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Zions' (ZION) Q1 Earnings Miss Estimates, Provisions Rise
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Zions Bancorporation’s (ZION - Free Report) first-quarter 2023 net earnings per share of $1.33 lagged the Zacks Consensus Estimate of $1.51. The bottom line increased 4.7% from the year-ago quarter. We had projected earnings of $1.39 per share.
Results were adversely impacted by higher provisions, a rise in non-interest expenses and lower deposit balances. However, there was an improvement in net interest income (NII), which was driven by rising rates and decent loan demand. Non-interest income also increased for the quarter.
Net income attributable to common shareholders was $198 million, up 1.5% year over year. Our estimate for the metric was $205.8 million.
Revenues Improve, Expenses Rise
Net revenues (tax equivalent) were $848 million, jumping 22.2% year over year. The top line also surpassed the Zacks Consensus Estimate of $844.3 million. Our estimate for the metric was $856.8 million.
NII was $679 million, growing 24.8%. The rise was mainly driven by higher interest rates and a favorable change in the composition of interest-earning assets. Likewise, the net interest margin (NIM) expanded 73 basis points (bps) to 3.33%. Our estimates for NII and NIM were $661.2 million and 3.21%, respectively.
Non-interest income was $160 million, increasing 12.7%. This was mainly attributable to a rise in capital markets fees, commercial account fees and dividends and other income. We had projected a non-interest income of $185.7 million. In the reported quarter, the company recorded a net securities gain of $1 million against a loss of $17 million in the prior-year quarter.
Adjusted non-interest expenses were $509 million, up 9.7%. We had expected this metric to be $519.1 million.
The efficiency ratio was 59.9%, down from 65.8% in the prior-year period. A fall in the efficiency ratio indicates an improvement in profitability.
As of Mar 31, 2023, net loans and leases held for investment were $55.7 billion, up 1.1% from the prior quarter. Total deposits were $69.2 billion, down 3.4% sequentially.
Credit Quality: Mixed Bag
The ratio of non-performing assets to loans and leases, as well as other real estate owned, contracted 18 bps year over year to 0.31%. In the reported quarter, the company recorded nil net loan and lease charge-offs compared with $6 million in the prior-year quarter.
The provision for credit losses was $45 million against a benefit of $33 million in the year-earlier quarter. We had projected provisions of $59.7 million for the first quarter.
Capital Ratios and Profitability Ratios Solid
Tier 1 leverage ratio was 7.8% as of Mar 31, 2023 compared with 7.3% at the end of the prior-year quarter. Tier 1 risk-based capital ratio of 10.6% decreased from 10.8%.
Further, as of Mar 31, 2023, the common equity tier 1 capital ratio was 9.9%, which declined from 10% in the prior-year period.
At the end of the first quarter, the return on average assets was 0.91%, up from 0.90% as of Mar 31, 2022. Also, the return on average tangible common equity was 12.3%, down from 12.9% in the year-ago quarter.
Share Repurchases
The company repurchased 0.9 million shares for $50 million in the reported quarter.
Our Take
Zions’ strong balance-sheet position, business-simplifying efforts, higher interest rates and a rise in loan demand bode well for the future. However, persistently increasing operating expenses and deteriorating economic outlook are near-term concerns.
Zions Bancorporation, N.A. Price, Consensus and EPS Surprise
Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter.
HWC's results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.
The PNC Financial Services Group, Inc.’s (PNC - Free Report) first-quarter 2023 earnings per share of $3.98 surpassed the Zacks Consensus Estimate of $3.60. The bottom line improved 21% year over year.
PNC’s results were aided by an increase in NII, supported by higher rates and loan growth. However, rising expenses and higher provisions were headwinds.
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Zions' (ZION) Q1 Earnings Miss Estimates, Provisions Rise
Zions Bancorporation’s (ZION - Free Report) first-quarter 2023 net earnings per share of $1.33 lagged the Zacks Consensus Estimate of $1.51. The bottom line increased 4.7% from the year-ago quarter. We had projected earnings of $1.39 per share.
Results were adversely impacted by higher provisions, a rise in non-interest expenses and lower deposit balances. However, there was an improvement in net interest income (NII), which was driven by rising rates and decent loan demand. Non-interest income also increased for the quarter.
Net income attributable to common shareholders was $198 million, up 1.5% year over year. Our estimate for the metric was $205.8 million.
Revenues Improve, Expenses Rise
Net revenues (tax equivalent) were $848 million, jumping 22.2% year over year. The top line also surpassed the Zacks Consensus Estimate of $844.3 million. Our estimate for the metric was $856.8 million.
NII was $679 million, growing 24.8%. The rise was mainly driven by higher interest rates and a favorable change in the composition of interest-earning assets. Likewise, the net interest margin (NIM) expanded 73 basis points (bps) to 3.33%. Our estimates for NII and NIM were $661.2 million and 3.21%, respectively.
Non-interest income was $160 million, increasing 12.7%. This was mainly attributable to a rise in capital markets fees, commercial account fees and dividends and other income. We had projected a non-interest income of $185.7 million. In the reported quarter, the company recorded a net securities gain of $1 million against a loss of $17 million in the prior-year quarter.
Adjusted non-interest expenses were $509 million, up 9.7%. We had expected this metric to be $519.1 million.
The efficiency ratio was 59.9%, down from 65.8% in the prior-year period. A fall in the efficiency ratio indicates an improvement in profitability.
As of Mar 31, 2023, net loans and leases held for investment were $55.7 billion, up 1.1% from the prior quarter. Total deposits were $69.2 billion, down 3.4% sequentially.
Credit Quality: Mixed Bag
The ratio of non-performing assets to loans and leases, as well as other real estate owned, contracted 18 bps year over year to 0.31%. In the reported quarter, the company recorded nil net loan and lease charge-offs compared with $6 million in the prior-year quarter.
The provision for credit losses was $45 million against a benefit of $33 million in the year-earlier quarter. We had projected provisions of $59.7 million for the first quarter.
Capital Ratios and Profitability Ratios Solid
Tier 1 leverage ratio was 7.8% as of Mar 31, 2023 compared with 7.3% at the end of the prior-year quarter. Tier 1 risk-based capital ratio of 10.6% decreased from 10.8%.
Further, as of Mar 31, 2023, the common equity tier 1 capital ratio was 9.9%, which declined from 10% in the prior-year period.
At the end of the first quarter, the return on average assets was 0.91%, up from 0.90% as of Mar 31, 2022. Also, the return on average tangible common equity was 12.3%, down from 12.9% in the year-ago quarter.
Share Repurchases
The company repurchased 0.9 million shares for $50 million in the reported quarter.
Our Take
Zions’ strong balance-sheet position, business-simplifying efforts, higher interest rates and a rise in loan demand bode well for the future. However, persistently increasing operating expenses and deteriorating economic outlook are near-term concerns.
Zions Bancorporation, N.A. Price, Consensus and EPS Surprise
Zions Bancorporation, N.A. price-consensus-eps-surprise-chart | Zions Bancorporation, N.A. Quote
Currently, Zions carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter.
HWC's results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.
The PNC Financial Services Group, Inc.’s (PNC - Free Report) first-quarter 2023 earnings per share of $3.98 surpassed the Zacks Consensus Estimate of $3.60. The bottom line improved 21% year over year.
PNC’s results were aided by an increase in NII, supported by higher rates and loan growth. However, rising expenses and higher provisions were headwinds.