Zions BanCorp Is Cheap But It Has A Revenue Problem
Higher Rates Can't Come Fast Enough For Zions Bancorp
Stephen Simpson, CFA
Stephen Simpson, CFA
Wed, Jun. 15, 3:17 PM
- Having already shed value in June as expectations for rate hikes evaporated, the financial sector (XLF +0.7%) is showing relative strength following the FOMC's standing pat and dialing back expectations for the future level of the Fed Funds rate.
- The S&P 500 is higher by just half the amount of the financials.
- Within financials, the banks (KBE +1.1%), (KRE +1.1%) are particularly strong, led by Bank of America (BAC +1.5%), Morgan Stanley (MS +1.3%), Citigroup (C +1%), BB&T (BBT +1.2%), Fifth Third (FITB +2.2%), SunTrust (STI +1.4%), Zion (ZION +1.3%).
Tue, Feb. 23, 2:38 PM
- Holding its investor day today, JPMorgan said it was going to add another $500M to energy-related loan-loss reserves. This followed a $67M provision in Q4, which at the time brought total oil and gas loss reserves to $815M (vs. a portfolio with book value of $44B).
- In addition, the bank said it could need to add another $1.5B to reserves should oil hang around $25 per barrel over the next 18 months. For perspective, prior to Q4, JPMorgan hadn't had to add to reserves for six years - in fact reserve releases were a big boost to profits across the industry.
- "When the biggest bank increases reserves for potential oil losses it sets a tone for the industry,” says Mike Mayo.
- Separately, the FDIC says bad loan provisions across the banking sector were $3.8B higher in Q4 than a year earlier.
- JPMorgan (JPM -3.5%), Citigroup (C -2.9%), Bank of America (BAC -2.9%), Wells Fargo (WFC -2%), U.S. Bancorp (USB -3%), Regions Financial (RF -3.8%), Comerica (CMA -4.2%), Zions (ZION -4.1%), PNC Financial (PNC -2%).
- ETFs: KRE, KBE, IAT, KBWB, QABA, KBWR, KRU, KRS
Thu, Jan. 28, 9:40 AM
- Nice post-earnings bounces continue for Comerica (CMA +3.3%) and Prosperity Bancshares (PB +4.5%) as oil soars above $34 per barrel on chatter of production cuts.
- Also at work, BMO Capital pulls its Underperform rating on Comerica, and Evercore pulls its Sell rating on Prosperity. Alongside that is DA Davidson upgrading Prosperity to Buy from Neutral.
- Previously: Comerica beats by $0.02, beats on revenue (Jan. 19)
- Previously: Prosperity Bancshares launches buyback (Jan. 27)
- Previously: Prosperity Bancshares beats by $0.01, misses on revenue (Jan. 27)
- Other energy-exposed lenders: Cullen/Front (CFR +3.9%), Texas Capital (TCBI +2.5%), Independent Bank Group (IBTX +11.6%), Zions Bancorp (ZION +2.8%)
Tue, Jan. 26, 11:28 AM
- Q4 income of $88.2M or $0.43 per share vs. $84.2M and $0.41 in Q3, and $66.8M or $0.33 one year ago.
- Net interest income of $449M vs. $425M in Q3, with adjusted NIM of 3.18% up seven basis points.
- Adjusted noninterest expense of $403M, with efficiency ratio of 69.8% for quarter and 69.6% for H2. Full-year adjusted noninterest expense of $1.581B came in below the $1.6B target.
- Credit quality saw deterioration in the energy portfolio, with classified loans up 3%, NPAs down 4%, and the allowance for credit losses up slightly. Provisions of $22.7M up from $18.3M in Q3. Net charge-offs in energy of $24M up from $17M.
- ZION +6.5%
- Previously: Zions beats by $0.02, beats on revenue (Jan. 25)
Dec. 30, 2015, 5:38 PM
Dec. 15, 2015, 12:40 PM
- The S&P 500 (SPY +1.5%) is at its session high alongside oil (NYSEARCA:USO), which is up 3.3% on the session and nearly 10% since falling to almost $34 per barrel roughly 24 hours ago.
- Energy (XLE +2.7%) is the best-performing sector in the S&P 500, but financials (XLF +2.5%) aren't far behind, with energy-exposed names like Comerica (CMA +5.2%), ZIons Bancorp (ZION +3.8%), and Prosperity Bancshares (PB +2.7%) among the regional bank movers.
- The surge has also given a big lift to junk bond prices even as the 10-year Treasury yield jumps five basis points to 2.27%. TLT -0.7%, TBT +1.4%.
Dec. 8, 2015, 1:35 PM
- The selloff in financial names is a broad one, but those seen as especially reliant on energy deals and lending are suffering worst as oil and natural gas make new multi-year lows.
