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Higher Interest Rates to Support Zions (ZION) in Q2 Earnings
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Zions Bancorporation (ZION - Free Report) is slated to report second-quarter 2023 results on Jul 19, after market close. Lending activities gradually waned in the quarter on higher interest rates and a challenging macroeconomic backdrop. Specifically, the demand for commercial and industrial loans (constituting a major portion of Zions’ loan portfolio) was soft in April and May.
The Zacks Consensus Estimate for the company’s average interest-earning assets for the second quarter is pegged at $84 billion, which indicates a marginal decline from the prior-year quarter’s reported number.
Nevertheless, the Federal Reserve continued to tighten its monetary policy, raising interest rates by another 25 basis points during the quarter, while pausing rate hikes in the June FOMC meeting. The policy rate now stands at 5-5.25%.
Thus, while the inversion of the yield curve and rising funding costs are expected to have negatively impacted Zions’ net interest margin (NIM) in the second quarter, the company’s net interest income (NII), which is its main revenue component, is expected to have improved on higher rates. The consensus estimate for NII for the second quarter is pegged at $609 million, indicating a year-over-year rise of 2.7%. Our estimate for the metric is $630.1 million, reflecting an increase of 6.3%.
The company expects second-quarter NII to decline 7% sequentially, given the hastening of deposit repricing beta and balance sheet changes.
Other Key Factors & Estimates for Q2
Fee Revenues: The consensus estimate for commercial account fees of $41.88 million implies a year-over-year rise of 13.2%. The Zacks Consensus Estimate for wealth management fees of $14.90 million indicates a rise of 14.6%.
The consensus estimate for dividends and other income of $9.06 million indicates a rise of 29.4% from the prior-year quarter’s reported number. We project the metric to rise 57.1% to $11 million.
However, the consensus estimate for card fees of $24.57 million suggests a decline of 1.7% from the previous year’s reported figure. Our estimate for card fees is $18.5 million, which implies a year-over-year decline of 26%.
The consensus estimate for retail and business banking fees is pegged at $15.96 million, suggesting a 20.2% year-over-year decline. We project the metric to fall 39% to $12.2 million.
Subdued volatility across markets and products is likely to have hurt Zions’ capital markets and foreign exchange fees. The consensus estimate for the same is $18.21 million, which reflects a year-over-year decline of 13.3%. Our estimate for the metric is $15 million, indicating a 28.5% fall.
The consensus mark for loan-related fees and income is $20.50 million, implying a year-over-year decline of 2.4%. Our estimate for the metric is $14 million, indicating a decline of 33.4%.
Thus, due to an expected decline in most of the fee income components, total non-interest income is expected to have fallen in the to-be-reported quarter. The Zacks Consensus Estimate for total non-interest income is pegged at $159 million, indicating a fall of 7.6% from the prior-year quarter’s reported figure. Our estimate for the metric is pegged at $119.6 million, suggesting a 30.4% decline.
Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. The company has been investing in franchise, which, along with inflationary pressure, is expected to have kept operating expenses elevated in the second quarter.
Our estimate for total non-interest expenses is pegged at $460.1 million.
Asset Quality: ZION is expected to have set aside money for potential bad loans, given the global recession risk due to geopolitical and macroeconomic concerns and tighter financial conditions. Our estimate for provision for credit losses for the second quarter is pegged at $49.2 million, indicating a rise of 20% from the year-ago quarter.
The Zacks Consensus Estimate for total non-accrual loans is pegged at $189 million, suggesting a decline of 6% from the prior-year quarter’s reported figure. The consensus estimate for total non-performing assets of $192 million indicates a year-over-year fall of 4.5%.
What the Zacks Model Predicts
According to our quantitative model, the chances of Zions beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
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 -2.72%.
Zacks Rank: The company currently carries a Zacks Rank #5 (Strong Sell).
Q2 Earnings & Sales Growth Expectations
The Zacks Consensus Estimate for Zions’ second-quarter earnings is pegged at $1.16 per share, which indicates a decline of 10.1% from the year-ago quarter’s reported number. The estimate has been revised 1.7% lower over the past seven days. Our estimate for earnings is $1.12 per share.
The consensus estimate for sales is pegged at $757.3 million, which indicates a decline of 2.2% from the prior-year reported figure. Our estimate for sales is $758.3 million, suggesting a 2% decline.
Stocks That Warrant a Look
A couple of finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around, are Wells Fargo (WFC - Free Report) and Moody's Corporation (MCO - Free Report) .
