Hovde Group initiated coverage on Zions Bancorporation (NASDAQ:ZION) with an Outperform rating and a price target of $40.00.
According to the firm, Zion’s operational playbook and historically lower-than-peer deposit beta position the company well for the volatile economic landscape, underscored by the improved credit history and consistent growth through a wide range of economic periods.
Despite its conservative estimates accounting for modest near-term deposit runoff, slower growth, and higher LLP (loan loss provisions), the firm confidently recommends the stock due to its significantly discounted share price.
Even with its late-stage economic outlook, moderate concerns about Office CRE (Commercial Real Estate), and the expectation of a more pronounced deposit beta in the second half of 2023, the firm finds the core earnings too robust to pass up at today’s discount.
According to the firm, the market is incorrectly pricing in a draconian deposit environment and overlooks the looming rapid capital build; supported by earnings and the short duration bond book.
Furthermore, the firm believes Zion’s diversified client base likely limits outsized near-term deposit flight, even with the recent “doomloop” seen by some peers.