Zions Bancorporation(US:ZION)2024-04-22 16:48Financial Data and Key Metrics Changes - The company reported net earnings of $143 million for the quarter, with diluted earnings per share of $0.96, up $0.18 from the prior quarter [18][20] - Adjusted revenue decreased by 11% compared to the prior year and was stable versus the fourth quarter [26] - The common equity Tier 1 ratio improved to 10.4% from 10.3% in the previous quarter [19] Business Line Data and Key Metrics Changes - Net interest income improved slightly from the prior quarter as the repricing of earning assets outpaced rising funding costs [23] - Customer-related non-interest income was $151 million, slightly up from $150 million in the prior quarter, driven by higher capital markets fees [26] - Adjusted non-interest expense increased by $22 million to $511 million, largely due to seasonal increases in compensation [27] Market Data and Key Metrics Changes - Average loans increased by 1% in the current quarter, with loan demand and customer sentiment improving somewhat [28] - Customer deposit balances declined approximately 1% in the quarter due to seasonal outflows [18] - The loan-to-deposit ratio was 78%, with net charge-offs at just 4 basis points, down from 6 basis points in the prior quarter [19][35] Company Strategy and Development Direction - The company is focused on growing its customer base, particularly in small business lending, and has seen success with a streamlined SBA program [14] - The completion of the core deposit system migration is expected to enhance digital capabilities and improve customer service [10] - The company aims to grow fee income as a larger percentage of total revenue, with capital markets fees representing a key opportunity [15] Management's Comments on Operating Environment and Future Outlook - Management noted that revenue growth remains a challenge, with adjusted revenue down 11% year-over-year, but expressed optimism about improving loan demand [13] - The company anticipates a positive trajectory for net interest margin and credit performance, which should enhance shareholder returns [17] - Management is confident in the adequacy of loan loss reserves, particularly in the commercial real estate portfolio, despite some credit deterioration indicators [48][49] Other Important Information - The company received 20 national excellence awards from Greenwich Associates, ranking third among U.S. banks [11] - The investment portfolio is expected to decline over the near term, providing a source of funds for the balance sheet [31] Q&A Session Summary Question: Can you dig into the NII guide and the assumptions regarding rate cuts? - Management indicated that the base expectation includes three rate cuts, but they are monitoring indicators suggesting fewer cuts may occur [40][41] Question: On the credit front, how confident are you in the adequacy of the loan loss reserve? - Management expressed confidence in the current level of reserves, noting that losses remain manageable and are supported by conservative underwriting practices [48][49] Question: Can you provide color on the increase in C&I classified loans? - The increase was attributed to specific credits experiencing slower lease-up and higher expenses, with no significant large-scale issues identified [86] Question: What are your expectations on further bringing down wholesale borrowing for this year? - Management expects to continue reducing wholesale borrowing, contingent on deposit growth and loan demand [68] Question: How do you see the mix of earning assets evolving? - The company anticipates continued attrition in the investment securities portfolio, with a focus on reinvesting in loans [72]