HOUSE_OVERSIGHT_014348.jpg

uncertain macro backdrop. That said, following the results of the election, and assuming the new administration can create fiscal stimulus, management sounded optimistic around growth prospects in C&! (10% ex-energy YoY), owner-occupied, etc. = Energy portfolio performing in-line with expectations. Management reaffirmed the >8% allowance on its energy portfolio ($2.3mn or 5% of total loans) remains sufficient to cover future losses. However, continued stress in its oilfield services portfolio (26% of portfolio) remains the primary reason behind ZION’s cautious view. This was consistent with the 60% of the audience polled whose ownership in the stock is modestly influenced by this portfolio. That said, until supply/demand fundamentals improve or activity picks up, material reserve release is unlikely. Chart 51: How much does credit quality in ZION’s energy portfolio influence your decision on owning the stock? 70% 60% 50% 40% 30% 20% 10% 0% Still a material factor in my A modest factor in my No longer a factor in my investment decision investment decision investment decision Source: BofA Merrill Lynch Global Research = Steepening yield curve a modest benefit, though short-end matters more. Despite recent actions that have reduced the bank’s asset sensitivity, ZION remains the most asset sensitive among US banks. For a 25bp rise in the short-end, ZION estimates a $30mn incremental benefit to spread income. That said, due to the variable-rate mismatch between assets/liabilities, a steeper yield curve is expected to have a marginal impact. = Potential changes to CCAR viewed as positive for ZION. Mr. Burdiss viewed the potential change to the annual stress test (CCAR)}, specifically the static RWA balance, as net positive for the bank/industry. That said, overall these changes are immaterial as CCAR remains their capital constraint. Although only 14% of the audience polled think more aggressive capital return is the most important catalyst for the stock (top response: 29% for stronger revenue growth), investor bias leaned higher as it relates to total payout. 34 2016 Future of Financials Conference | 17 November 2016 Bankof America 2 Merrill Lynch HOUSE_OVERSIGHT_014348