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Zions Bancorporation Q3 earnings decline despite beating estimates

EditorVenkatesh Jartarkar
Published 20-10-2023, 02:04 am
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ZION
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Zions Bancorporation (NASDAQ:ZION) reported a 19.3% year-over-year decrease in its third-quarter earnings, leading to a 4% drop in shares during after-market trading hours on Thursday. This decline occurred despite the company's Earnings Per Share (EPS) of $1.13 surpassing the Zacks Consensus Estimate of $1.10. According to InvestingPro data, the bank's P/E ratio stands at 5.7, indicating a low earnings multiple, a fact also highlighted by InvestingPro Tips.

The bank's net income attributable to shareholders fell by 20.4% year over year to $168 million. Net revenues were $776 million, exceeding the Zacks estimate, but this marked a 7.4% decrease from the previous year. Yet, as per InvestingPro data, the bank's revenue growth has been accelerating, with a 7.38% increase in the last twelve months.

One of the factors contributing to the decline was an 11.8% year-over-year fall in Net Interest Income (NII) to $585 million, caused by higher funding costs, fewer interest-earning assets, and more interest-bearing liabilities. This resulted in a decrease in the Net Interest Margin (NIM) by 31 basis points to 2.93%.

On the other hand, non-interest income rose by 9.1% year over year to $180 million, driven by increases in commercial account fees, loan-related fees and income, wealth management fees, fair value and non-hedge derivative income, and dividends and other income.

InvestingPro data indicates that adjusted non-interest expenses also rose by 3.4% year over year to $493 million. The bank's efficiency ratio increased from 57.6% to 64.4%, indicating lower profitability.

As of September 30, 2023, net loans and leases held for investment stood at $56.2 billion, while total deposits rose by 1.4% sequentially to $75.4 billion. The ratio of non-performing assets to loans and leases expanded by 10 basis points year over year to 0.38%.

Net loan and lease charge-offs decreased to $14 million from $27 million in the prior-year quarter, while the provision for credit losses fell by 42.3% from the previous year's quarter to $41 million.

Zions Bancorporation's capital ratios improved, with the Tier 1 leverage ratio at 8.3%, compared with 7.5% in the prior-year quarter. The Tier 1 risk-based capital ratio increased from 10.3% to 10.9%, and the common equity tier 1 capital ratio increased from 9.6% to 10.2%.

Despite these improvements, profitability ratios declined; return on average assets decreased from 0.97% to 0.80%, and the return on average tangible common equity fell from 19.6% to 17.3%. Yet, according to InvestingPro Tips, Zions has maintained dividend payments for 53 consecutive years and has raised its dividend for 10 consecutive years, with the dividend yield standing at 4.6% as per InvestingPro data. This suggests that stockholders continue to receive high returns on book equity, even in the face of declining profitability.

For more insights like these, consider subscribing to InvestingPro, which offers access to real-time metrics and valuable tips for a wide range of companies. You can find more information here.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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