also recently announced deals for Regency Bancorp in Fresno, Calif. and Pioneer Bancorp. of Las Vegas.
The deals extend Zions' practice of searching for banks with track records of strong performance in markets with good demographics. Acquisition targets with these characteristics help further the Internet strategy, according to analysts.
"Given the benefits of an attractive currency, Zions should emerge as a winner in the acquisition game," said Erika Hill, an analyst at Pacific Crest Securities in Portland, Ore.
Zions' digital certificates are electronic credentials based on security standards. They bind owners to electronic keys that can be used to encrypt and sign documents, assuring that the keys actually belong to the person or entity specified.
The service can, for example, let people to renew their driver's licenses over the Internet. Potential users include Utah's court systems, allowing lawyers to be able to file briefs over the Internet.
Lori Appelbaum, a banking analyst at Goldman, Sachs & Co., estimates that the digital certificate service should ultimately contribute 5% of Zions' total earnings.
Ms. Appelbaum also said Zions' profit margins for the service would ultimately exceed 30%, with the company leveraging its existing data center and platforms.
Zions offers other Internet services like electronic bond trading. The company's annual Internet revenues are about $10 million and have been doubling annually. This translates into $3 to $5 per share, Ms. Appelbaum said.
Besides mergers and the Internet, Zions has been pursuing other initiatives. The company is also a big Small Business Administration lender and underwriter of municipal revenue bonds.
In general, Zions has been a solid performer, with core revenues on common equity, excluding merger charges, averaging 19.6% over the past four years.