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Zions Bancorporation ZION remains well poised for revenue growth, supported by continued improvement in loan balances along with higher rates. Moreover, the regulatory nod for removal of the label of systemically important financial institution (“SIFI”) is a major positive for the company.
However, increasing expenses and a risky loan portfolio are major concerns for Zions. Despite strong fundamentals, the Zacks Consensus Estimate for current-year earnings has been marginally revised downward over the past 30 days, reflecting that analysts are not very optimistic regarding the company’s earnings growth potential.
Thus, the stock currently carries a Zacks Rank #3 (Hold). In fact, its shares have gained 16.4% in a year’s time, marginally underperforming 16.8% growth recorded by the industry.
Looking at the fundamentals, Zions’ net loans and leases have witnessed a CAGR of 3.5% over the last six years (2012-2017). Additionally, its non-interest deposits, as a percentage of total deposits, have been on the rise. The company’s initiatives to efficiently deploy the capital generated from these deposits and growth in loan demand will support revenue generation in the quarters ahead.
Moreover, with the improvement in interest rates, margin pressure for Zions seems to be easing. The company has been benefiting from increased yields and growth in loan balance.
Additionally, credit quality continues to be a major strength for Zions. The company has been recording a consistent decline in allowance for credit losses over the past several quarters. With stress in energy portfolio gradually diminishing and no longer a concern, the company’s asset quality will improve in the future, driven by improving economy.
However, due to higher salaries and employee benefits, and FDIC premiums, Zions’ expenses have remained elevated. In fact, management expects operating expenses to flare up marginally in 2018.
Moreover, the presence of high levels of commercial real estate (CRE) assets on the company’s balance sheet will likely put it in a tight spot. Because of this, raising new capital and removing troubled loans are expected to take precedence over finding growth opportunities.
Further, the presence of concentration risk because of lack of geographic diversification might hurt the company’s financials in the long run.
A few stocks from the finance space worth considering are Ameriprise Financial, Inc. AMP, Lazard Ltd LAZ and SEI Investments Co. SEIC. Each of these stocks has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ameriprise Financial’s Zacks Consensus Estimate for current-year earnings has been revised 1.7% upward over the past 60 days. The company’s share price has increased 2% over the past year.
Lazard has witnessed an upward earnings estimate revision of 2.9% for the current year over the past 60 days. The stock has gained 10.1% in the past year.
SEI Investments’ Zacks Consensus Estimate for current-year earnings has been revised nearly 1% upward over the past 60 days. Additionally, the company’s shares have gained 6.4% in a year’s time.
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Zions Bancorporation (ZION) : Free Stock Analysis Report
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