Morningstar

Zions Earnings: Tepid Loan Growth and Net Interest Margin Sequential Decline

We expect to increase our fair value estimate for Zions stock.

Zions bank sign on building
Kristoffer Tripplaar via AP
Securities in This Article
Zions Bancorp NA
(ZION)

Key Morningstar Metrics for Zions Bancorporation

  • Fair Value Estimate
    : $62.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : High

What We Thought of Zions Bancorporation’s Earnings

Zions Bancorporation ZION reported slightly disappointing first-quarter results, with its net interest margin contracting 4 basis points sequentially. The bank’s shares traded down 2%-3% in after-hours trading on April 20 following its earnings release.

Why it matters: Zions’ 2% year-over-year loan growth was tepid and weaker, in our opinion, than its “modestly increasing” 2026 loan growth guidance of mid-single-digit growth. The bank’s loan growth has been sluggish, in the low-single-digit range, over the past several quarters, despite having an attractive footprint in the Western United States.

  • We surmise Zions’ weaker loan growth likely partly reflects its tighter underwriting appetite. Management noted reluctance to expand nondepository financial lending, or NDFI, a major industry growth driver in recent years. While US banks tripled NDFI lending over five years, Zions’ exposure stayed largely flat.
  • Zions also dialed back its expectations for consumer loan growth in its rolling 12-month guidance, believing it will slightly contract rather than stay relatively stable, despite capital relief for mortgage lending in newly proposed bank regulations.

The bottom line: Despite being slightly underwhelmed by the latest results, we expect to increase our $62 fair value estimate for no-moat-rated Zions by mid-single digits, mostly from a higher leverage ratio forecast, due to newly proposed bank regulations. We view shares as slightly undervalued with our contemplated update.

Between the lines: Net interest margin declined by 4 basis points from the prior quarter to 3.27%, mostly driven by the decline in loan yields. Zions’ balance sheet is more asset-sensitive than most of its regional peers, and a reduction in the federal-funds rate would have a larger impact on its profitability.

  • Including the impact of hedging, around 65% of Zions’ loans will reprice over the next 12 months, with 49% repricing in less than three months.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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