Shares of Zions Bancorporation ZION gained 3.5% in response to better-than-expected first-quarter 2024 results. Adjusted net earnings per share of $1.03 surpassed the Zacks Consensus Estimate of $1.00. However, the bottom line decreased 26% from the year-ago quarter.

Results were primarily aided by lower provisions and stable adjusted expenses. However, a decline in net interest income (NII) and non-interest income, and a fall in loan balance were major headwinds.

Results in the reported quarter excluded the FDIC special assessment charge. After considering it, net income attributable to common shareholders was $143 million, plunging 28% year over year. We had projected the metric to be $134.3 million.

Revenues Decline, Expenses Stable

Net revenues (tax equivalent) were $752 million, down 11% year over year. The top line, however, beat the Zacks Consensus Estimate of $747.2 million.

NII was $583 million, declining 14%. The fall was mainly due to higher funding costs. Likewise, net interest margin (NIM) shrunk 39 basis points (bps) to 2.94%. Our estimates for NII and NIM were $581.7 million and 2.91%, respectively.

Non-interest income came in at $156 million, decreasing 3%. We had projected non-interest income to be $152.5 million.

Adjusted non-interest expenses were relatively stable at $511 million. Our estimate for the metric was the same as the reported number.

Adjusted efficiency ratio was 67.9%, up from 59.9% in the prior-year period. A rise in the efficiency ratio indicates a decrease in profitability.

As of Mar 31, 2024, net loans and leases held for investment were $57.4 billion, rising 1% from the prior quarter. Total deposits were $74.2 billion, down 1%.

Credit Quality: Mixed Bag

The ratio of non-performing assets to loans and leases, as well as other real estate owned, expanded 13 bps year over year to 0.44%. In the reported quarter, the company recorded net loan and lease charge-offs of $6 million against nil net loan and lease charge-offs in the prior-year quarter.

Provision for credit losses was $13 million in the reported quarter, down 71% from the year-ago quarter.

Capital Ratios Improve, Profitability Ratios Deteriorate

Tier 1 leverage ratio was 8.4% as of Mar 31, 2024, up from 7.8% at the end of the prior-year quarter. Tier 1 risk-based capital ratio of 11% increased from 10.6%.

Further, as of Mar 31, 2024, common equity tier 1 capital ratio was 10.4%, up from 9.9% in the prior-year period.

At the end of the first quarter, the return on average assets was 0.70%, down from 0.91% as of Mar 31, 2023. Return on average tangible common equity was 13.7%, down from 22.7% in the year-ago quarter.



Share Repurchase Update

During the reported quarter, the company repurchased 0.9 million shares for $35 million.

Our Take

Zions’ decent balance sheet position, business-simplifying efforts and higher interest rates bode well for the future. However, persistently increasing operating expenses, high funding costs and uncertain macroeconomic outlook are concerns.

Zions Bancorporation, N.A. Price, Consensus and EPS Surprise 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

First Horizon Corporation’s FHN first-quarter 2024 adjusted earnings per share (excluding notable items) of 35 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure declined 22.2% year over year.

Higher fee income supported FHN’s results. However, a fall in NII and loan balances, coupled with a rise in operating expenses, was an undermining factor.

BankUnited, Inc.’s BKU first-quarter 2024 earnings of 64 cents per share surpassed the Zacks Consensus Estimate of 62 cents. In the prior-year quarter, the company had reported earnings of 70 cents. The just-reported quarter’s earnings included expenses related to FDIC special assessment.

Results were aided by an increase in non-interest income and deposits and a decline in provisions. However, lower NII and loan balance, along with higher expenses, were the undermining factors for BKU.

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