Zions' Q1 Earnings Top Estimates on Higher NII & Fee Income

Zions Bancorporation’s ZION first-quarter 2025 adjusted earnings per share (EPS) of $1.24 beat the Zacks Consensus Estimate of $1.20. Moreover, the bottom line surged 29.2% from the year-ago quarter.

Results were primarily aided by higher net interest income (NII) and non-interest income. Also, higher loans were another positive. However, higher provisions and a rise in adjusted non-interest expenses were major headwinds. In light of these negatives, Zions' shares declined 3.9% in yesterday’s after-market hours trading session.

Results in the reported quarter excluded 11 cents per share of charge related to the revaluation of deferred tax assets due to newly elected state tax legislation. After considering it, net income attributable to its common shareholders (GAAP) was $169 million, up 18.2% year over year. We had projected the metric to be $167.5 million.

Zions’ Revenues & Expenses Rise

Net revenues (tax equivalent) were $795 million, up 7.1% year over year. However, the top line missed the Zacks Consensus Estimate of $808.3 million.

NII was $624 million, up 6.5%. The increase was mainly attributed to lower funding costs alongside a favorable mix change in average interest-earning assets. Likewise, net interest margin (NIM) expanded 16 basis points (bps) to 3.10%. Our estimates for NII and NIM were $630 million and 3.04%, respectively.

Non-interest income rose 9.6% to $171 million. We had projected non-interest income to be $163.3 million.

Adjusted non-interest expenses increased 4.3% to $533 million. Our estimate for the metric was $535.4 million.

Adjusted efficiency ratio was 66.6%, down from 67.9% in the prior-year period. A decline in the efficiency ratio indicates an increase in profitability.

As of March 31, 2025, net loans and leases held for investment were $59.2 billion, up roughly 1% from the prior quarter. On the other hand, total deposits were down marginally to $76 billion. Our estimates for net loans and leases held for investment and total deposits were $58.4 billion and $76.4 billion, respectively.

Credit Quality for ZION Deteriorates

The ratio of non-performing assets to loans and leases, as well as other real estate owned, expanded 7 bps year over year to 0.51%. In the reported quarter, the company recorded net loan and lease charge-offs of $16 million against $6 million loan and lease charge-offs in the prior-year quarter.

Provision for credit losses was $18 million in the reported quarter, up 38.5% from the year-ago quarter.

Zions’ Capital & Profitability Ratios: Mixed Bag

Tier 1 leverage ratio was 8.4% as of March 31, 2025, stable from the prior-year quarter. The common equity tier 1 capital ratio was 10.8%, up from 10.4% in the prior-year period.

However, as of March 31, 2025, the tier 1 risk-based capital ratio was down to 10.9% from 11% in the prior-year quarter.

At the end of the first quarter, the return on average assets was 0.77%, up from 0.70% in the prior-year quarter. Return on average tangible common equity was 13.4%, down from 13.7% in the year-ago quarter.

Our Take on ZION Stock

Zions’ rising loan demand and improving fee income, alongside relatively higher interest rates, bode well for the future. However, persistently increasing operating expenses, high funding costs and significant exposure to commercial loans amid an uncertain macroeconomic outlook are concerns.

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

KeyCorp’s KEY first-quarter 2025 adjusted EPS from continuing operations of 33 cents beat the Zacks Consensus Estimate by a penny. Further, the bottom line reflected a 50% jump from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

KEY’s results benefited from a rise in non-interest income, higher NII, and lower expenses. However, a lower loan and deposit balance was the undermining factor.

M&T Bank Corporation’s MTB first-quarter 2025 adjusted net operating EPS of $3.38 missed the Zacks Consensus Estimate of $3.41. The bottom line compared favorably with earnings of $3.09 per share in the year-ago quarter.

Results were affected by a fall in loan balance and a rise in expenses. Nonetheless, a rise in NII and non-interest income supported its financial performance. A decline in provision for credit losses was another positive for MTB.

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

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