Why Is Zions (ZION) Down 6.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Zions (ZION). Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Zions due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

Zions' Q2 Earnings Top Estimates on Higher NII & Fee Income

Zions’ second-quarter 2025 adjusted earnings per share of $1.58 beat the Zacks Consensus Estimate of $1.31. Moreover, the bottom line surged 30.6% from the year-ago quarter.

Results were primarily aided by higher net interest income and non-interest income alongside a provision benefit. Additionally, higher loan amounts were another positive. However, a rise in adjusted non-interest expenses was a major headwind.

Results in the reported quarter excluded the positive impact of 5 cents per share from the IPO of SBIC Investment. After considering it, net income attributable to its common shareholders (GAAP) was $243 million, up 27.9% year over year. We had projected the metric to be $188.1 million.

Revenues & Expenses Rise

Net revenues (tax equivalent) were $851 million, up 8.1% year over year. Further, the top line beat the Zacks Consensus Estimate of $815.5 million.

NII was $648 million, up 8.5%. The increase was mainly attributed to lower funding costs alongside an increase in average interest-earning assets. Likewise, net interest margin expanded 19 basis points (bps) to 3.17%. Our estimates for NII and NIM were $628 million and 3.06%, respectively.

Non-interest income rose 6.1% to $190 million. The rise was driven by an increase in almost all the components except card fees, wealth management fees and dividends and other income. We had projected non-interest income to be $174.1 million.

Adjusted non-interest expenses increased 3% to $521 million. Our estimate for the metric was $524.3 million.

Adjusted efficiency ratio was 62.2%, down from 64.5% in the prior-year period. A decline in the efficiency ratio indicates an increase in profitability.

As of June 30, 2025, net loans and leases held for investment were $60.1 billion, up 1.5% from the prior quarter. On the other hand, total deposits were down 2.5% to $73.8 billion. Our estimates for net loans and leases held for investment and total deposits were $58.2 billion and $75.8 billion, respectively.

Credit Quality: A Mixed Bag

The ratio of non-performing assets to loans and leases, as well as other real estate owned, expanded 6 bps year over year to 0.51%. In the reported quarter, the company recorded net loan and lease charge-offs of $10 million, down 33.3% from the prior-year quarter.

Provision for credit losses was negative $1 million in the reported quarter against provision for credit losses of $5 million in the year-ago quarter.

Profitability & Capital Ratios

Tier 1 leverage ratio was 8.5% as of June 30, 2025, stable from the prior-year quarter. The common equity tier 1 capital ratio was 11%, up from 10.6% in the prior-year period. As of June 30, 2025, the tier 1 risk-based capital ratio was down to 11.1% from 11.2% in the prior-year quarter.

At the end of the second quarter, the return on average assets was 1.09%, up from 0.91% in the prior-year quarter. Return on average tangible common equity was 18.7%, up from 17.5% in the year-ago quarter.

Outlook

Management has provided an outlook for second-quarter 2026. The quarters in between are subject to normal seasonality.

Period-end loan balances are expected to increase marginally on a year-over-year basis. The growth will be driven by an increase in commercial loans.

NII is expected to witness a moderate year-over-year increase, primarily driven by earning asset remix, loan and deposit growth, and fixed-rate asset repricing.

Customer-related non-interest income is anticipated to rise moderately from the prior-year quarter, driven by increased customer activity and new client acquisition, with capital markets contributing in an outsized way.

Adjusted non-interest expenses are projected to witness a moderate increase year over year. Technology-costs, increased marketing expense and continued investments in revenue-generating businesses are expected to put pressure on non-interest expenses. Management expects to have positive operating leverage.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 7.83% due to these changes.

VGM Scores

At this time, Zions has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock has a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Zions has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Zions is part of the Zacks Banks - West industry. Over the past month, WaFd (WAFD), a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended June 2025 more than a month ago.

WaFd reported revenues of $186.26 million in the last reported quarter, representing a year-over-year change of -4.2%. EPS of $0.73 for the same period compares with $0.76 a year ago.

WaFd is expected to post earnings of $0.75 per share for the current quarter, representing a year-over-year change of +7.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +3.2%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for WaFd. Also, the stock has a VGM Score of F.

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This article originally published on Zacks Investment Research (zacks.com).

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