Zions Bancorporation, National Association (N.A) ((ZION)) has held its Q3 earnings call. Read on for the main highlights of the call.
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In the latest earnings call, Zions Bancorporation, National Association (N.A) presented a mixed sentiment. The company showcased positive trends in net interest margin expansion and revenue growth, which suggest a strong core earnings momentum. However, these positive developments were somewhat overshadowed by significant credit loss provisions and legal issues related to isolated loan defaults, presenting notable challenges for the company.
Net Interest Margin Expansion
The earnings call revealed a positive trend in net interest margin, which expanded by 11 basis points to 3.28%. This marks the seventh consecutive quarter of improvement, highlighting the bank’s ability to enhance its interest income relative to interest expenses, a crucial factor for profitability.
Revenue Growth Outpacing Expenses
Zions Bancorp reported an 11% improvement in pre-provision net revenue compared to the prior quarter and an 18% increase from the previous year. This indicates strong revenue growth that outpaces expense growth, showcasing effective cost management and operational efficiency.
Increased Customer Fees
The bank experienced a $10 million growth in customer fees, excluding the net credit valuation adjustment. This reflects increased customer activity, which is a positive indicator of the bank’s ability to generate income from its customer base.
Positive Operating Leverage
Zions Bancorp achieved positive operating leverage, as evidenced by an improved efficiency ratio of 59.6%. This improvement is driven by revenue growth and controlled expenses, indicating the bank’s effective management of its operational costs.
Significant Credit Loss Provision
The bank recorded a $49 million provision for credit loss, with net charge-offs amounting to $56 million. These were primarily due to an isolated issue with two related commercial and industrial (C&I) loans, which poses a challenge to the bank’s financial stability.
Earnings Per Share Decline
Diluted earnings per share decreased to $1.48 from $1.63 in the prior period. This decline was negatively impacted by a $0.06 per share due to net credit valuation adjustment and elevated credit provision, reflecting the financial strain from credit issues.
Legal Action for Loan Recovery
Zions Bancorp has initiated legal action to recover approximately $60 million related to two C&I loans. This resulted in a $50 million charge-off and a full reserve against the remaining $10 million, highlighting the bank’s proactive approach to managing loan defaults.
Forward-Looking Guidance
Looking ahead, Zions Bancorp provided guidance for the third quarter of 2026, anticipating moderately increasing net interest income supported by a 2 to 3 basis point lift in earning asset yields and growth in loans and deposits. The bank expects the net interest margin to continue its upward trend, with forecasts of a 2.1% annualized increase in average loans and a 3.1% rise in customer deposits. Despite the challenges, Zions aims to maintain positive operating leverage as revenue growth outpaces noninterest expense growth.
In summary, Zions Bancorporation’s earnings call reflected a mixed sentiment with strong net interest margin expansion and revenue growth, counterbalanced by significant credit loss provisions and legal challenges. The bank’s forward-looking guidance suggests optimism in maintaining positive operating leverage and continued growth in key financial metrics.