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Can High Rates Aid Zions (ZION) Q3 Earnings Amid Low Fee Income?
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Zions Bancorporation (ZION - Free Report) is slated to report its third-quarter 2023 results on Oct 18, after market close. Lending activities were muted in the quarter on higher interest rates and an uncertain macroeconomic backdrop. Specifically, demand for commercial and industrial loans (which constitute a large part of Zions’ loan portfolio) remained weak in July and August, per the Federal Reserve’s latest data.
The Zacks Consensus Estimate for average interest-earning assets for the third quarter is pegged at $81.4 billion, indicating a decline of 1.3% from the prior quarter’s reported number. Our estimate for the metric is $81.5 billion.
During the quarter, the Fed continued to tighten its monetary policy (pausing hikes in the September FOMC meeting), raising interest rates by another 25 basis points. The policy rate now stands at a 22-year high of 5.25-5.5%. Nevertheless, the inversion of the yield curve and rising funding costs are expected to weigh on Zions’ net interest margin (NIM) and net interest income (NII) to some extent. But high rates are likely to have offset this.
In early September, at the Barclays Global Financial Conference, ZION presented updates for July and August. It showed marked improvement in NII and NIM for both July and August from the June 2023 level.
The consensus estimate for NII is pegged at $593.2 million, indicating a marginal rise on a sequential basis. Our estimate for the metric is the same as the consensus number.
Other Key Factors & Estimates for Q3
Fee Revenues: The consensus estimate for commercial account fees of $44.36 million implies a quarter-over-quarter fall of 1.4%. Our estimate for the metric is $37 million.
The consensus estimate for dividends and other income of $11.4 million indicates a fall of 56.2% from the previous quarter.
The consensus estimate for retail and business banking fees is pegged at $15.7 million, suggesting a 1.6% decline. We project the metric to be $13.5 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 $25.1 million, suggesting a fall of 6.9%. Our estimate for the metric stands at $22 million.
The consensus estimate for card fees of $25 million suggests a marginal decline from the previous quarter. Our estimate for card fees is $21.3 million.
However, the consensus mark for loan-related fees and income is $19.5 million, implying a quarter-over-quarter increase of 2.7%. Our estimate for the metric is $15.8 million.
The Zacks Consensus Estimate for wealth management fees of $14.2 million indicates a rise of 1.6%. Our estimate for the metric is $11.8 million.
Thus, due to an expected fall in most of the fee income components, total non-interest income is expected to have decreased in the to-be-reported quarter. The Zacks Consensus Estimate for total non-interest income is pegged at $169 million, indicating a decrease of 10.6% sequentially. Our estimate for the metric is pegged at $152.4 million.
Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. As the company continues to invest in franchise and digitize operations, it is expected to witness a rise in operating expenses in the third quarter.
Our estimate for total non-interest expenses is pegged at $491.3 million, indicating a fall of 3.3% sequentially.
Asset Quality: ZION is expected to have set aside a huge amount of money for potential bad loans, given the global slowdown risk due to geopolitical and macroeconomic concerns and tighter financial conditions. Our estimate for provision for credit losses is pegged at $65 million, suggesting a jump of 41.3% from the previous quarter.
The Zacks Consensus Estimate for total non-accrual loans is pegged at $169 million, suggesting a rise of 4.3% from the previous quarter. Our estimate for the metric is pegged at $153.9 million.
The consensus estimate for total non-performing assets of $170 million indicates an increase of 3.7%. We project the metric to be $155.2 million.
What the Zacks Model Predicts
Our proven quantitative model predicts an earnings beat for Zions this time. This is because it has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) — to increase the odds of an earnings beat.
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 +0.21%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Q3 Earnings & Sales Growth Expectations
The Zacks Consensus Estimate for Zions’ third-quarter earnings is pegged at $1.10 per share, suggesting a decline of 21.4% year over year. The estimate has been revised marginally upward over the past seven days. Our estimate for earnings is 95 cents per share.
The consensus estimate for sales is pegged at $769.5 million, indicating a fall of 8.2% from the prior-year reported figure. Our estimate for sales is $754.6 million.
Banks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and M&T Bank Corporation (MTB - Free Report) are a couple of bank stocks that you may want to consider, as these have the right combination of elements to post an earnings beat.
The Earnings ESP for FCNCA is +3.85% and the company currently sports a Zacks Rank #1. It is scheduled to report third-quarter 2023 results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s third-quarter earnings has moved marginally lower over the past week.
MTB is scheduled to release third-quarter 2023 results on Oct 18. It currently has an Earnings ESP of +1.01% and a Zacks Rank #3.
The Zacks Consensus Estimate for MTB’s third-quarter earnings has moved marginally north over the past week.
