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Can Mortgage Banking Income Aid Zions (ZION) in Q2 Earnings?

Zacks Equity Research

Zions Bancorporation, National Association ZION is scheduled to announce second-quarter 2019 results on Jul 22, after the market closes. Its revenues and earnings for the to-be-reported quarter are projected to grow year over year.

In the last reported quarter, Zions’ earnings missed the Zacks Consensus Estimate. An increase in expenses and lower non-interest income hurt results. Moreover, the company recorded higher provision for credit losses in the quarter.

Notably, Zions has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, the average beat being 1.5%.

Zions Bancorporation Price and EPS Surprise

Zions Bancorporation Price and EPS Surprise

Zions Bancorporation price-eps-surprise | Zions Bancorporation Quote

However, the company’s activities in the second quarter were not able to impress analysts. Hence, the Zacks Consensus Estimate for earnings of $1.09 for the to-be-reported quarter has remained unchanged over the past 30 days. However, the figure indicates a 22.5% improvement from the year-ago quarter’s reported number.

The consensus estimate for revenues is pegged at $723.2 million, which suggests 5.4% rise from the prior-year quarter’s reported figure.

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

Factors to Impact Q2 Results

Muted growth in net interest income (NII): The second quarter witnessed a slowdown in the lending scenario, primarily in commercial and industrial loans (constituting a large part of Zions’ loan portfolio). Thus, soft loan growth combined with little support from margins due to the flattening of the yield curve and the Fed’s accommodative policy stance is expected to negatively impact NII growth.

Fee revenues to witness modest growth: Zions’ second-quarter non-interest income is expected to benefit from service charge on deposits as deposit balances are likely to increase in the quarter.

Mortgage banking activities are expected to witness improvement. Relatively low mortgage rates, seasonality and the central bank’s dovish stance seem to have led to an increase in refinancing activity and mortgage originations during the quarter. Hence, the company’s loan sales and servicing income are expected to be positively impacted.

However, as fixed income trading activities remained weak, Zions’ capital markets and foreign exchange fees are not expected to benefit much.

Expenses to rise modestly: Despite undertaking several cost control initiatives, the company’s adjusted non-interest expenses are expected to increase slightly in the to-be-reported quarter due to its continued spending on technology system overhaul and investment in franchise.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Zions beating the Zacks Consensus Estimate in the second quarter are low. This is because it doesn’t have the right combination of the two key 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 -0.71%.

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

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

TD Ameritrade Holding Corporation AMTD is slated to release results on Jul 22. It currently has an Earnings ESP of +0.03% and a Zacks Rank #3.

T. Rowe Price Group, Inc. TROW has an Earnings ESP of +0.33% and sports a Zacks Rank #1 (Strong Buy) at present. The company is expected to release results on Jul 24.

Ares Capital Corporation ARCC is expected to release results on Jul 30. It presently has an Earnings ESP of +1.02% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Zions Bancorporation (ZION) : Free Stock Analysis Report
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