Can Mortgage Banking Income Aid Zions (ZION) In Q3 Earnings?

Zions Bancorporation, National Association (NASDAQ:ZION) is scheduled to report third-quarter 2019 results on Oct 21, after the market closes. Its revenues and earnings for the to-be-reported quarter are expected to have increased year over year.

In the last reported quarter, Zions’ earnings missed the Zacks Consensus Estimate. An increase in expenses and lower non-interest income hurt results. Moreover, the company recorded higher provision for credit losses.

Notably, Zions has a decent earnings surprise history, having surpassed the Zacks Consensus Estimate in two of the trailing four quarters.

The company’s activities in the third quarter were not able to impress analysts. Hence, its Zacks Consensus Estimate for earnings of $1.08 for the to-be-reported quarter has declined nearly 1% over the past 30 days. However, the figure indicates a 3.9% improvement from the year-ago quarter’s reported number.

The consensus estimate for Zions’ revenues for the third quarter is pegged at $709.3 million, which suggests 1.2% rise from the prior-year quarter’s reported figure.

Before we take a look at what our quantitative model predicts for the third quarter, let’s check the factors that are likely to have influenced results.

Factors to Impact Q3 Results

Net interest income (NII) not to offer support: The third quarter did not witness significant improvement in the lending scenario. Particularly, growth in commercial and industrial loans (constituting a large part of Zions’ loan portfolio) remained muted. Moreover, the decline in interest rates and the flattening of the yield curve along with rising deposit betas and soft loan growth are expected to have hurt the company’s NII.

Fee revenues likely to witness modest growth: Zions’ third-quarter non-interest income is expected to have benefited from rise in service charge on deposits as deposit balances are likely to have increased in the quarter.

Mortgage banking activities are also expected to have witnessed improvement. Supported by relatively lower mortgage rates, refinancing activity and mortgage originations are expected to have increased during the quarter. Hence, the company’s loan sales and servicing income are likely to have been positively impacted.

However, as fixed-income trading activities remained weak, Zions’ capital markets and foreign exchange fees are not expected to have benefited much.

Expenses likely to rise modestly: Despite undertaking several cost-control initiatives, the company’s non-interest expenses are likely to have remained elevated in the to-be-reported quarter due to continued spending on technology system overhauls and investments in franchise.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Zions is +0.51%.

Zacks Rank: Zions currently carries a Zacks Rank #3.

Other Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

Old National Bancorp (NASDAQ:ONB) is scheduled to release results on Oct 21. It presently has an Earnings ESP of +2.34% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Blackstone Group Inc (NYSE:BX) has an Earnings ESP of +3.70% and a Zacks Rank #3 at present. The company is slated to release results on Oct 23.

Cullen/Frost Bankers, Inc (NYSE:CFR) is expected to release results on Oct 31. It currently has an Earnings ESP of +0.07% and a Zacks Rank #3.

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