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Can High Rates Aid Zions (ZION) Q3 Earnings Amid Low Fee Income?
Zions Bancorporation (ZION - Free Report) is slated to report its third-quarter 2023 results on Oct 18, after market close. Lending activities were muted in the quarter on higher interest rates and an uncertain macroeconomic backdrop. Specifically, demand for commercial and industrial loans (which constitute a large part of Zions’ loan portfolio) remained weak in July and August, per the Federal Reserve’s latest data.
The Zacks Consensus Estimate for average interest-earning assets for the third quarter is pegged at $81.4 billion, indicating a decline of 1.3% from the prior quarter’s reported number. Our estimate for the metric is $81.5 billion.
During the quarter, the Fed continued to tighten its monetary policy (pausing hikes in the September FOMC meeting), raising interest rates by another 25 basis points. The policy rate now stands at a 22-year high of 5.25-5.5%. Nevertheless, the inversion of the yield curve and rising funding costs are expected to weigh on Zions’ net interest margin (NIM) and net interest income (NII) to some extent. But high rates are likely to have offset this.
In early September, at the Barclays Global Financial Conference, ZION presented updates for July and August. It showed marked improvement in NII and NIM for both July and August from the June 2023 level.
The consensus estimate for NII is pegged at $593.2 million, indicating a marginal rise on a sequential basis. Our estimate for the metric is the same as the consensus number.
Other Key Factors & Estimates for Q3
Fee Revenues: The consensus estimate for commercial account fees of $44.36 million implies a quarter-over-quarter fall of 1.4%. Our estimate for the metric is $37 million.
The consensus estimate for dividends and other income of $11.4 million indicates a fall of 56.2% from the previous quarter.
The consensus estimate for retail and business banking fees is pegged at $15.7 million, suggesting a 1.6% decline. We project the metric to be $13.5 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 $25.1 million, suggesting a fall of 6.9%. Our estimate for the metric stands at $22 million.
The consensus estimate for card fees of $25 million suggests a marginal decline from the previous quarter. Our estimate for card fees is $21.3 million.
However, the consensus mark for loan-related fees and income is $19.5 million, implying a quarter-over-quarter increase of 2.7%. Our estimate for the metric is $15.8 million.
The Zacks Consensus Estimate for wealth management fees of $14.2 million indicates a rise of 1.6%. Our estimate for the metric is $11.8 million.
Thus, due to an expected fall in most of the fee income components, total non-interest income is expected to have decreased in the to-be-reported quarter. The Zacks Consensus Estimate for total non-interest income is pegged at $169 million, indicating a decrease of 10.6% sequentially. Our estimate for the metric is pegged at $152.4 million.
Expenses: Zions has been witnessing a persistent rise in operating expenses over the past few years. As the company continues to invest in franchise and digitize operations, it is expected to witness a rise in operating expenses in the third quarter.
Our estimate for total non-interest expenses is pegged at $491.3 million, indicating a fall of 3.3% sequentially.
Asset Quality: ZION is expected to have set aside a huge amount of money for potential bad loans, given the global slowdown risk due to geopolitical and macroeconomic concerns and tighter financial conditions. Our estimate for provision for credit losses is pegged at $65 million, suggesting a jump of 41.3% from the previous quarter.
The Zacks Consensus Estimate for total non-accrual loans is pegged at $169 million, suggesting a rise of 4.3% from the previous quarter. Our estimate for the metric is pegged at $153.9 million.
The consensus estimate for total non-performing assets of $170 million indicates an increase of 3.7%. We project the metric to be $155.2 million.
What the Zacks Model Predicts
Our proven quantitative model predicts an earnings beat for Zions this time. This is because it has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) — to increase the odds of an earnings beat.
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 +0.21%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Q3 Earnings & Sales Growth Expectations
The Zacks Consensus Estimate for Zions’ third-quarter earnings is pegged at $1.10 per share, suggesting a decline of 21.4% year over year. The estimate has been revised marginally upward over the past seven days. Our estimate for earnings is 95 cents 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 $769.5 million, indicating a fall of 8.2% from the prior-year reported figure. Our estimate for sales is $754.6 million.
Banks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and M&T Bank Corporation (MTB - Free Report) are a couple of bank stocks that you may want to consider, as these have the right combination of elements to post an earnings beat.
The Earnings ESP for FCNCA is +3.85% and the company currently sports a Zacks Rank #1. It is scheduled to report third-quarter 2023 results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s third-quarter earnings has moved marginally lower over the past week.
MTB is scheduled to release third-quarter 2023 results on Oct 18. It currently has an Earnings ESP of +1.01% and a Zacks Rank #3.
The Zacks Consensus Estimate for MTB’s third-quarter earnings has moved marginally north over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.