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Zions' (ZION) Q4 Earnings Beat Estimates on Higher Revenues

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Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2018 earnings per share of $1.08 surpassed the Zacks Consensus Estimate of $1.06. Also, the figure increased 100% from the prior-year quarter’s earnings of 54 cents.

Results primarily benefited from improvement in net revenues. Balance-sheet position was also strong during the quarter. However, higher adjusted non-interest expenses and provision for credit losses were the headwinds.

Net income attributable to common shareholders for the quarter was $217 million, up 90.4% year over year.

Net income for 2018 attributable to common shareholders was $850 million or $4.08 per share compared with $550 million or $2.6 per share in the prior year.

Revenues Improve, Costs Rise

Net revenues for the quarter came in at $716 million, increasing 7.7% year over year. The top line also beat the Zacks Consensus Estimate of $712.48 million.

Net revenues for 2018 came in at $2.78 billion, increasing 6.6% year over year. The figure came in line with the Zacks Consensus Estimate.

Net interest income for the quarter was $576 million, up 9.5% from the prior-year quarter. The rise was primarily attributable to loan growth and increase in interest and fees on loans, partially offset by higher interest expenses. Further, net interest margin expanded 22 basis points (bps) year over year to 3.67%.

Non-interest income amounted to $140 million, up nearly 1% from the year-ago quarter. The upside mainly stemmed from higher other service charges, commissions and fees.

Adjusted non-interest expenses were $418 million, up nearly 1% from the prior-year quarter.

Efficiency ratio was 57.8%, down from 61.6% reported a year ago. A fall in efficiency ratio indicates improvement in profitability.

Strong Balance Sheet

As of Dec 31, 2018, total net loans came in at $46.2 billion, up 2% from the end of the prior quarter. Total deposits came in at $54.1 billion, up marginally from the third-quarter end.

Credit Quality: A Mixed Bag

The ratio of non-performing assets to loans and leases as well as other real estate owned shrunk 38 bps year over year to 0.55%. Moreover, net loan and lease recoveries were $8 million against charge-offs of $12 million in the prior-year quarter.

Provisions for credit losses were $6 million compared to a benefit of $12 million in the year-earlier quarter.

Capital Ratios Deteriorate, Profitability Ratios Improve

Tier 1 leverage ratio was 10.3% as of Dec 31, 2018, compared with 10.5% at the end of the prior-year quarter. Tier 1 risk-based capital ratio was 12.7%, down from 13.2% in the year-ago quarter.

At the end of the fourth quarter, return on average assets was 1.34%, up from 0.74% as of Dec 31, 2017. Also, as of Dec 31, 2018, tangible return on average tangible common equity was 14.5%, up from 7.4% witnessed as of Dec 31, 2017.

Share Repurchases

During the quarter, Zions repurchased $250 million worth of shares.

Our Viewpoint

Zions’ top-line performance looks encouraging. We are also impressed with the company’s ability to boost its net interest income. However, higher provisions and significant exposure to risky loan portfolios might dent its financials.

Zions Bancorporation Price, Consensus and EPS Surprise

 

Zions Bancorporation Price, Consensus and EPS Surprise | Zions Bancorporation 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

Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s (SNV - Free Report) fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation’s (HWC - Free Report) fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. The reported figure, however, came in 30.2% higher than the year-ago tally.

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