Zions (ZION) Stock Down Despite Q1 Earnings Beat, Revenues Dip

Zions Bancorporation’s ZION first-quarter 2022 net earnings per share of $1.27 surpassed the Zacks Consensus Estimate of $1.15. The bottom line, however, decreased 33.2% from the year-ago quarter.

In the quarter under review, the company recorded a benefit from credit losses of $33 million, which was a positive. Loan balances increased sequentially. However, a decline in net interest income (NII) and non-interest income, along with a rise in expenses, hurt results to an extent. The capital and profitability ratios also witnessed a decline. Probably because of these, shares of the company lost 1.8% in after-market trading following the release.

Net income attributable to common shareholders was $195 million, down 37.9% year over year.

Revenues Decline, Expenses Rise

Net revenues (tax equivalent) were $694 million, down 3.9% year over year. The top line missed the Zacks Consensus Estimate of $703.3 million.

NII was $544 million, down marginally from $545 million in the prior-year quarter. Net interest margin (NIM) contracted 23 basis points (bps) year over year to 2.60%.

Non-interest income was $142 million, down 16% from the year-ago quarter. The decline was due to a fall in fair-value and non-hedge derivative income, and dividends and other income. In the reported quarter, the company recorded a net securities loss against a gain in the year-ago quarter.

Adjusted non-interest expenses were $464 million, up 5.5% from the prior-year quarter.

The efficiency ratio (non-GAAP) was 65.8%, up from 63.5% in the prior-year period. A rise in the efficiency ratio indicates a decrease in profitability.

As of Mar 31, 2022, net loans held for investment were $50.8 billion, up marginally from $50.3 billion at the prior quarter’s end. Total deposits were $82.4 billion, down marginally on a sequential basis.

Credit Quality Improves

The ratio of non-performing assets to loans and leases, as well as other real estate owned, contracted 12 bps year over year to 0.49%. In the reported quarter, the company recorded net loan and lease charge offs of $6 million, down from $8 million in the prior-year quarter.

Provision for credit losses was a benefit of $33 million compared with a benefit of $132 million in the year-earlier quarter.

Capital & Profitability Ratios Deteriorate

Tier 1 leverage ratio was 7.3% as of Mar 31, 2022, compared with 8.3% recorded at the end of the prior-year quarter. Tier 1 risk-based capital ratio of 10.8% decreased from 12.2%.

At the end of the reported quarter, return on average assets was 0.90%, down from 1.57% as of Mar 31, 2021. Also, return on average tangible common equity was 13.9%, down from 20.2% witnessed in the year-ago quarter.

Share Repurchases

The company repurchased $50 million worth of shares in the reported quarter.

Our Take

Zions’ strong balance-sheet position, along with its business-simplifying efforts and a rise in loan demand, bodes well for the future. The bank’s capital deployment actions seem sustainable on its earnings strength. However, persistently increasing operating expenses, mainly owing to the company's investments in franchise and its efforts to digitize operations, are likely to hurt the bottom line to some extent in the near term.

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Truist Financial’s TFC first-quarter 2022 adjusted earnings of $1.23 per share handily surpassed the Zacks Consensus Estimate of $1.12. The bottom line grew 4.2% from the prior-year quarter.

Truist Financial’s results were aided by modest average loan growth and provision benefits. However, lower revenues, a rise in expenses and relatively lower rates were the major headwinds.

U.S. Bancorp USB reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, the bottom line compares unfavorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

Fifth Third Bancorp FITB reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline primarily due to a fall in the fee income. Margin contraction and capital position deterioration played spoilsports for FITB.

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