On Thursday, Zions Bancorp (NASDAQ:ZION) experienced a shift in stock rating as Argus Research changed its stance from Buy to Hold. The adjustment follows Zions' report of second-quarter earnings per share (EPS) of $1.28 on July 22, marking an increase from $1.11 in the same quarter the previous year.
This rise was primarily attributed to a recovery in net interest income. Despite this improvement, revenue saw a slight year-over-year decline of 1%, totaling $776 million. The dip was attributed to increased interest expenses, which partially offset gains from higher rates on loans.
Zions' average deposits also witnessed a marginal decrease of 1% compared to the previous year, settling at $73.8 billion. Concurrently, the cost of deposits rose significantly to 2.11% from 1.27%. In light of these second-quarter results, along with a stabilizing net interest margin (NIM) and deposit base, Argus Research has made slight adjustments to its earnings estimates.
For the year 2024, the estimate has been marginally increased to $4.44 from $4.39. Conversely, the 2025 EPS forecast has been lowered to $4.62 from $4.66.
The rationale behind the downgrade to a Hold rating is based on the current stock price, which is hovering around $51. Argus Research has indicated that at this price point, Zions' shares are perceived to be fully valued.
In other recent news, Zions Bancorporation (NASDAQ:ZION) reported stable financial results for Q2 2024, with net earnings of $190 million and diluted earnings per share of $1.28. This was accompanied by the completion of a significant system overhaul, aimed at enhancing operational efficiency and fraud detection.
Despite a slight uptick in adjusted expenses, the company saw an expansion in net interest margin and an increase in loan demand. However, the first half of the year saw slow growth in fee income, expected to improve later in the year.
Zions Bancorporation also reported a slight decrease in customer deposit balances and plans for a reduction in its investment portfolio, with a shift towards higher-yielding loans.
The company's common equity Tier-1 (CET1) ratio stood strong at 10.6%, and it reported a tangible book value increase of 20.1% year-over-year. Looking ahead, the company anticipates a slight to moderate increase in financial performance in Q2 2025 compared to Q2 2024.
In other developments, the company expects a slight increase in adjusted expenses in Q2 2025, and credit quality remains robust with some expected deterioration within manageable limits. The company is actively managing its interest rate sensitivity and projects a slight to moderate increase in net interest income for Q2 2025.
InvestingPro Insights
Zions Bancorp's recent performance and Argus Research's subsequent rating change highlight the importance of examining both the company's financial health and market valuation. To provide a more comprehensive view, let's consider some key metrics and insights from InvestingPro. With a market capitalization of $7.53 billion and a Price/Earnings (P/E) ratio of 12.66, Zions presents a picture of a company with a reasonable market valuation relative to its earnings. Notably, the company has shown resilience with its dividend policy, having raised dividends for 11 consecutive years and maintained payments for an impressive 54 years. This consistency is a testament to Zions' commitment to shareholder returns, even as it navigates through market fluctuations.
InvestingPro Tips for Zions Bancorp reveal a mixed financial landscape. On the positive side, 10 analysts have revised their earnings upwards for the upcoming period, indicating a potentially brighter future for the company's profitability. Additionally, Zions has experienced strong returns over the last month and three months, with a 21.41% and 24.68% total price return respectively. These figures suggest a robust short-term performance that may interest investors looking for recent positive trends.
However, it's not without its challenges. The company suffers from weak gross profit margins, which may raise concerns about its operational efficiency. Despite this, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months. For investors considering Zions Bancorp, these insights could prove valuable in making a more informed decision. To delve deeper into Zions Bancorp's financials and for additional InvestingPro Tips, visit https://www.investing.com/pro/ZION. Remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and note that there are 5 more tips available on InvestingPro that could further guide your investment strategy.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.