Zions BancorporationZION reported fourth-quarter 2016 earnings of 60 cents per share, which handily surpassed the Zacks Consensus Estimate of 52 cents. Moreover, the figure compared favorably with the year-ago earnings of 43 cents.
Better-than-expected quarterly results largely benefited from higher revenues and provisions. Also, driven by cost saving efforts, the company recorded a marginal fall in operating expenses. Further, growth in deposits and stable loan balances supported the results. However, deteriorating asset quality and capital position remained headwinds.
Net income applicable to common shareholders came in at $125 million, up 41.7% from the year-ago quarter.
For 2016, earnings of $1.99 per share beat the Zacks Consensus Estimate of $1.92. Also, it was up 65.8% year over year. Net income available to common shareholders was $411.3 million, an increase of 66.8% from 2015.
Rising Revenues Support Results
Net revenues (FTE basis) for the quarter were $608.7 million, up 7.3% year over year. However, the figure lagged the Zacks Consensus Estimate of $612.7 million.
For 2016, net revenues (on FTE basis) grew 13% year over year to $2.38 billion. Nonetheless, this was below the Zacks Consensus Estimate of $2.40 billion.
Net interest income increased 7% year over year to $480.5 million. Further, net interest margin improved 14 basis points (bps) year over year to 3.37%.
Non-interest income amounted to $128.2 million, up 8.1% from the year-ago quarter. The improvement reflected an increase in all fee income components except loan sales and servicing income, capital markets and foreign exchange as well as net equity securities losses.
Adjusted non-interest expenses fell 1% from the year-ago quarter to $395.1 million. Further, efficiency ratio was 64.5%, down from 69.6% a year ago. A fall in efficiency ratio indicates an improvement in profitability.
Strong Balance Sheet
As of Dec 31, 2016, total loans, net of allowance, were almost in line with the prior quarter at $42.1 billion. Also, total deposits rose 4.7% from the previous quarter to $53.2 billion.
Credit Quality Weakened
The ratio of nonperforming lending-related assets to net loans and leases as well as other real estate owned increased 50 bps year over year to 1.34%. Further, net charge-offs were $27 million, up from $13 million in the year-ago quarter.
Nonetheless, benefits from provisions for loan losses were $2.7 million, compared with a provision of $22.7 million in the prior-year quarter.
Capital Ratios Deteriorated but Profitability Improved
Under the Basel III rules, Tier 1 leverage ratio came in at 11.1%, as of Dec 31, 2016, down from 11.3% in the prior-year quarter. Tier 1 risk-based capital ratio came in at 13.5% compared with 14.1% in the year-ago quarter.
Return on average assets was 0.89% as of Dec 31, 2016, up from 0.68% as of Dec 31, 2015. Also, as of Dec 31, 2016, tangible return on average tangible common equity was 8.40%, up from 6.20% a year ago.
Zions remains well positioned for future growth based on consistent improvement in loans and deposits. Also, the company's efforts to restructure its balance sheet continue to be impressive. Further, its persistent cost control initiatives should continue supporting the bottom line.
Zions Bancorporation Price, Consensus and EPS Surprise
Currently, Zions sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Performance of Other West Banks
First Republic Bank's FRC earnings per share for fourth-quarter 2016 came in at $1.03, beating the Zacks Consensus Estimate by a penny. Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. On the flip side, higher expenses remained a headwind.
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