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Can Loan Growth, High Rates Aid Zions (ZION) in Q1 Earnings?

Zacks Equity Research

Zions Bancorporation, National Association ZION is scheduled to announce first-quarter 2019 results on Apr 22, after the market closes. While its revenues for the to-be-reported quarter are projected to grow year over year, earnings are expected to witness a decline.

In the last reported quarter, Zions’ earnings beat the Zacks Consensus Estimate. Higher revenues and loan growth provided support while higher expenses and provisions were the undermining factors.

Notably, the company has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 9.6%.

Zions Bancorporation Price and EPS Surprise
 

Zions Bancorporation Price and EPS Surprise | Zions Bancorporation Quote

Moreover, Zions’ activities in the first quarter were able to impress analysts. Hence, the Zacks Consensus Estimate for earnings of $1.05 for the to-be-reported quarter has moved nearly 1% upward over the past 30 days. However, the figure reflects a year-over-year decline of 3.7%.

The consensus estimate for revenues is pegged at $715.6 million, which reflects a year-over-year improvement of 5.2%.

Before we take a look at what our quantitative model predicts for the first quarter, let’s check the factors that are likely to influence results.

Factors to Impact Q1 Results

Modest growth in net interest income (NII): Given the decent growth in loan balances, particularly commercial and industrial loans (constituting a large part of Zions’ loan portfolio), along with higher interest rates, Zions’ NII is likely to be positively impacted during the first quarter.

Fee revenues to not offer much support: Zions’ first-quarter non-interest income is not expected to benefit much from service charge on deposits as deposit balances are likely to decrease in the quarter. Moreover, as fixed income trading activities remained somewhat muted, the company’s capital markets and foreign exchange fees are not expected to benefit much.

Mortgage banking activities continue to be negatively impacted by higher rates and lower originations. However, because of the Fed’s dovish stance on future rate hikes and relatively lower mortgage rates witnessed during the first quarter, the company’s loan sales and servicing income are expected to remain somewhat stable and not decline drastically.

Expenses to rise modestly: Despite undertaking a number of cost control initiatives, Zions’ adjusted non-interest expenses are expected to increase slightly in the quarter to be reported due to its continued spending on technology systems overhaul and investment in franchise.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate in the first quarter are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Zions is -0.55%.

Zacks Rank: Zions currently has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to be sure of an earnings beat.

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

BankUnited, Inc. BKU has an Earnings ESP of +1.89% and carries a Zacks Rank of 3 at present. The company is slated to release results on Apr 24.

Associated Banc-Corp ASB is expected to release results on Apr 25. It presently has an Earnings ESP of +0.55% and a Zacks Rank #3.

SVB Financial Group SIVB is slated to release results on Apr 25. It has an Earnings ESP of +0.42% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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BankUnited, Inc. (BKU) : Free Stock Analysis Report
 
Associated Banc-Corp (ASB) : Free Stock Analysis Report
 
SVB Financial Group (SIVB) : Free Stock Analysis Report
 
Zions Bancorporation (ZION) : Free Stock Analysis Report
 
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