Zions' (ZION) Q3 Earnings In Line With Estimates, Costs Up

Zions BancorporationZION reported third-quarter 2017 earnings of 72 cents per share, in line with the Zacks Consensus Estimate. The reported figure reflects year-over-year improvement of 26.3%.

Results to a great extent benefitted from improvement in net interest income and lower provisions. Also, loan growth remained strong during the quarter. However, higher adjusted non-interest expenses and lower non-interest income were the headwinds.

Net income attributable to common shareholders came in at $152 million, up from $117 million reported in the year-ago quarter.

Net Interest Income Improves, Costs Escalate

Net revenues were $661 million for the quarter, increasing 7.7% year over year. However, the figure lagged the Zacks Consensus Estimate of $666.8 million.

Net interest income increased 11.3% year over year to $522 million. The rise was primarily attributable to increased interest income, partially offset by higher interest expenses. Further, net interest margin improved 9 basis points (bps) year over year to 3.45%.

However, non-interest income amounted to $139 million, declining 4.1% from the year-ago quarter. The decline was primarily due to lower customer-related fees and net securities gains.

Adjusted non-interest expenses increased 2.5% from the year-ago quarter to $414 million.

Efficiency ratio was 62.3%, down from 65.9% a year ago. A fall in efficiency ratio indicates improvement in profitability.

Strong Balance Sheet

As of Sep 30, 2017, total loans, net of allowance came in at $43.6 billion, up 1.1% from the end of the prior quarter. Total deposits decreased marginally from the prior quarter end to $52.1 billion.

Credit Quality Improves

The ratio of nonperforming assets to loans and leases as well as other real estate owned decreased 31 bps year over year to 1.06%. Further, net charge-offs were $8 million, down 73.3% from the year-ago quarter.

Also, provision for credit losses fell nearly 94% from the year-ago quarter to $1 million.

Capital Ratios Deteriorate, Profitability Improves

Under the Basel III rules, Tier 1 leverage ratio was 10.6%, as of Sep 30, 2017, down from 11.3% at the end of the prior-year quarter. Tier 1 risk-based capital ratio was 13.3%, down from 13.5% in the year-ago quarter.

At the end of the reported quarter, return on average assets was 0.97%, increasing from 0.84% as of Sep 30, 2016. Also, as of Sep 30, 2017, tangible return on average tangible common equity was 9.8%, up from 7.9% a year ago.

Our Viewpoint

Zion's revenue growth is commendable. Also, the company's consistent growth in loans and rising profitability ratios are impressive. Moreover, we are encouraged by exceptional improvement in the company's credit quality.

However, a risky loan portfolio along with concentration risk could hurt the company's financials.

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 and Upcoming Releases of Other Stocks

First Republic Bank's FRC third-quarter 2017 earnings per share came in at $1.14, missing the Zacks Consensus Estimate of $1.16. Despite rising rates, net interest margin disappointed on high deposit costs. However, revenues improved from the prior-year quarter. Additionally, considerable rise in loans and deposit balances were registered.

SVB Financial Group SIVB and First Hawaiian, Inc. FHB are slated to report results on Oct 26.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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