A typical Investor eyes an energy lending portfolio (IMAGE c Tom Toles) Zions Bank just posted their earnings report for Q4, and although the company posted profits ($88 Million) versus significant losses one year ago, it missed the Reuters analysts' survey consensus estimate by .07. A dominant topic of the earnings conference call was energy exposure, energy exposure. As a matter of fact, right from jumpstreet, at the outset of the call Chairman and CEO Harris Simmons stated, Based on other calls we've listened to, we expect that a major focus of this earnings call will be on our energy portfolio, and we've included a significant amount of information in the earnings release on that topic. We expect some deterioration in the portfolio as a result of the sharp decline in energy prices, particularly if price levels remain low for a prolonged period of time. IIt's been an ongoing part of the banking narrative to keep a very sharp watch on the earnings of banks which have a substantial investment in the energy sector via loans to energy producing/related companies while the price of oil has collapsed and none in the market can say with certainty whether or not a bottom has been found. Of course, as has already been mentioned here on this page, much of the apprehension about lenders with a reasonable quantity of eggs in the energy loan basket is justified, as much of this paper is in danger of nonperforming as of present, and the fear is that the fallout from plummeting profits from the industry will signal another bloodbath in the banking industry a la the late 1980's, when the post 1970's energy crisis led to falling consumer demand and an oversupply of stocks--resulting in prices of crude supplies tumbling way way down, and playing a significant part in the bank failure narrative of the period. Scott McClean, the President of Zions, went into further detail on the energy sector of their portfolio and did his best to reassure investors with the fundamental practice of their underwriting process and selection of clients with unique access to capital that should allow them to differentiate themselves from clients of other like-exposed banks and thus survive the current volatile situation: The third element I'd like to mention is just the fact that our energy companies that are in our portfolio have other sources of support that differentiate them. These energy companies have access to capital markets and private equity sources beyond what many companies have. We saw good support from the private equity sponsors that are actively involved with many of our clients during the 2008/2009 downturn, whereas that source of support was really never there in the 1980's, which was another very notable period of price volatility. Approximately 30% of our exposure in the energy portfolio is to public companies, and approximately 45% have private equity sponsors. And the private equity firms we've partnered with have exceptionally strong experience in the industry and understand the cyclicality, as opposed to generalist firms or younger, less experienced firms. Additionally, the remainder of our portfolio generally has private sponsors, very high net worth families, that have been highly involved in the energy industry over the years. Whether or not these supposed client safeguards are mirages remain to be seen, and will be borne out one way or another if prices do not rebound in the near term. Zions price target has been lowered today from Deutsche Bank and Compass Point, with a mix of hold and strong buy signals across analytical tables. Preston Clive 1/27/2015***