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Zions (ZION) Q1 Earnings Lag Estimates, Revenues & Costs Up

Zacks Equity Research

Zions Bancorporation’s ZION first-quarter 2019 earnings per share of $1.04 missed the Zacks Consensus Estimate of $1.05. Also, the figure compared unfavorably with the prior-year quarter’s earnings per share of $1.09.

Results were adversely affected by an increase in expenses and lower non-interest income. Moreover, the company recorded higher provision for credit losses during the quarter, which was a negative factor. However, rise in net interest income was a tailwind. Also, the balance sheet position remained strong.

Net income attributable to common shareholders was $205 million, down 11.3% year over year.

Revenues Improve, Costs Rise

Net revenues for the quarter under review were $708 million, increasing 4.1% year over year. However, the top line lagged the Zacks Consensus Estimate of $715.6 million.

Net interest income was $576 million, up 6.3% from the prior-year quarter. This rise was primarily attributable to loan growth and increase in interest and fees on loans, partially offset by higher interest expenses. Further, net interest margin expanded 12 basis points (bps) year over year to 3.68%.

Non-interest income amounted to $132 million, down 4.3% from the year-ago quarter. This downside was due to a fall in almost all fee income components.

Adjusted non-interest expenses were $431 million, up nearly 2.9% from the prior-year quarter.

Efficiency ratio was 60.2%, down from 61.3% reported a year ago. A fall in efficiency ratio indicates improvement in profitability.

Strong Balance Sheet

As of Mar 31, 2019, total net loans held for investment were $47.1 billion, up from $46.2 billion recorded at the end of the prior quarter. Total deposits were $54.5 billion, up nearly 1% from the fourth-quarter end.

Credit Quality: A Mixed Bag

The ratio of non-performing assets to loans and leases as well as other real estate owned shrunk 37 bps year over year to 0.50%. Moreover, net loan and lease charge-offs were nil compared with charge-offs of $5 million in the prior-year quarter.

However, provision for credit losses was $4 million against a benefit of $47 million in the year-earlier quarter.

Capital & Profitability Ratios Deteriorate

Tier 1 leverage ratio was 9.9% as of Mar 31, 2019, compared with 10.5% at the end of the prior-year quarter. Tier 1 risk-based capital ratio was 12.3%, down from 13.3% in the year-ago quarter.

At the end of the first quarter, return on average assets was 1.26%, down from 1.45% as of Mar 31, 2018. Also, as of Mar 31, 2019, return on average tangible common equity was 13.9%, down from 15.5% witnessed a year earlier.

Share Repurchases

During the quarter, Zions repurchased $275 million worth of shares.

Our Viewpoint

Zions remains well positioned for growth in profitability, supported by the consistent growth in loans and deposits, its efforts to improve operating efficiency, and higher interest rates. Moreover, its efficient capital deployment plans reflect strong balance sheet position. However, elevated expense levels will likely hamper bottom-line growth. Moreover, the company's significant exposure toward risky loan portfolios remains a concern.

Zions Bancorporation Price, Consensus and EPS Surprise

Zions Bancorporation Price, Consensus and EPS Surprise | Zions Bancorporation Quote

Currently, Zions carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Washington Federal’s WAFD second-quarter fiscal 2019 (ended Mar 31) earnings were 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflects year-over-year growth of 10.5%.

Hancock Whitney Corporation’s HWC first-quarter 2019 operating earnings per share of $1 surpassed the Zacks Consensus Estimate of 98 cents. Further, the reported figure comes in 11.1% higher than the year-ago tally.

Ally Financial Inc.’s ALLY first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

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