Back to top

Image: Bigstock

Zions' (ZION) Q4 Earnings Beat Estimates, Costs Escalate

Read MoreHide Full Article

Zions Bancorporation (ZION - Free Report) released fourth-quarter and full-year 2017 results. Adjusted earnings for the quarter came in at 80 cents per share, surpassing the Zacks Consensus Estimate of 73 cents. Also, the figure compares favourably with the prior-year quarter’s earnings of 60 cents per share.

Results to a great extent benefited from improvement in both net interest income and non-interest income. Also, the quarter witnessed overall improvement in credit quality. Further, loan growth remained strong. However, higher adjusted non-interest expenses remained a major headwind.

After taking into consideration the tax adjustment relating to the passage of the Tax Act, net income attributable to common shareholders for the quarter came in at $114 million or 54 cents per share.

For 2017, net income attributable to common shareholders was $550 million or $2.60 per share, up from $411 million or $1.99 per share registered in 2016.

Revenues Improve, Costs Escalate

Net revenues were $665 million for the quarter, increasing 9.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $670.6 million.

Net interest income for the quarter came in at $526 million, increasing 9.6% year over year. The rise was primarily attributable to increased interest income, partially offset by higher interest expenses. Further, net interest margin improved 8 basis points (bps) year over year to 3.45%.

Non-interest income amounted to $139 million, up 8.6% from the year-ago quarter. The rise was due to an increase in all components except other income.

Adjusted non-interest expenses increased 5.1% from the year-ago quarter to $415 million.

Efficiency ratio was 61.6%, down from 64.5% a year ago. A fall in efficiency ratio indicates improvement in profitability.

Strong Balance Sheet
    
As of Dec 31, 2017, total loans, net of allowance came in at $44.3 billion, up 1.5% from the end of the prior quarter. Total deposits increased nearly 1% from the prior quarter end to $52.6 billion.

Credit Quality Improves

The ratio of nonperforming assets to loans and leases as well as other real estate owned decreased 41 bps year over year to 0.93%. Further, net charge-offs were $12 million, down 55.6% from the year-ago quarter.

In the reported quarter, the company registered a provision benefit of $12 million compared with almost nil provisions recorded in the prior-year quarter.

Capital & Profitability Ratios Deteriorate

Under the Basel III rules, Tier 1 leverage ratio was 10.5%, as of Dec 31, 2017, down from 11.1% at the end of the prior-year quarter. Tier 1 risk-based capital ratio was 13.2%, down from 13.5% in the year-ago quarter.

At the end of the reported quarter, return on average assets was 0.74%, decreasing from 0.88% as of Dec 31, 2016. Also, as of Dec 31, 2017, tangible return on average tangible common equity was 7.4%, down from 8.4% a year ago.

Our Viewpoint

Zion’s revenue growth is commendable. Also, the company’s consistent growth in loans remains 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 #2 (Buy). 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 fourth-quarter 2017 earnings per share came in at $1.10, missing the Zacks Consensus Estimate of $1.15. However, the figure improved 6.8% from the year-ago tally. Despite rising rates, net interest margin disappointed on high deposit costs. Moreover, higher provisions and expenses were a major drag. However, revenues improved from the prior-year quarter. Additionally, a considerable rise in loans and deposit balances were registered.

SVB Financial Group and First Hawaiian, Inc. (FHB - Free Report) are slated to report results on Jan 25.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Zions Bancorporation, N.A. (ZION) - $25 value - yours FREE >>

First Hawaiian, Inc. (FHB) - $25 value - yours FREE >>

Published in