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Muted Loan Demand, Low Rates to Hurt Zions' (ZION) Q1 Earnings

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Zions Bancorporation ZION is scheduled to report first-quarter 2021 results on Apr 19, after market close. Similar to 2020, the overall demand for loans remained soft in the to-be-reported quarter due to the continued slow resumption of business activities. Commercial and industrial loan balances (constituting a large part of Zions’ loan portfolio) witnessed a decline in the quarter.

Moreover, the Zacks Consensus Estimate for the company’s average interest-earning assets for the first quarter of $75.9 billion indicates only a marginal rise from the previous quarter’s reported number.

Thus, owing to muted loan growth along with the near-zero interest rate environment, Zions’ net interest income (NII) — which is its main revenue component — is not expected to have improved in the quarter. The consensus estimate for NII of $545 million indicates a 1% decline sequentially.

Now, let’s have a look at the other key factors that are likely to have impacted Zions’ first-quarter performance.

Fee Revenues: Historically low mortgage rates continued to fuel the demand for new mortgages in the to-be-reported quarter. Relaxed lockdown measures and gradually improving economic conditions are likely to have resulted in prospective homebuyers entering the housing market to take advantage of the low rates. However, as rates gradually increased, refinancing activities are not expected to have been great. Thus, owing to decent mortgage-banking business performance, Zions’ loan sales and servicing income is likely to have been positively impacted in the quarter.

Also, given the easing of lockdown measures, consumer spending witnessed improvement in the quarter. Thus, the company’s card fee is expected to have increased.

However, customer-related fee (accounting for more than 85% of Zions’ total non-interest income) is not likely to have increased in the quarter. The consensus estimate for the same is pegged at $134 million, which indicates a 3.6% decline from the previous quarter’s reported figure.

The consensus estimate for total non-interest income is pegged at $141 million, which indicates a decline of 15.1% on a sequential basis.

Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. In fact, as the company continues to invest in franchise, overall costs are expected to have remained elevated in the first quarter as well.

Asset Quality: The Zacks Consensus Estimate for total non-performing loans for the first quarter is pegged at $372 million, suggesting a 1.4% rise from the prior quarter’s reported figure.

What Our Quantitative Model Predicts

According to our quantitative model, the chances of Zions beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

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 -1.00%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Zions Bancorporation, N.A. Price and EPS Surprise

Zions Bancorporation, N.A. Price and EPS Surprise
Zions Bancorporation, N.A. Price and EPS Surprise

Zions Bancorporation, N.A. price-eps-surprise | Zions Bancorporation, N.A. Quote

Q1 Earnings & Sales Growth Expectations

The Zacks Consensus Estimate for earnings is pegged at $1.15 per share, which suggests significant growth from the year-ago quarter’s reported number. The estimate has been revised nearly 1% upward over the past seven days.

The consensus estimate for sales is pegged at $690.96 million, which indicates a marginal rise from the prior-year reported figure.

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 in their upcoming releases, per our model.

BankUnited BKU is scheduled to release earnings on Apr 22. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.64%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Invesco IVZ is +1.21% and it carries a Zacks Rank #2 (Buy) at present. The company is slated to report quarterly numbers on Apr 27.

Capital One Financial Corporation COF is slated to report quarterly results on Apr 27. The company currently has an Earnings ESP of +1.47% and a Zacks Rank of 3.

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