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Zions (ZION) to Report Q2 Earnings: What's in the Cards?

Zions Bancorporation ZION is scheduled to report second-quarter 2020 results on Jul 20, after market close. During the quarter, the overall lending scenario was muted, while there was substantial growth in commercial and industrial loans (constituting large part of Zions’ loan portfolio).

Moreover, the Zacks Consensus Estimate for average interest-earning assets of $70.9 billion suggests a 8.4% rise from the prior quarter. Thus, Zions’ net interest income (NII) — which is the main revenue component — is expected to have improved in the to-be-reported quarter despite lower interest rates. The consensus estimate for NII is pegged at $575 million, indicating growth of 4.9% sequentially.

Given near-zero interest rates, the company’s net interest margin is likely to have contacted in the second quarter. In addition, management expects the yield on earning assets to decline, which will reflect the reduction in interest rates in March.

Other Factors to Influence Zions’ Q2 Results

Fee Revenues Did Not Offer Much Support: Historically low mortgage rates are expected to have led to a significant rise in refinancing activities during the second quarter. However, new mortgage originations was muted. Hence, loan sales and servicing income are likely to have improved in the quarter.

However, the consensus estimate for commercial account fees of $30.4 million indicates a 1.9% decline sequentially.

Further, the consensus estimate for card fees of $17.8 million indicates fall of 15.2%, mainly due to dismal consumer loan demand. Likewise, the Zacks Consensus Estimate for retail and business banking fees of $16.8 million for the quarter indicates a 11.6% decline from the prior quarter.

The Zacks Consensus Estimate for wealth management and trust fees of $15.2 million indicates a 5% decline from the previous quarter.

Thus, total customer-related fee is not expected to have improved in the quarter. The Zacks Consensus Estimate for the same is pegged at $129 million, which indicates a decrease of 9.7% sequentially.

Total customer-related fees (accounting for more than 85% of total fee revenues) are likely to have declined. On account of this, total fee revenues are likely to have been negatively impacted. Nonetheless, dividend and other income are likely to have risen in the second quarter. The Zacks Consensus Estimate for the same of $9 million indicates a substantial improvement from the prior quarter.

Therefore, the consensus estimate for total non-interest income is pegged at $136 million, which indicates a rise of 1.5% on a sequential basis.

Expenses to Decline: With Zions undertaking several cost-control initiatives, operating expenses are likely to have declined during the second quarter. Nevertheless, as the majority of employees worked from home, there is likely to have been an increase in technology-related costs.

Asset Quality to Worsen: As Zions is likely to have built additional loan loss reserves owing to the worsening and uncertain macro-economic backdrop, provisions are expected to have risen substantially in the second quarter.

Notably, the Zacks Consensus Estimate for non-performing loans of $305 million suggests a 11.3% rise from the prior quarter. Further, management expects net charge-offs to increase.

What Our Quantitative Model Predicts

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate are low this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Zions is -10.36%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Zions Bancorporation, N.A. Price and EPS Surprise

Zions Bancorporation, N.A. Price and EPS Surprise

Zions Bancorporation, N.A. price-eps-surprise | Zions Bancorporation, N.A. Quote

Q2 Earnings & Sales Growth Expectations

The Zacks Consensus Estimate for Zions’ earnings is pegged at 37 cents for the to-be-reported quarter, which suggests a decline of 62.6% year over year. The figure has been revised 9.8% downward over the past seven days.

The consensus estimate for the company’s sales is pegged at $694.1 million, which indicates a decline of 1% from the prior-year reported figure.

Stocks That Warrant a Look

Here are some bank stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases.

Bank OZK OZK is slated to release quarterly results on Jul 23. The company has an Earnings ESP of +52.86% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Associated Banc-Corp ASB is +7.31% and the company presently carries a Zacks Rank #3. It is scheduled to report quarterly numbers on Jul 23.

SVB Financial Group SIVB is slated to report quarterly numbers of Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +6.71%.

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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.

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