- Among the movers: Comerica (CMA -2.9%), Zions (ZION -3.3%), Prosperity (PB -3.3%), Cullen/Frost (CFR -2.6%), MidSouth Bancorp (MSL -1.4%), BOK Financial (BOKF -3.2%), Hancock Holding (HBHC -3.8%), Green Bancorp (GNBC -0.1%), Iberiabank (IBKC -3%), National Bank Holdings (NBHC -0.5%), Texas Capital (TCBI -4.6%), Independent Bank Group (IBTX -2.6%), Interstate BancSystem (FIBK -1.1%), First Financial Bankshares (FFIN -3.5%).
- Screening the whole group against the KRE finds only Interstate BancSystem as outperforming over the past month.
Aug. 18, 2015, 10:03 AM
- "We think the benefits associated with Zions (ZION +1.6%) opportunity to control expenses, enhance revenues, and deploy excess capital over the next few years far exceed the near-term risks tied to its energy exposure (7% of total loans), sluggish loan growth, and elevated efficiency ratio," says Barclays, upgrading to Overweight with price target boosted to $40 from $34.
- "As the Street gains confidence its current overhangs are transitory as opposed to structural, we envision favorable EPS revisions and multiple expansion."
- The team does cut 2015 EPS to $1.28 from $1.30, but hikes 2016 to $2.20 from $2.10 and 2017 to $2.75 from $2.45.
Jul. 21, 2015, 11:00 AM
- The bar for Zions (ZION +3.3%) was set low after Comerica last week reported boosted loan loss provisions thanks to the crash in energy prices.
- Thus investors are buying today after Zions reported nonaccrual energy loans as flat from the previous quarter, and total oil-and-gas related loans down 9% to $2.9B.
- “After [Comerica’s] energy deterioration, all eyes were on the credit trends in Zions’ energy book which deteriorated less than feared,” says Evercore's John Pancari.
- Also helping, the bank sold the rest of its CDO securities (which had helped cause a failed Fed stress test). It forced a one-time pre-tax loss of $137M, but removed a large weight from Zions' back.
- Previously: Comerica tumbles on miss as charge-offs and provisions rise (July 17)
- Previously: More on Zions Bancorp Q2 results (July 20)
- Previously: Zions beats by $0.03, misses on revenue (July 20)
Jun. 5, 2015, 10:27 AM
- This morning's strong nonfarm payroll report may put to rest the idea of a continuing economic slowdown and puts on the table a rate hike maybe as soon as September.
- The 10-year Treasury yield is up nine basis points to 2.40%.
- The KRE +1.5%, KBE +1.6%, and the XLF +1.1% amid a flat S&P 500.
- Regional banks: Regions Financial (RF +3.3%), KeyCorp (KEY +2.5%), PNC Financial (PNC +1.9%), SunTrust (STI +2.3%), U.S. Bancorp (USB +2.2%), Zions (ZION +3.7%), First Niagara (FNFG +1.4%)
- Too Big Too Fails: Citigroup (C +2.2%), Bank of America (BAC +3.4%), JPMorgan (JPM +2.2%), Wells Fargo (WFC +1.9%)
- Life insurers: MetLife (MET +2.7%), Prudential (PRU +2.8%), Sun Life (SLF +1.9%), Lincoln Financial (LNC +2.5%)
- Online brokerage: Schwab (SCHW +3.8%), TD Ameritrade (AMTD +2.8%), E*Trade (ETFC +2.3%), Interactive Brokers (IBKR +2.5%)
- Previously: Jobs up 280K in May; UE rate ticks higher (June 5)
- Previously: Treasury yields surge amid strong job gains, boosted wage growth (June 5)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, IAT, SEF, IYG, FXO, FNCL, KBWB, QABA, FINU, KBWR, KRU, RWW, RYF, FINZ, KRS
Jun. 2, 2015, 9:57 AM
- Among the changes: Consolidate seven bank charters into a single one, while maintaining local CEOs, local pricing, local credit authority, and local branding; create a Chief Banking Officer position; consolidate risk functions and various non-customer facing operations.
- Targets include bringing the efficiency ratio into the low 60s by FY2017, increasing ROTCE to double-digit levels, maintaining noninterest expense below $1.6B this year and next (and increasing somewhat in 2017), achieving gross pre-tax savings of $120M annually by FY2017.
- Among the management changes: President Scott McLean is now also COO; President and CEO of National Bank of Arizona Keith Maio assumes the position of EBP and Chief Banking Officer of the parent company.
- Upgrades roll in, with CLSA and Credit Agricole boosting two notches to Buy, and Evercore ISI and Guggenheim one notch to Buy.
