Zions Bancorporation (ZION) reported stronger-than-expected Q3 results, topping earnings estimates, driven by a recovery in deposit growth and all-time low gross charge-off rates aided by an improving economic outlook.
However, the bank holding company’s shares fell 2.1% in Monday’s after-market trading hours. (See Zions Bancorporation stock charts on TipRanks)
In Q3, adjusted earnings of $1.45 per share grew 43.6% year-over-year and beat analysts’ expectations of $1.34 per share. The company reported earnings of $1.01 per share in the prior-year period.
Net interest income came in at $555 million, flat year-over-year. However, non-interest income grew 8.6% to $151 million, mainly due to higher customer-related fee income driven by improved capital markets, wealth management, and mortgage banking activities.
Net interest margins declined to 2.68% in the quarter, down 9 bps sequentially and 38 bps from the year-ago period.
The company recorded a provision for loan losses during the quarter of $46 million versus $132 million recorded in the prior-year quarter. Non-interest expenses were down 2.9% year-over-year to $429 million.
Zions CEO Harris H. Simmons commented, “We’re optimistic that, despite lingering supply chain issues and a tight labor market, the economy seems poised for continued growth over the next several quarters as, thanks to a great deal of government stimulus, consumers and most businesses are emerging from the pandemic in relatively strong condition.”
Ahead of the earnings announcement, Jefferies analyst Ken Usdin increased the price target from $56 to $68 (9.3% upside potential) and reiterated a Hold rating on the stock.
Usdin forecasts Fed rate hikes by 25 bps twice in 2023, one in January and the second in July. He also estimates a steeper rate curve and the 10-year U.S. Treasury yield to reach 2.1% by year-end 2023.
Consensus among analysts is a Moderate Buy based on 6 Buys, 3 Holds, and 1 Sell. The average Zions Bancorporation price target of $62.40 implies that shares are fully valued at current price levels.
ZION scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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