Zions Bancorporation, National Association (ZION) Bundle
Understanding Zions Bancorporation, National Association (ZION) Revenue Streams
Understanding Zions Bancorporation’s Revenue Streams
As of the third quarter of 2024, Zions Bancorporation reported a net interest income of $620 million, reflecting a 6% increase from $585 million in the same quarter of 2023. This increase was attributed to a rise in average interest-earning assets and a favorable yield on these assets, which stood at 5.35% compared to 5.02% in the prior year.
The breakdown of revenue sources for the third quarter of 2024 is as follows:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Net Interest Income | $620 | $585 | 6% |
| Noninterest Income | $172 | $180 | -4% |
| Total Revenue | $792 | $765 | 3.5% |
Year-over-year revenue growth reflects a 3.5% increase in total revenue, driven primarily by net interest income despite a slight decline in noninterest income.
Year-over-Year Revenue Growth Rate
The year-over-year growth rates for key revenue components from Q3 2023 to Q3 2024 are detailed below:
| Metric | Q3 2024 | Q3 2023 | Growth Rate (%) |
|---|---|---|---|
| Net Interest Income | $620 million | $585 million | 6% |
| Noninterest Income | $172 million | $180 million | -4% |
| Total Revenue | $792 million | $765 million | 3.5% |
Contribution of Different Business Segments to Overall Revenue
In terms of segment contribution, net interest income accounted for approximately 78% of total revenue in Q3 2024, while noninterest income contributed around 22%. This represents a slight shift from Q3 2023, where net interest income made up 76% of total revenue.
The major components of noninterest income in Q3 2024 included:
| Noninterest Income Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Commercial Account Fees | $46 | $43 | 7% |
| Card Fees | $24 | $26 | -8% |
| Capital Markets Fees | $28 | $18 | 56% |
| Wealth Management Fees | $14 | $15 | -7% |
| Total Noninterest Income | $172 | $180 | -4% |
Analysis of Significant Changes in Revenue Streams
The increase in net interest income was primarily due to higher earning asset yields, which were positively influenced by rising interest rates. The net interest margin for Q3 2024 was 3.03%, up from 2.93% in Q3 2023. Meanwhile, noninterest income saw a decline, largely due to lower loan-related fees and a decrease in dividends on Federal Home Loan Bank stock.
The provision for credit losses significantly decreased to $13 million in Q3 2024 from $41 million in Q3 2023, indicating improved credit quality metrics and contributing positively to net earnings.
A Deep Dive into Zions Bancorporation, National Association (ZION) Profitability
Profitability Metrics
Gross Profit Margin: As of September 30, 2024, the gross profit margin was approximately 3.03%, reflecting an increase from 2.93% in the prior year period.
Net Profit Margin: The net profit margin for the third quarter of 2024 stood at 1.37%, compared to 1.13% in the same quarter of 2023.
Operating Profit Margin: The operating profit margin was reported at 2.45% for Q3 2024, showing a growth from 2.10% in Q3 2023.
Trends in Profitability Over Time
The profitability metrics indicate a consistent upward trend in margins over the past year. The following table summarizes the profitability metrics over the last four quarters:
| Quarter | Gross Profit Margin (%) | Net Profit Margin (%) | Operating Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | 3.03 | 1.37 | 2.45 |
| Q2 2024 | 2.98 | 1.34 | 2.40 |
| Q1 2024 | 2.90 | 1.25 | 2.30 |
| Q3 2023 | 2.93 | 1.13 | 2.10 |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the key profitability ratios for this institution are as follows:
| Metric | Company Value (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 3.03 | 2.85 |
| Net Profit Margin | 1.37 | 1.25 |
| Operating Profit Margin | 2.45 | 2.20 |
Analysis of Operational Efficiency
Operational efficiency, measured by the efficiency ratio, was reported at 60.5% for the third quarter of 2024, reflecting improved cost management practices. The adjusted pre-provision net revenue (PPNR) for Q3 2024 was $277 million, compared to $228 million in Q3 2023.
Cost Management: Noninterest expenses increased by 1%, totaling $502 million for Q3 2024, primarily due to rising salaries and technology expenses.
Gross Margin Trends: The gross margin has seen a steady increase, driven by increased loan growth and improved asset yields. The yield on average interest-earning assets increased to 5.35% in Q3 2024 from 5.02% in Q3 2023.
Overall, these profitability metrics illustrate a robust financial health, indicating strong growth and effective management strategies in place.
Debt vs. Equity: How Zions Bancorporation, National Association (ZION) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company's total long-term debt amounted to $548 million, a slight increase from $542 million at December 31, 2023. This long-term debt primarily consists of subordinated notes valued at $544 million.
