Sep. 12--Two analysts lowered their target price for Zions Bancorp's shares Friday and said that the Utah-based bank-holding company will need up to $800 million in new capital if the economy were to continue to significantly deteriorate.

But the report by John Pancari and Dana King, putting their target price at $15 a share, failed to convince investors, who bid down the company's stock slightly to close the week at $15.89.

That the stock held its price after the report came out suggests that stockholders already have taken into account the possible need of Zions to raise new capital under a worst-case scenario, said James Abbott, Zions director of investor relations.

"That's already part of everyone's expectations," he said.

The analysts from Fox-Pitt Kelton Cochran Caronia Waller said under a "highly stressed scenario," they estimate Zions would need $500 million to $800 million in additional capital.

"While investors may be willing to provide additional capital, resulting dilution [of shareholder value] is likely to prove material and could limit upside to Zions shares," said Pancari and King.

They cited the strain on Zions' capital from the economic deterioration in California, Nevada and Arizona -- three of the areas hardest hit by the collapse of the U.S. housing bubble and also where Zions has a significant presence.

The analysts also lowered their earnings-per-share projection for 2009 to a loss of $8.59 from

a loss of $7.36. For 2010, they project a loss of $1.54 a share compared with the earlier projection of a loss of 20 cents a share.

Abbott said the analysis used a worst case scenario for the economy into next year, apparently from the Federal Reserve Board's recently released stress test for banks. The Fed's "highly stressed scenario" used an unemployment rate of 10.5 percent by the middle of next year and counted on home prices declining throughout 2010.

But Abbott pointed to more positive economic indicators, including the S&P Case Shiller U.S. National Home Price Index that recently showed U.S. home prices are stabilizing. In addition, Abbott said bankers and customers in California are reporting increasing sales of home lots, and business people are saying they believe the worst of the recession is behind us.

"The economy is improving, though at a very slow pace," Abbott said. "But nonetheless improving. It's not getting worse."

"We're not calling the all-clear sign at Zions, that the economy's fine and we don't have anything to worry about anymore," he said. "But what we are comfortable saying is we think the challenges in front of us are very manageable and we're very confident we'll get through the credit cycle."

Analysts recently have not had a consensus view on Zions' finances. Estimates of its future capital needs to meet worst case scenarios have been all across the board. Another Fox-Pitt Kelton Cochran analyst, Albert Savastano, even suggested earlier this year that Zions does not need any more capital.

tharvey@sltrib.com

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