Loan Growth, Fee Income To Support Zions (ZION) Q4 Earnings

Zions Bancorporation, National Association (NASDAQ:ZION) is scheduled to announce fourth quarter and 2018 results on Jan 22, after market close. Its revenues and earnings for the quarter are projected to grow year over year.

In the last reported quarter, Zions’ earnings beat the Zacks Consensus Estimate. Higher net interest income, loan growth and stable costs provided support while lower fee income was the undermining factor.

Notably, the company’s earnings surprise history is decent. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 11.5%.

Also, Zions’ activities in the fourth quarter were able to impress the analysts. Hence, the Zacks Consensus Estimate for earnings of $1.06 for moved nearly 1% upward over the past 30 days. The figure reflects a year-over-year improvement of 32.5%.

The consensus estimate for revenues is $712.5 million, which reflects an improvement of 7.1% year over year.

Before we take a look at what our quantitative model predicts, let’s check the factors that are likely to influence fourth-quarter results.

Factors to Impact Q4 Results

Modest growth in net interest income (NII): Rise in interest rates will likely boost the bank’s NII in the quarter under review. Further, commercial and industrial loans (constituting a large part of Zions’ loan portfolio), as well as consumer loans witnessed decent growth. Therefore, the company’s NII will record a rise.

Muted fee revenue growth: Zions’ fourth-quarter non-interest income is expected to benefit slightly from rise in service charge on deposits as deposit balances are expected to increase in the quarter, driven by higher rates. However, as fixed income trading activities remained muted, the company’s capital markets and foreign exchange fees are not expected to benefit much.

Also, as mortgage banking activities continue to be negatively impacted by higher rates and lower originations, the company’s loan sales and servicing income are expected to either remain stable or decline.

Expenses not to lend much support: Despite undertaking a number of cost control initiatives, Zions’ adjusted non-interest expenses are expected to increase slightly in the quarter to be reported due to its continued spending on technology systems overhaul and investment in franchise.

Notably, the company expects FDIC insurance expenses in the fourth quarter to be nearly $7 million.

In 2018, management expects adjusted non-interest expenses to increase at a low-single digit rate.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate in the fourth quarter are low. This is because it doesn’t have the right combination of the two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

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 -0.41%.

Zacks Rank: Zions currently has a Zacks Rank #3. This increases the predictive power of ESP but we need to have positive ESP to be sure of an earnings beat.

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release.

Huntington Bancshares Incorporated (NASDAQ:HBAN) is slated to release results on Jan 24. It has an Earnings ESP of +3.97% and a Zacks Rank #3.

Prosperity Bancshares, Inc. (NYSE:PB) is slated to announce results on Jan 30. It has an Earnings ESP of +1.11% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital Corporation (NASDAQ:ARCC) is scheduled to release results on Feb 12. It has an Earnings ESP of +1.10% and carries a Zacks Rank #3.

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