Will Debt Reduction Result In Accelerated Growth For Zions? - Analyst Blog

On Mar 6, 2015, we issued an updated research report on Zions Bancorporation ZION. Consistent growth in loans and deposits continued to drive the growth momentum, while elevated costs and provisions remained headwinds.

Zions has been steadily witnessing improvement in loans and deposits over several years. While net loans and leases rose 3% year over year in 2014, deposits also grew 3% year over year. In addition, total revenue increased 8% year over year in 2014, reflecting strengthening fundamentals.

Further, the company is evaluating ways to streamline its operations and improve overall efficiency, which will help achieve greater economies of scale, superior access to capital markets, additional robust treasury management and stronger risk management. Also, the company undertook considerable actions during 2014 to reduce risk by selling a significant portion of the construction and land development loans.

On the flip side, higher non-interest expenses and provisions continued to weigh on profitability. The expense level is expected to remain elevated in the upcoming quarters owing to the technology initiatives, while raising new capital and removing troubled loans are expected to take precedence over finding new growth opportunities.

Further, a low interest rate environment continues to put pressure on the net interest margin (NIM). Also, Zion’s asset-sensitive balance sheet and stringent regulatory environment might affect the company’s top-line growth in the near term.

Hence, over the last 30 days, the Zacks Consensus Estimate declined by a penny to $1.61 per share for 2015 and decreased 1% to $1.98 per share for 2016.

Zions currently carries a Zacks Rank #3 (Hold).

Some better-ranked Western banks include Central Valley Community Bancorp CVCY, BofI Holding, Inc. BOFI and Sierra Bancorp BSRR. All these stocks sport a Zacks Rank #2 (Buy).

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