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Low Rates, Muted Loan Growth to Mar Zions' (ZION) Q3 Earnings

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Zions Bancorporation (ZION - Free Report) is scheduled to report third-quarter 2020 results on Oct 19, after market close. The overall lending scenario was not very impressive in the third quarter. In fact, commercial and industrial loan balances (constituting a large part of Zions’ loan portfolio), which witnessed significant growth in the second quarter, witnessed a considerable decline in the to-be-reported quarter.

Moreover, the Zacks Consensus Estimate for Zions’ average interest-earning assets for the third quarter is pegged at $70.8 billion, which indicates a marginal decline from the previous quarter’s reported number.

Thus, owing to muted loan growth along with near-zero interest rates, Zions’ net interest income (NII) — which is its main revenue component — is not expected to have improved in the quarter. The consensus estimate for NII of $559 million indicates a 1% decline sequentially.

Now, let’s have a look at the other key factors that are likely to have impacted Zions’ third-quarter performance.

Fee Revenues: Continued stay-at-home orders led to people buying new homes, which resulted in a rise in mortgage originations in the third quarter. Moreover, there was a substantial rise in refinancing activities, owing to historically low mortgage rates. Owing to these factors, the company’s loan sales and servicing income are likely to have improved in the quarter.

Moreover, commercial account fee is expected to have been positively impacted. The consensus estimate for the same is pegged at $30.46 million, which indicates a rise of 1.5% sequentially.

Although overall consumer banking activities were strained in the third quarter due to the continuation of economic slowdown because of the pandemic, consumer spending witnessed some improvement from the first half of the year. Thus, Zions’ card fee is expected to have improved in the quarter. The consensus estimate for card fees of $20.18 million indicates a 6.2% rise sequentially.

The Zacks Consensus Estimate for retail and business banking fees of $16.36 million for the quarter indicates a 9.1% rise from the prior quarter. Further, the Zacks Consensus Estimate for wealth management and trust fees of $15.60 million indicates a 4% rise from the previous quarter.

Owing to an expected rise in almost all components of customer-related fee, total customer-related fee (accounting for more than 85% of total fee revenues) is expected to have been positively impacted. The Zacks Consensus Estimate for the same is pegged at $134 million for the third quarter, which indicates an increase of 3.1% sequentially.

Notably, dividend and other income are likely to have risen in the quarter as well. The Zacks Consensus Estimate for the same of $4.75 million indicates an improvement of 58.3% from the prior quarter.

Therefore, driven by an increase in total customer-related fee as well as dividend income, total fee revenues are likely to have improved in the quarter. The consensus estimate for total non-interest income for the third quarter is pegged at $138 million, which indicates a rise of 17.9% on a sequential basis.

Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. In fact, as the company continues to invest in franchise, overall costs are expected to have remained elevated in the third quarter as well.

Asset Quality: The Zacks Consensus Estimate for total non-performing loans for the third quarter is pegged at $375 million, suggesting a 10.6% rise from the prior quarter.

What Our Quantitative Model Predicts

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate this time are high. This is because it has 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 +5.38%.

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

Q3 Earnings & Sales Growth Expectations

The Zacks Consensus Estimate for Zions’ earnings is pegged at 86 cents for the to-be-reported quarter, which suggests a decline of 26.5% year over year. The figure has been revised 8.9% upward over the past seven days.

The consensus estimate for the company’s sales is pegged at $708.85 million, which indicates a marginal decline from the prior-year reported figure.

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

Other Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for CullenFrost Bankers, Inc. (CFR - Free Report) is +2.61% and the company carries a Zacks Rank of 3, at present. It is slated to report quarterly results on Oct 29. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huntington Bancshares Incorporated (HBAN - Free Report) is set to release earnings figures on Oct 22. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +2.88%.

The Earnings ESP for Civista Bancshares, Inc. (CIVB - Free Report) is +26.31% and the company carries a Zacks Rank #2 (Buy), currently. It is scheduled to report quarterly numbers on Oct 23.

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