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Loans, Solid Balance Sheet Aid Zions (ZION) Despite Low Rates

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Zions Bancorporation’s ZION solid loan and deposit balance, and business simplification efforts are expected to keep supporting its financials. Also, the bank’s capital-deployment activities are impressive and will enhance shareholder value. However, low interest rates and mounting expenses remain major near-term woes.

Zions Bancorporation’s organic growth looks impressive. The company’s revenues have witnessed a compound annual growth rate (CAGR) of 4% over the last five years (2016-2020), largely driven by continued growth in loans. The bank's non-interest-bearing deposits also continue to boost its financials. Given the company's initiatives to efficiently deploy the capital generated from these deposits, along with a decent rise in loan demand, its top line is likely to improve further.

The company’s capital deployment is also commendable. While the bank is anticipated to continue paying quarterly dividends at the same rate of 34 cents per share, it announced a share-repurchase plan for first-quarter 2021 to buy back up to $50 million shares. Given Zions Bancorporation’s strong balance sheet and lower dividend payout ratio, its capital-deployment activities seem sustainable.

Notably, analysts seem to have an optimistic stance for the stock. The Zacks Consensus Estimate for both 2021 and 2022 earnings has moved 0.7% upward over the past 30 days.

However, given the near-zero interest rates, pressure on net interest margin (NIM) is a major concern for Zions Bancorporation. The company saw a fall in NIM in 2020 to 3.15% from 3.54% in 2019 and 3.61% in 2018. As the Federal Reserve has signaled no change in interest rates anytime soon, the NIM might remain under pressure despite the rise in loan demand.

Also, the company’s mounting expenses on account of investments in franchise and technology upgrades is a major concern. The total non-interest expenses witnessed a CAGR of 1.8% over the last five years (ended 2020).

Shares of this Zacks Rank #3 (Hold) company have rallied 73.2% over the past six months, underperforming the industry’s growth of 77.5%.

Stocks to Consider

Virtu Financial, Inc. VIRT has been witnessing upward estimate revisions of 27% for the past 30 days for current-year earnings. Its shares have declined 2.8% over the past six months. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Community Trust Bancorp, Inc. CTBI recorded an upward earnings estimate revision of 4.5% for 2021 over the past 30 days. Its shares have gained 41.5% in six months’ time. Currently, it flaunts a Zacks Rank of 1.

First Financial Bancorp. FFBC has witnessed an upward earnings estimate revision of 3% for the ongoing year in 30 days’ time. Its shares have surged 81.7% in the past six months. At present, it sports a Zacks Rank of 1.

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Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report

Community Trust Bancorp, Inc. (CTBI) : Free Stock Analysis Report

First Financial Bancorp. (FFBC) : Free Stock Analysis Report

Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report

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