Zions Bancorporation(ZION) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The net interest margin expanded by 11 basis points to 3.28% [5][10] - Customer fees, excluding net credit valuation adjustment, grew by $10 million [5] - Adjusted expenses declined by $1 million, leading to an improved efficiency ratio of 59.6% [5] - Diluted earnings per share was $1.48, down from $1.63 in the prior period [7] - The provision for credit loss was recorded at $49 million, with net charge-offs of $56 million, or 37 basis points of loans on an annualized basis [6][17] Business Line Data and Key Metrics Changes - Net interest income increased by $52 million, or 8%, compared to the third quarter of 2024 [9] - Customer-related non-interest income was $163 million, slightly down from $164 million in the prior period [11] - Adjusted customer-related non-interest income, excluding net CVA, was $174 million, representing a 6% increase versus the second quarter [11] - Average loans increased by 2.1% annualized over the previous quarter [13] - Average deposit balances were relatively flat, with a notable 11.5% reduction in average brokered deposits [13][14] Market Data and Key Metrics Changes - Average non-interest-bearing deposits grew by approximately $192 million, or 0.8% compared to the prior quarter [14] - Total borrowings declined by $1.8 billion during the quarter [15] - Non-performing assets remained low at 0.54% of loans and other real estate owned [16] Company Strategy and Development Direction - The company aims to continue producing positive operating leverage as revenue growth outpaces non-interest expense growth [19] - There is a focus on enhancing capital markets offerings, including real estate capital markets and investment banking advisory fees [11] - The company is open to M&A opportunities but prioritizes smaller deals that enhance market density [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the credit issues faced are isolated incidents and emphasized a strong credit history [24][96] - The outlook for net interest income is moderately increasing, supported by continued growth in loans and deposits [9][10] - Management expects to maintain a stable risk appetite despite recent credit challenges [96] Other Important Information - The common equity tier one ratio was reported at 11.3%, indicating a strong capital position [18] - The company has seen a 17% growth in tangible book value per share compared to the prior year [18] Q&A Session Summary Question: Can you talk about the isolated incident related to the charge-offs? - Management confirmed that the incident is isolated and has conducted a thorough review of the portfolio, finding no similar issues [22][23] Question: What is the outlook for net interest income? - The guidance includes expectations for fixed-rate asset repricing and loan growth, with a potential yield pickup of 2-3 basis points [31][32] Question: How has loan demand changed recently? - Loan spreads have improved slightly, and while there was some runoff in CNI, production has been up in most months this year [78][81] Question: What is the company's approach to M&A? - The company is open to smaller deals that enhance market presence but is not under pressure to pursue acquisitions [58][59] Question: How does the company view the NDFI portfolio? - Management believes that concerns regarding the NDFI portfolio are somewhat overblown, highlighting the safety of certain categories like capital call lines [106]