A month has gone by since the last earnings report for Zions (ZION). Shares have lost about 2.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Zions Q1 Earnings Beat on Higher NII & Fee Income, Provision Benefit
Zions reported first-quarter 2026 earnings of $1.56 per share, which beat the Zacks Consensus Estimate of $1.43. Moreover, the bottom line surged 38% from the year-ago quarter.
Results were primarily aided by higher NII and growth in fee-based income. Higher loan and deposit balances, along with a provision benefit, provided additional support. However, a rise in non-interest expenses was a headwind.
Net income attributable to its common shareholders (GAAP) was $232 million, up 37.3% year over year. We had projected the metric to be $205.6 million.
Revenues & Expenses Rise
Net revenues (taxable-equivalent) were approximately $860 million, up 6.7% year over year. The top line missed the Zacks Consensus Estimate of $862 million.
NII was $662 million, up 6% from the prior-year quarter. The increase was mainly driven by lower funding costs and a favorable mix of earning assets. NIM expanded 17 basis points (bps) year over year to 3.27%. Our estimates for NII and NIM were $672.8 million and 3.32%, respectively.
Non-interest income was $187 million, up 9% year over year. The rise was driven by an increase in almost all the components except card fees. We had projected non-interest income to be $170.7 million.
Adjusted non-interest expenses were $558 million, up 4.7% year over year. Our estimate for the metric was $537.9 million.
The adjusted efficiency ratio improved to 65.0% from 66.6% in the prior-year quarter. A decline in the efficiency ratio indicates an increase in profitability.
Loans & Deposits Increase
As of March 31, 2026, net loans and leases held for investment were $60.6 billion, up marginally from the prior quarter. Total deposits were $76.9 billion, up 1.7% from the prior quarter. Our estimates for net loans and leases held for investment and total deposits were $61.1 billion and $76.3 billion, respectively.
Credit Quality Improves
The ratio of non-performing assets to total loans and leases and other real estate owned declined to 0.48% from 0.51% in the year-ago quarter.
Net loan and lease charge-offs were $4 million, down significantly from $16 million in the prior-year quarter. In the reported quarter, the company recorded a $7 million benefit from provision for credit losses against a $18 million provision expense in the prior-year quarter.
Strong Capital & Profitability Ratios
As of March 31, 2026, the common equity tier 1 (CET1) capital ratio was 11.5%, up from 10.8% in the prior-year quarter. The Tier 1 risk-based capital ratio was 11.6% compared with 10.9% a year ago, while the Tier 1 leverage ratio improved to 9.1% from 8.4% reported at the end of the year-ago quarter.
Return on average assets was 1.05%, up from 0.77% in the year-ago quarter. Return on average tangible common equity was 15.5%, up from 13.4% in the prior-year quarter.
Share Repurchase Update
During the quarter, the company repurchased 1.3 million shares for $77 million.
First Quarter 2027 Outlook
Period-end loan balances are expected to increase moderately on a year-over-year basis. The growth will be driven by an increase in commercial loans (mainly commercial & industrial (C&I) and owner-occupied) and commercial real estate loans, while consumer loans are expected to decline marginaly. Further, management expects commercial real estate classified balances to continue to decline due to payoffs and upgrades.
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 adjusted non-interest income is anticipated to rise moderately from the prior year, driven by increased customer activity and new client acquisition, with capital markets contributing in an outsized way, as well as higher loan-related fees.
Adjusted non-interest expenses are projected to witness a moderate increase year over year. Technology costs, increased marketing expenses 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, fresh estimates flatlined during the past month.
VGM Scores
At this time, Zions has a average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for value investors.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Zions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zions Bancorporation, N.A. (ZION): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).