FBR reiterates 'Market Perform' rating on Zions

In a note to clients late Thursday, analyst James Abbott said he was "incrementally more positive" on the bank after visiting Zion's most difficult market in Arizona.

"The independent appraiser that traveled with us indicated that Zions was one of, if not the most comprehensive and proactive in its workout process of all the banks and brokerage firms he deals with in Arizona," noted Abbott. "This conservatism and visibility should ultimately lead to visibility for investors as the non-performing assets trend begins to decelerate, and should ultimately drive the stock higher."

Abbott said he believes the Salt Lake City-based bank has curbed loan growth, which should boost its capital ratios. Abbott also expects net interest margin to strengthen as Zions has, in many cases, been able to raise the yield on loans when they come up for renewal.

Additionally, "we got the sense that raising capital in the stated range of $200 million to $300 million was not really an 'if' but rather a 'when,' " Abbott wrote. "Many investors who would like to buy Zions Bancorp are waiting for Zions to raise $500 million to $1 billion, but we would be very surprised if that were the case in the near term."

Zions shares slipped 14 cents to $30.39 in morning trading. The stock has lost nearly 35 percent in the year to date.