It has been about a month since the last earnings report for Zions (
ZION Quick Quote ZION - Free Report) . Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Zions Q4 Earnings Beat Estimates, Revenues Improve Y/Y
Zions’ fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.
Results for the quarter were aided by an increase in non-interest income and lower expenses. Moreover, the company recorded negative provision for credit losses, which was a major positive. However, a decline in net interest income (NII) was an undermining factor. Net income attributable to common shareholders was $275 million, up from the prior-year quarter’s $174 million. For 2020, net earnings per share of $3.02 surpassed the Zacks Consensus Estimate of $2.38. However, the figure declined 27.4% year over year. Net income attributable to common shareholders was $505 million, down from $782 million recorded a year ago. Revenues Improve Marginally, Expenses Decline
Net revenues for the reported quarter (on a taxable-equivalent basis) were $723 million, up marginally year over year. Also, the top line surpassed the Zacks Consensus Estimate of $701 million.
In 2020, net revenues of $2.82 billion declined 1.5% from the previous year. However, the figure outpaced the Zacks Consensus Estimate of $2.80 billion. Quarterly NII (taxable equivalent) was $557 million, down 1.6% from the prior-year quarter. NIM contracted 51 basis points (bps) year over year to 2.95%. Non-interest income amounted to $166 million, up 9.2% from the year-ago quarter. The increase was driven by a rise in total customer-related fees, fair value and non-hedge derivative income, and net securities gains. Adjusted non-interest expenses were $423 million, declining 2.8% from the prior-year quarter. Efficiency ratio was 60.2%, down from 61.3% reported in the prior-year period. A fall in efficiency ratio indicates higher profitability. Balance Sheet Strong
As of Dec 31, 2020, net loans held for investment were $52.7 billion, down from $53.9 billion recorded at the end of the prior quarter. Total deposits were $69.7 billion, up from $67.1 billion recorded at the end of third-quarter 2020.
Credit Quality: Mixed Bag
The ratio of non-performing assets to loans and leases as well as other real estate owned expanded 18 bps year over year to 0.69%.
However, net loan and lease charge-offs were $15 million at the end of the reported quarter compared with $22 million witnessed in the year-earlier quarter. Also, provision for credit losses was a negative $67 million against a positive $4 million reported in the year-earlier quarter. Capital Ratios Mixed, Profitability Ratios Improve
Tier 1 leverage ratio was 8.3% as of Dec 31, 2020, compared with 9.2% recorded at the end of the prior-year quarter. Tier 1 risk-based capital ratio of 11.8% increased from 11.2% recorded in the prior-year quarter end.
At the end of the December quarter, return on average assets was 1.41%, up from 1.04% as of Dec 31, 2019. Also, return on average tangible common equity was 17.8%, up from 11.8% witnessed in the year-ago quarter. 2021 Outlook
Management expects loan balance to improve modestly, excluding paycheck protection program (PPP) loans. Further, NII is projected to rise slightly on the assumptions that benchmark rates are consistent with the forward curve.
Customer related fees (excluding securities gains and dividends) are expected to grow marginally. On the cost front, adjusted non-interest expenses are likely to remain relatively stable. Further, the company expects total non-interest expenses (GAAP basis) to be roughly on par with the 2020 level of $1.7 billion. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 12.75% due to these changes.
At this time, Zions has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.