Stephens has updated its outlook on Zions Bancorp (NASDAQ: ZION), raising the price target to $55 from the previous $53 while maintaining an Equal Weight rating on the stock.
The adjustment follows Zions Bancorp's third-quarter performance which surpassed expectations with approximately a 9% operating pre-provision net revenue (PPNR) beat. The company's earnings per share (EPS) also benefited from a loan loss provision that was significantly lower than the consensus estimate.
Zions' third-quarter results were bolstered by positive net interest income trends and operating expenses that came in below expectations. Despite these positive factors, the bank did see a 39% increase in nonperforming assets and a 66% quarter-over-quarter increase in classified loans, attributed in part to downgrades in the multifamily portfolio, particularly those originated in 2021 and 2022. These challenges were linked to extended lease-ups and concessions in the sector.
The bank has shifted its grading methodology to place a greater emphasis on cash flow rather than collateral values or the strength of sponsors. This change comes as part of Zions' strategic adjustments in response to market conditions. Looking ahead, the analyst interprets management's comments about the third quarter of 2025 as suggesting potential upside to their estimates, leading to an updated 2025 EPS forecast of $4.85, up from $4.65.
In the last quarter, Zions Bancorp also reported new customer growth stemming from a branch transaction in California, contributing $730 million in deposits and $420 million in loans. However, management indicated a limited interest in pursuing additional deals in the near future.
In other recent news, Zions Bancorporation (NASDAQ:ZION) has reported a rise in net earnings for the third quarter of 2024, reaching $204 million, an increase of $14 million. This growth is largely attributed to higher revenues and reduced expenses. The bank's customer deposits have also seen a rise, particularly in non-interest-bearing deposits, while loan growth remained modest.
In addition, Zions Bancorporation is set to acquire four FirstBank branches in California, pending regulatory approval, a move expected to bolster its deposits and loans portfolio. Citi, meanwhile, has raised its price target for Zions Bancorp, maintaining a neutral rating on the stock, reflecting a more favorable view of the bank's near-term net interest income trends.
Despite a rise in classified loans and non-performing assets, credit quality at Zions Bancorporation remains strong. Looking ahead, analysts predict stable to slightly increasing loan growth in Q3 2025, alongside a projected 1.4% increase in net interest income.
InvestingPro Insights
Zions Bancorp's recent performance and strategic adjustments are reflected in several key metrics and insights from InvestingPro. The company's P/E ratio of 12.01 suggests a relatively attractive valuation, especially considering its strong financial position. This aligns with the analyst's decision to maintain an Equal Weight rating while raising the price target.
InvestingPro Tips highlight that Zions has maintained dividend payments for 54 consecutive years and has raised its dividend for 11 consecutive years. This demonstrates the bank's commitment to shareholder returns, even in challenging market conditions. The current dividend yield of 3.32% further underscores the value proposition for income-focused investors.
Despite the increase in nonperforming assets mentioned in the article, InvestingPro data shows that Zions has been profitable over the last twelve months, with a basic EPS of $4.15. This profitability, coupled with the fact that 5 analysts have revised their earnings upwards for the upcoming period, suggests a positive outlook that aligns with the analyst's increased 2025 EPS forecast.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Zions Bancorp, providing deeper insights into the company's financial health and market position.
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