Zions Bancorporation(US:ZION)2025-10-20 22:32Financial Data and Key Metrics Changes - The third quarter reflected continued momentum in core earnings with net interest margin expanding by 11 basis points to 3.28% [5] - Customer fees, excluding net credit valuation adjustment, grew by $10 million, and adjusted expenses declined by $1 million, improving the efficiency ratio to 59.6% [5] - Diluted earnings per share was $1.48 compared to $1.63 in the prior period and $1.37 in the year-ago period [7] - Net interest income increased by $52 million, or 8%, relative to the third quarter of 2024 [9] - Adjusted non-interest income was $174 million for the quarter, representing a 6% increase versus the second quarter and an 8% increase versus the year-ago quarter [11] Business Line Data and Key Metrics Changes - Average loans increased by 2.1% annualized over the previous quarter and 3.6% over the year-ago period [13] - Customer-related non-interest income was $163 million for the quarter, with capital market fees, excluding net CVA, increasing by 25% compared to the prior year period [11] - Adjusted expenses of $520 million decreased by $1 million versus the prior quarter and increased by 4% versus the year-ago period [12] Market Data and Key Metrics Changes - Average non-interest-bearing deposits grew approximately $192 million, or 0.8% compared to the prior quarter [14] - Total borrowings declined by $1.8 billion during the quarter, with short-term FHLB advances decreasing by $2.3 billion [15] - Non-performing assets remained relatively low at 0.54% of loans and other real estate owned compared to 0.51% in the prior quarter [16] Company Strategy and Development Direction - The company expects to continue producing positive operating leverage as revenue growth outpaces non-interest expense growth [19] - The outlook for customer-related fee income in the third quarter of 2026 is moderately increasing relative to the third quarter of 2025, driven by increased customer activity and new client acquisitions [12] - The company is open to M&A opportunities but is not feeling compelled to pursue any deals at this time [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the recent credit issues are isolated incidents and emphasized a strong credit history [24][25] - The company anticipates continued growth in loans and deposits, supported by fixed asset repricing and favorable shifts in the composition of average interest-earning assets [9] - Management noted that the current economic environment requires a thoughtful approach to lending, particularly in commercial real estate [66] Other Important Information - The company recorded a $49 million provision for credit loss, with net charge-offs in the quarter being $56 million, or 37 basis points of loans on an annualized basis [6][16] - The common equity tier one ratio this quarter was 11.3%, indicating a strong capital position [18] Q&A Session Summary Question: Can you talk about the isolated incident related to the charge this quarter? - Management confirmed that the incident is isolated and that a thorough internal review has not revealed similar issues [23][24] Question: How much fixed-rate asset repricing is factored into the NII guide outlook? - The CFO indicated that there is potential for two to three basis points on earning asset yields to play through, which is embedded in the guidance [32] Question: What is the current risk appetite and how might it evolve? - Management stated that underwriting practices will remain consistent and that the recent credit issues will not impact loan growth [95] Question: How has loan demand changed over the last 90 days? - Loan spreads have improved slightly, and while there has been some muted growth, the company is prepared for increased loan growth in the future [77] Question: What does deregulation mean for the company? - Management welcomed a return to solid regulation and emphasized that it would not materially change how the company operates [87]