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Zions (ZION) Q2 Earnings Miss Estimates, Revenues Decline Y/Y

Zacks Equity Research
·4 mins read

Zions Bancorporation’s ZION second-quarter 2020 net earnings per share of 34 cents missed the Zacks Consensus Estimate of 37 cents. Moreover, the bottom line compares unfavorably with the year-ago quarter’s 99 cents.

Results reflect lower net interest and non-interest income, and a significant rise in provision for credit losses. However, an increase in deposit and loan balances, and fall in expenses were positives.

Net income attributable to common shareholders was $57 million, down from the prior-year quarter’s $189 million.

Revenues Decline, Expenses Down

Net revenues for the quarter under review came in at $686 million, down 3.1% year over year. Further, the top line missed the Zacks Consensus Estimate of $694.1 million.

Net interest income in the quarter came in at $563 million, down 1.1% from the prior-year quarter. This downside resulted from a fall in interest income. Net interest margin contracted 31 basis points (bps) year over year to 3.23%.

Non-interest income amounted to $117 million, down 11.4% from the year-ago quarter. The decrease resulted from a fall in card fees, retail and business banking fees and capital markets and foreign exchange fees.
Adjusted non-interest expenses were $402 million, down 5% from the prior-year quarter.

Efficiency ratio was 57.3%, down from the 59% reported in the prior-year period. A fall in efficiency ratio indicates an increase in profitability.

Solid Balance Sheet

As of Jun 30, 2020, net loans held for investment were $54.3 billion, up from the $49.2 billion recorded at the end of the prior quarter. Total deposits were $65.7 billion, up 14.2% from the $57.1 billion recorded at the end of first-quarter 2020.

Credit Quality Deteriorates

The ratio of non-performing assets to loans and leases as well as other real estate owned expanded 6 bps year over year to 0.62%. Provision for credit losses was $168 million compared with the $21 million reported in the year-earlier quarter.

Moreover, net loan and lease charge-offs were $31 million at the end of the reported quarter compared with the $14 million witnessed in the year-earlier quarter.

Capital & Profitability Ratios Deteriorate

Tier 1 leverage ratio was 8.4% as of Jun 30, 2020, compared with the 9.5% recorded at the end of the prior-year quarter. Tier 1 risk-based capital ratio was 11.2%, down from the year-ago quarter’s 11.8%.

At the end of the June-end quarter, return on average assets was 0.35%, down from 1.14% as of Jun 30, 2019. Also, return on average tangible common equity was 3.8%, down from the 12.7% reported in the year-ago quarter.

Share Repurchases

During the reported quarter, the company did not repurchase any shares.

Our Viewpoint

Zion’s balance-sheet position was strong in the second quarter. This will support the company’s capital deployments, thereby, enhancing shareholder value.

However, a decline in interest rates amid the Federal Reserve's accommodative policy stance is expected to hurt the company’s margins and revenues in the days to come.

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

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

Zions Bancorporation, N.A. price-consensus-eps-surprise-chart | Zions Bancorporation, N.A. 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.

Earnings Schedules of Other Banks

Signature Bank SBNY, Hancock Whitney Corporation HWC and Texas Capital Bancshares TCBI are scheduled to announce second-quarter results this week. While Signature Bank and Hancock Whitney will release the quarterly figures on Jul 21, Texas Capital will report on Jul 22.

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