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Analyst Blog

We issued an updated research report on Zions Bancorporation (ZION - Analyst Report) on June 6, 2014. The company initiatives to improve the balance sheet position are commendable. However, we remain skeptical about elevated expenses and continued pressure on net interest margin (NIM).

Zions’ released its first-quarter earnings on Apr 22. Adjusted earnings per share were in line with the Zacks Consensus Estimate but compared unfavorably with the prior-year quarter. Improvement in non-interest income and prudish expense management were tailwinds. However, these positives were offset by a decline in net interest income and lower benefit from provisions.

Zions continues with its efforts to enhance the balance sheet position by disposing of risky collateralized debt obligations (CDOs) from its portfolio. Moreover, the company has witnessed consistent rise in loans and deposits. Therefore, going forward, as investors gain confidence, there remain further scopes of organic growth.

Nonetheless, we remain concerned about the overall subdued interest rate that continues to weigh on Zions’ NIM. Further, the company’s efforts to reduce excess liquidity have not paid off, making Zions more vulnerable in the ongoing subdued economy.

Additionally, the Zacks Consensus Estimate for 2014 decreased 2.2% to $1.78 per share over the last 60 days. For 2015, the Zacks Consensus Estimate declined 3.5% to $1.92 per share over the same time period.

Currently, Zions has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked banks include BofI Holding, Inc. (BOFI - Snapshot Report), Central Pacific Financial Corp. (CPF - Snapshot Report) and CVB Financial Corp. (CVBF - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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