Recently we issued an updated research report on
). While reduced net interest margin and sluggish loan
demandcreate headwinds on the revenue front, shareholders'
confidence is buoyed by a stable capital position.
Moreover, Zions has delivered positive earnings surprise in 3
of the last 4 quarters with an average beat of 10.1%. The
company's fourth-quarter earnings were in line with the Zacks
Consensus Estimate but lagged the year-ago quarter number by
Results suffered due to 16.9% year-over-year decline in the
top line against higher expenses. Capital as well as
profitability ratios deteriorated in the reported quarter.
Nevertheless, higher recoveries and growth in loans and deposits
served as tailwinds for the quarter. Further, credit quality was
a mixed bag.
Moreover, the regulatory amendments faced by Zions now require
the U.S. banks to set aside more capital as buffer, in case of
unexpected losses, directly challenges the company's lending and
investment capacity, overall hampering margins and profitability.
As well, higher proportion of risky assets may put the company in
a tight spot.
Nonetheless, debt modifications and improving non-interest
demand deposits have been reducing pressure on Zions' balance
sheet and boosting return on equity. The recent divestiture of a
part of collateralized debt obligations (CDOs) and resubmission
of its capital plan to the Federal Reserve has further increased
the likelihood of the second dividend hike since the financial
Additionally, despite escalating credit costs, Zions has been
witnessing stable capital ratios, all well above the regulatory
requirements. Management also expects consistent improvement in
the credit quality going forward.
Key Picks in the Sector
While Zions carries a Zacks Rank #3 (Hold), some top-ranked
stocks in the banking sector include
Summit State Bank
). All these stocks bear a Zacks Rank #1 (Strong Buy).
SIERRA BANCORP (BSRR): Free Stock Analysis
PREFERRED BANK (PFBC): Free Stock Analysis
SUMMIT STATE BK (SSBI): Get Free Report
ZIONS BANCORP (ZION): Free Stock Analysis
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