- ZION +6.6%
Feb. 6, 2015, 9:50 AM
- Financials have been mercilessly pounded in 2015 as hopes for higher interest rates looked like they might be dashed yet again, but today's blowout jobs number - firmly putting a June rate hike on the table - has brought in the dip-buyers.
- The major averages are flat, but the XLF is up 1.4%. The Regional Bank ETF (KRE +2%) and the Bank ETF (KBE +2.1%) are doing even better.
- Among the yield-starved banking names: Bank of America (BAC +3.1%), JPMorgan (JPM +2.6%), Citigroup (C +2%), Regions Financial (RF +4%), KeyCorp (KEY +3%), PNC Financial (PNC +2.9%), SunTrust (STI +2.3%), Zions (ZION +3.6%), Synovus (SNV +2.3%).
- Insurers: MetLife (MET +2%), Prudential (PRU +3.2%), Lincoln National (LNC +4.6%). AIG (AIG +1.5%).
- Trust banks: BNY Mellon (BK +2.7%) State Street (STT +1.9%), Northern Trust (NTRS +2.3%).
- Online brokers (currently getting killed on money-market fee rebates): Schwab (SCHW +4.5%), TD Ameritrade (AMTD +3.5%), E*Trade (ETFC +2.1%).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, IAI, SEF, IYG, IAK, FXO, FNCL, KBWB, QABA, FINU, KRU, RWW, KBWR, RYF, KBWP, KBWI, PSCF, FINZ, KRS
Jan. 26, 2015, 4:26 PM
- Q4 net interest income of $430M vs. $417M in Q3, with net interest margin of 3.25% up five basis points.
- Noninterest income of $129M vs. $116M in Q3. Noninterest expense of $412M vs. $439M.
- Commenting extensively on its energy-related exposure, the bank says it has about $3.2B in primarily oil and gas energy-related loan balances, representing 7.9% of the total loan portfolio. As of year-end, $17M, or 0.5% of the loans were nonperforming.
- Noting the especially fast decline in oil prices, the bank says it's difficult to see any measurable changes to the financial conditions of its borrowers, but did make some changes which resulted in an increase of credit loss reserves of $25M. The bank also expects to be down-sizing the credit lines of some of its oil & gas-related borrowers.
- Conference call at 5:30 ET
- ZION -2.5% after hours
Dec. 5, 2014, 10:06 AM
- Among those counting on higher interest rates to boost profits are banks, insurers, and online brokers, and all are outliers to the upside in today's session after a strong November jobs report has rate hike expectations on the rise. The XLF is up 1%.
- TBTFs: Bank of America (BAC +2.1%), Citigroup (C +1.8%), JPMorgan (JPM +2.2%), Wells Fargo (WFC +1.2%)
- Regionals (KRE +1.9%): Regions Financial (RF +2.6%), KeyCorp (KEY +2.3%), Huntington (HBAN +1.5%), BB&T (BBT +1.6%), Zions (ZION +4%)
- Custodials: BNY Mellon (BNY), State Street (STT +1.6%), Northern Trust (NTRS +1.8%)
- Life insurers: MetLife (MET +2.1%), Prudential (PRU +2.5%), Lincoln National (LNC +2.3%)
- Online brokers: Schwab (SCHW +3.8%), E*Trade (ETFC +3%), Ameritrade (AMTD +2.7%)
- Previously: Short end of yield curve on the move after jobs number (Dec. 5, 2014)
- Previously: Bonds and dollar higher, gold slumps after strong jobs report (Dec. 5, 2014)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, IAI, SEF, IYG, IAK, FXO, FNCL, KBWB, RKH, QABA, FINU, KRU, RWW, KBWR, RYF, KBWP, KBWI, PSCF, FINZ, KRS
Oct. 9, 2014, 5:36 PM
Sep. 19, 2014, 9:11 AM
- The team doubles down on Outperform ratings on Zions Bancorp (NASDAQ:ZION) and Synovus Financial (NYSE:SNV), upgrading both to Strong Buy. ZION is up 1.3% premarket.
- Texas Capital Bancshares (NASDAQ:TCBI) gets a two-notch upgrade - from Market Perform to Strong Buy - and First Horizon National (NYSE:FHN) is boosted to Outperform from Market Perform.
- The team partially cashes in its chips on United Community Bank, downgrading to Outperform from Strong Buy. Iberiabank (NASDAQ:IBKC) is cut to Market Perform from Outperform.
- Cut to Underperform from Market Perform is First Financial Bankshares (NASDAQ:FFIN).
Zions Bancorp. is a financial holding company. The company, through its subsidiaries, provides a full range of banking and related services. It provides variety of commercial and retail banking and mortgage lending products and services. The company offers personal banking services to... More
Industry: Regional - Pacific Banks
Country: United States
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