Short-term debt, primarily in the form of borrowed funds, saw a significant rise, totaling $6.3 billion as of September 30, 2024, compared to $4.5 billion a year earlier, reflecting a 39% increase driven by higher short-term borrowings.
The debt-to-equity ratio as of September 30, 2024, stood at 0.09, indicating a conservative capital structure compared to the industry average of approximately 0.12. This ratio highlights the company’s preference for equity financing over debt financing in its growth strategy.
Recent credit ratings from major agencies indicate a stable outlook, with ratings at an investment-grade level. Specifically, the company holds a credit rating of Baa1 from Moody's and BBB+ from S&P, reflecting solid financial health and access to capital markets.
The following table summarizes the company’s debt and equity structure as of September 30, 2024:
| Debt Component | Amount (in millions) |
|---|---|
| Long-Term Debt | $548 |
| Short-Term Debt | $6,300 |
| Total Debt | $6,848 |
| Total Shareholders' Equity | $6,385 |
| Debt-to-Equity Ratio | 0.09 |
The company has effectively balanced its debt financing with equity funding, opting for equity to support its expansion while maintaining a low debt profile. As of the end of the third quarter of 2024, total deposits reached $75.7 billion, bolstered by a 1% increase since December 31, 2023.
Moreover, the average interest-bearing liabilities rose by 8% to $56.6 billion, indicating a strategic approach to leverage deposits for funding operations while keeping debt levels manageable.
Assessing Zions Bancorporation, National Association (ZION) Liquidity
Assessing Zions Bancorporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.19, indicating that for every dollar of current liabilities, there are $1.19 in current assets.
Quick Ratio: The quick ratio was reported at 0.95, suggesting a strong liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital stood at $6.4 billion compared to $5.9 billion at December 31, 2023, showing an increase of $500 million or 8.5%. This growth reflects effective management of current assets and liabilities.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flows from operating, investing, and financing activities were as follows:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $631 | $1,130 |
| Investing Activities | $1,776 | $1,962 |
| Financing Activities | ($1,062) | ($1,480) |
Cash Flow Trends
The cash flow from operating activities decreased by 44% from the previous year, primarily due to changes in working capital and adjustments to reconcile net income. Cash flow from investing activities also decreased, reflecting a 9.5% decline year-over-year.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the total available liquidity was $43.1 billion, an increase from $40.6 billion at December 31, 2023. The ratio of available liquidity to uninsured deposits stood at 130%, indicating a robust buffer against liquidity risks.
Overall, the liquidity profile demonstrates a strong capability to meet short-term obligations while maintaining operational flexibility.
Is Zions Bancorporation, National Association (ZION) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, we will analyze key valuation metrics including the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Enterprise Value-to-EBITDA (EV/EBITDA) ratio. This analysis will provide insights into whether the company is overvalued or undervalued in the current market.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 14.0, based on a diluted earnings per share (EPS) of $3.61 for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 0.97, with total shareholders' equity reported at $6.4 billion and total assets at $87.0 billion.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 8.5, based on an enterprise value calculated from total market capitalization and net debt.
Stock Price Trends
Over the last 12 months, the stock price has shown a trend with the following data:
- 12-month high: $45.50
- 12-month low: $33.75
- Current stock price: $38.75
Dividend Yield and Payout Ratios
The current dividend yield is 1.06%, with a recent quarterly dividend of $0.41 per share. The payout ratio is approximately 22.7% based on the latest earnings data.
Analyst Consensus on Stock Valuation
Analyst consensus ratings indicate a Hold recommendation, with several analysts suggesting that the stock is fairly valued based on current market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 14.0 |
| P/B Ratio | 0.97 |
| EV/EBITDA Ratio | 8.5 |
| 12-Month High | $45.50 |
| 12-Month Low | $33.75 |
| Current Stock Price | $38.75 |
| Dividend Yield | 1.06% |
| Dividend Payout Ratio | 22.7% |
| Analyst Consensus | Hold |
Key Risks Facing Zions Bancorporation, National Association (ZION)
Key Risks Facing Zions Bancorporation
The financial health of a banking institution like Zions Bancorporation is influenced by a variety of risk factors that can affect its operations and profitability. Below is a detailed analysis of the internal and external risks impacting the company as of 2024.
Overview of Risk Factors
Several key risks can impact Zions Bancorporation's financial health:
- Regulatory Changes: Compliance with evolving banking regulations, including Basel III capital requirements, is crucial. As of September 30, 2024, the bank exceeded all capital adequacy requirements under these rules.