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Higher Interest Rates to Support Zions (ZION) in Q2 Earnings
Zions Bancorporation (ZION - Free Report) is slated to report second-quarter 2023 results on Jul 19, after market close. Lending activities gradually waned in the quarter on higher interest rates and a challenging macroeconomic backdrop. Specifically, the demand for commercial and industrial loans (constituting a major portion of Zions’ loan portfolio) was soft in April and May.
The Zacks Consensus Estimate for the company’s average interest-earning assets for the second quarter is pegged at $84 billion, which indicates a marginal decline from the prior-year quarter’s reported number.
Nevertheless, the Federal Reserve continued to tighten its monetary policy, raising interest rates by another 25 basis points during the quarter, while pausing rate hikes in the June FOMC meeting. The policy rate now stands at 5-5.25%.
Thus, while the inversion of the yield curve and rising funding costs are expected to have negatively impacted Zions’ net interest margin (NIM) in the second quarter, the company’s net interest income (NII), which is its main revenue component, is expected to have improved on higher rates. The consensus estimate for NII for the second quarter is pegged at $609 million, indicating a year-over-year rise of 2.7%. Our estimate for the metric is $630.1 million, reflecting an increase of 6.3%.
The company expects second-quarter NII to decline 7% sequentially, given the hastening of deposit repricing beta and balance sheet changes.
Other Key Factors & Estimates for Q2
Fee Revenues: The consensus estimate for commercial account fees of $41.88 million implies a year-over-year rise of 13.2%. The Zacks Consensus Estimate for wealth management fees of $14.90 million indicates a rise of 14.6%.
The consensus estimate for dividends and other income of $9.06 million indicates a rise of 29.4% from the prior-year quarter’s reported number. We project the metric to rise 57.1% to $11 million.
However, the consensus estimate for card fees of $24.57 million suggests a decline of 1.7% from the previous year’s reported figure. Our estimate for card fees is $18.5 million, which implies a year-over-year decline of 26%.
The consensus estimate for retail and business banking fees is pegged at $15.96 million, suggesting a 20.2% year-over-year decline. We project the metric to fall 39% to $12.2 million.
Subdued volatility across markets and products is likely to have hurt Zions’ capital markets and foreign exchange fees. The consensus estimate for the same is $18.21 million, which reflects a year-over-year decline of 13.3%. Our estimate for the metric is $15 million, indicating a 28.5% fall.
The consensus mark for loan-related fees and income is $20.50 million, implying a year-over-year decline of 2.4%. Our estimate for the metric is $14 million, indicating a decline of 33.4%.
Thus, due to an expected decline in most of the fee income components, total non-interest income is expected to have fallen in the to-be-reported quarter. The Zacks Consensus Estimate for total non-interest income is pegged at $159 million, indicating a fall of 7.6% from the prior-year quarter’s reported figure. Our estimate for the metric is pegged at $119.6 million, suggesting a 30.4% decline.
Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. The company has been investing in franchise, which, along with inflationary pressure, is expected to have kept operating expenses elevated in the second quarter.
Our estimate for total non-interest expenses is pegged at $460.1 million.
Asset Quality: ZION is expected to have set aside money for potential bad loans, given the global recession risk due to geopolitical and macroeconomic concerns and tighter financial conditions. Our estimate for provision for credit losses for the second quarter is pegged at $49.2 million, indicating a rise of 20% from the year-ago quarter.
The Zacks Consensus Estimate for total non-accrual loans is pegged at $189 million, suggesting a decline of 6% from the prior-year quarter’s reported figure. The consensus estimate for total non-performing assets of $192 million indicates a year-over-year fall of 4.5%.
What the Zacks Model Predicts
According to our quantitative model, the chances of Zions beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
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 -2.72%.
Zacks Rank: The company currently carries a Zacks Rank #5 (Strong Sell).
Q2 Earnings & Sales Growth Expectations
The Zacks Consensus Estimate for Zions’ second-quarter earnings is pegged at $1.16 per share, which indicates a decline of 10.1% from the year-ago quarter’s reported number. The estimate has been revised 1.7% lower over the past seven days. Our estimate for earnings is $1.12 per share.
Zions Bancorporation, N.A. Price and EPS Surprise
Zions Bancorporation, N.A. price-eps-surprise | Zions Bancorporation, N.A. Quote
The consensus estimate for sales is pegged at $757.3 million, which indicates a decline of 2.2% from the prior-year reported figure. Our estimate for sales is $758.3 million, suggesting a 2% decline.
Stocks That Warrant a Look
A couple of finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around, are Wells Fargo (WFC - Free Report) and Moody's Corporation (MCO - Free Report) .
The Earnings ESP for Wells Fargo is +0.16% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2023 results on Jul 14. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MCO is scheduled to release quarterly results on Jul 25. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +3.00%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.