Zions Bancorporation(ZION) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net earnings for Q1 2025 were $169 million or$ 1.13 per share, representing an 18% improvement year-over-year [14] - Net interest margin increased for the fifth consecutive quarter to 3.10%, up from 3.05% in the previous quarter [15] - Adjusted pre-provision net revenue (PPNR) was $267 million, a 10% increase from$ 242 million a year ago [16] - Efficiency ratio improved compared to last year, though it was seasonally higher [17] - Average loans grew modestly by 0.5% on a linked-quarter basis [18] Business Line Data and Key Metrics Changes - Customer-related income was $158 million, a decrease of 10% linked-quarter but a 4% increase year-over-year [27] - Adjusted non-interest expenses increased by$ 24 million to $533 million, largely due to seasonality [30] - Average loans increased by 3% compared to the year-ago period [33] - Total average deposits declined by 1.9% due to seasonal outflows [34] Market Data and Key Metrics Changes - Non-interest-bearing deposits remained stable at 33% of total deposits [17] - The average cost of interest-bearing deposits decreased by 26 basis points compared to the previous quarter [15] - The cost of deposits declined by 17 basis points to 1.76% [35] Company Strategy and Development Direction - The company aims to build an AI-enabled culture and is focused on managing risk and uncertainty while improving customer experiences [11][12] - The acquisition of four branches in California added approximately$ 630 million in deposits and $420 million in loans, enhancing market share in Southern California [13] - The company is committed to maintaining positive operating leverage and improved efficiency as revenue growth outpaces expense pressures [51] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic uncertainty affecting loan growth and business decisions [9][60] - The outlook for loan growth is expected to be stable to slightly increasing, with commercial loans leading growth while mortgages and commercial real estate may decline [33] - Management noted that the current economic environment is challenging for forecasting, particularly regarding trade policies and tariffs [50][64] Other Important Information - The common equity Tier 1 ratio was 10.8%, indicating a strong capital position [49] - The company expects to see some stabilization in credit quality, with manageable realized losses [44] Q&A Session Summary Question: Client sentiment in the middle market and small business sector - Management noted that businesses are grappling with uncertainty regarding trade policies, which is affecting their willingness to invest and build inventories [56][60] Question: Guidance on net interest income and loan growth - Management indicated that a reasonable amount of net interest income guidance is baked in, but loan growth may be tepid due to uncertainty [62][64] Question: Loan growth demand and pipeline erosion - Management observed slower demand in commercial and industrial loans due to uncertainty, while commercial real estate activity is increasing [69] Question: Expense management in a weaker revenue environment - Management confirmed that they are focused on managing expenses and have already reduced headcount by about 3% [83] Question: Customer-related fee income expectations - Management expects customer-related fee income to stabilize, with treasury management being a significant contributor [91][96] Question: Share repurchase plans and capital management - Management stated that they are considering capital management strategies, including share repurchases, while maintaining a focus on organic growth [100][102] Question: Deposit pricing trends and future expectations - Management indicated that there is still room to lower deposit pricing, depending on market conditions and Fed actions [112] Question: Monitoring specific loan portfolios for tariff exposure - Management is closely watching sectors like trucking and transportation for potential impacts from tariffs [130]