- Market Conditions: Fluctuations in interest rates can significantly impact net interest income. The net interest margin increased to 3.03% in Q3 2024 from 2.93% in Q3 2023, but higher funding costs present ongoing challenges.
- Credit Risk: The ratio of classified loans rose to 3.55% of total loans and leases as of September 30, 2024, up from 1.43% at the end of 2023, indicating a potential increase in loan defaults.
- Operational Risks: The bank's recent transition to a new core banking system may present operational challenges, despite the potential for improved efficiencies.
Operational and Strategic Risks
Recent earnings reports highlight operational risks related to credit quality:
- The increase in nonperforming assets was notable, totaling $368 million or 0.62% of total loans and leases, compared to $228 million or 0.39% at year-end 2023.
- Classified loans, which indicate higher credit risk, rose to $2.1 billion as of September 30, 2024.
Financial Risks
Financial risks are also evident in Zions Bancorporation's performance metrics:
- The provision for credit losses decreased to $13 million in Q3 2024, down from $41 million in Q3 2023, indicating some improvement in credit quality.
- Net loan and lease charge-offs amounted to $3 million, or 0.02% of average loans and leases, compared to $14 million or 0.10% in the previous year.
Mitigation Strategies
Zions Bancorporation employs various strategies to mitigate risks:
- Credit Risk Management: Stringent underwriting standards and early detection of potential problem loans are emphasized.
- Liquidity Management: As of September 30, 2024, total available liquidity was $43.1 billion, providing a buffer against market volatility.
- Operational Efficiencies: The bank has invested in technology upgrades to enhance operational efficiency and customer service.
| Risk Factor | Details | Impact |
|---|---|---|
| Regulatory Changes | Compliance with Basel III | Increased capital reserves |
| Market Conditions | Net interest margin: 3.03% | Pressure on profit margins |
| Credit Risk | Classified loans: $2.1 billion | Potential defaults |
| Operational Risks | Transition to new systems | Operational disruptions |
| Liquidity Management | Total available liquidity: $43.1 billion | Buffer against volatility |
Future Growth Prospects for Zions Bancorporation, National Association (ZION)
Future Growth Prospects for Zions Bancorporation
Analysis of Key Growth Drivers
The bank's growth is primarily driven by several key factors including product innovation, market expansion, and strategic acquisitions. The average loans and leases increased by $1.7 billion, or 3%, to $58.7 billion as of September 30, 2024. This growth is mainly attributed to the consumer and commercial real estate loan segments.
Furthermore, total deposits increased by $319 million, resulting in a total of $75.7 billion by September 30, 2024, supported by a 2% rise in customer deposits, which reached $70.5 billion.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections are promising, with net interest income rising by 6% in the third quarter of 2024 compared to the previous year. The net interest margin improved to 3.03%, up from 2.93%. Analysts estimate that earnings per share (EPS) will continue to grow, with diluted EPS reported at $1.37 for the third quarter of 2024, compared to $1.13 for the same period in 2023.
Strategic Initiatives and Partnerships
Strategic initiatives such as the completion of a multi-year project to modernize their banking systems are expected to enhance operational efficiency and customer experience. The total capitalized costs associated with this core system replacement project are approximately $271 million. This modernization is anticipated to support enhanced service delivery and operational efficiency, which are critical for future growth.
Competitive Advantages
The bank possesses significant competitive advantages, including a robust capital position and strong credit quality metrics. As of September 30, 2024, the common equity tier 1 capital ratio was 10.7%, exceeding regulatory requirements. The bank's efficiency ratio improved, indicating better cost management relative to revenue generation, with a current efficiency ratio of 74.1%.
Moreover, the bank's total shareholders' equity increased by $694 million, or 12%, to $6.4 billion as of September 30, 2024.
Table: Financial Overview and Growth Metrics
| Metric | Q3 2024 | Q3 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Average Loans and Leases | $58.7 billion | $57.0 billion | $1.7 billion | 3% |
| Total Deposits | $75.7 billion | $74.0 billion | $1.7 billion | 2.3% |
| Net Interest Margin | 3.03% | 2.93% | 0.10% | 3.4% |
| Diluted EPS | $1.37 | $1.13 | $0.24 | 21.2% |
| Common Equity Tier 1 Ratio | 10.7% | 10.2% | 0.5% | 4.9% |
| Total Shareholders' Equity | $6.4 billion | $5.7 billion | $0.7 billion | 12% |
The bank's focus on enhancing its product offerings and expanding its market presence, combined with solid financial metrics, positions it well for future growth opportunities.
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Updated on 16 Nov 2024
Resources:
- Zions Bancorporation, National Association (ZION) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Zions Bancorporation, National Association (ZION)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Zions Bancorporation, National Association (ZION)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.