Driven by continued improvement in loan balances, along with higher rates, Zions Bancorporation, National Association’s ZION top-line growth is expected to continue. Moreover, the regulatory nod for removal of the label of systemically important financial institution (“SIFI”) is a major positive for the company.
However, increasing expenses and exposure toward risky loan portfolios are major concerns for the company. Its Zacks Consensus Estimate for earnings in 2018 has remained unchanged over the past 30 days, reflecting that analysts are not very optimistic regarding the company’s earnings growth potential.
Thus, the stock currently carries a Zacks Rank #3 (Hold). In fact, its shares lost 22.1% in the last six months compared with 24% decline recorded by the industry.
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Looking at the fundamentals, Zions’ net loans and leases witnessed a CAGR of 3.5% over the last six years (2012-2017), with the trend continuing in the first nine months of 2018. Additionally, its non-interest deposits, as a percentage of total deposits, have been on the rise. The company’s initiatives to efficiently deploy the capital generated from these deposits and growth in loan demand will support revenue generation in the quarters ahead.
Moreover, with the improvement in interest rates, margin pressure for Zions has been easing. The company has been benefiting from increased yields and growth in loan balance.
Additionally, credit quality continues to be a major strength for Zions. The company has been recording a consistent decline in allowance for credit losses over the past several quarters. With stress in energy portfolio gradually diminishing and no longer a concern, the company’s asset quality will improve in the future, driven by improving economy.
However, due to higher salaries and employee benefits, as well as FDIC premiums, Zions’ expenses have remained elevated. In fact, management expects operating expenses to flare up marginally in 2018.
Moreover, the presence of high levels of commercial real estate (CRE) assets on the company’s balance sheet will likely put it in a tight spot. Because of this, raising new capital and removing troubled loans are expected to take precedence over finding growth opportunities.
Some better-ranked stocks from the finance space are On Deck Capital, Inc. ONDK, Ally Financial Inc. ALLY and Credit Acceptance Corporation CACC.
On Deck Capital witnessed an upward earnings estimate revision of 22.7% for 2018 over the past 60 days. Additionally, the stock has gained 26.6% in the past two years. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 60 days, Ally Financial’s earnings estimates for 2018 have been revised 1.3% upward. The company’s shares have increased 17.9% in the past two years. The stock currently sports a Zacks Rank #1.
Credit Acceptance’s earnings estimates for 2018 have remained stable over the past 60 days. Its shares have surged 76.5% in the past two years. The stock currently has a Zacks Rank #2 (Buy).
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