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Will Loan Growth & Fee Income Aid Zions' (ZION) Q1 Earnings?

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Zions Bancorporation (ZION - Free Report) is scheduled to announce first-quarter 2018 results on Apr 23, after market close. Its revenues and earnings for the quarter are projected to grow year over year.

Last quarter, Zions’ earnings outpaced the Zacks Consensus Estimate. Higher revenues and benefit from provisions aided results. However, higher adjusted non-interest expenses was the undermining factor.

Also, the company boasts an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and matched it in one of the trailing four quarters, with an average beat of 10.1%.

Zions Bancorporation Price and EPS Surprise

 

Zions Bancorporation Price and EPS Surprise | Zions Bancorporation Quote

Factors to Influence Q1 Results

Increase in net interest income: Per the Fed’s latest data, commercial and industrial loans (constituting a large part of Zions’ loan portfolio) recorded robust improvement in the first quarter, while growth in commercial real estate loans remained modest. Overall, the quarter witnessed a marginal improvement in lending activities on a year-over-year basis.

Thus, modest loan growth along with higher interest rates will likely support the bank’s net interest income in the to-be-reported quarter.

Notably, Zions expects net interest margin for the first quarter to remain stable sequentially. Benefits from the December rate hike will likely be offset by the effect of tax reform and its impact on the municipal loan and securities portfolio yield.

Modest fee income growth: Zions’ first-quarter non-interest income will benefit from rise in service charge on deposits as deposit balance is expected to increase in the quarter. Also, as trading activities improved during the quarter, the company’s capital markets and foreign exchange fees are expected to rise.

On the other hand, loan sales and servicing income are anticipated to fall as mortgage banking activities continued to be hurt by higher rates. Thus, Zions’ non-interest income is expected to witness a slight increase in to-be-reported quarter.

Expenses not to lend much support: Despite undertaking a number of cost control initiatives, Zions’ adjusted non-interest expenses are expected to increase in the to-be-reported quarter due to its continued spending on technology systems overhaul and investment in franchise.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate in the first quarter are low. This is because it doesn’t have the right combination of the two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Zions is -1.21%.

Zacks Rank: Zions has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of the earnings beat.

Nonetheless, Zions’ activities in the first quarter encouraged analysts to revise earnings estimates upward. As a result, the Zacks Consensus Estimate for earnings of 83 cents for the quarter increased 1.2% over the last 30 days. It reflects year-over-year improvement of 36.1%.

The Zacks Consensus Estimate for revenues for the first quarter is $666.1 million, which reflects improvement of 7.3% year over year.

Stocks That Warrant a Look

Here are a few stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Capital One Financial Corporation (COF - Free Report) has an Earnings ESP of +0.79% and carries a Zacks Rank of 3. The company is slated to release results on Apr 24.

BOK Financial Corporation (BOKF - Free Report) is slated to report first-quarter 2018 results on Apr 25. It has an Earnings ESP of +0.24% and a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

New York Community Bancorp (NYCB - Free Report) is slated to release results on Apr 25. It has an Earnings ESP of +0.14% and carries a Zacks Rank #3.

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