Citi has updated its outlook on Zions Bancorp (NASDAQ: ZION), raising the price target to $54.00 from the previous $48.00 while maintaining a Neutral rating on the stock.
The adjustment reflects a more favorable view of the bank's near-term net interest income (NII) trends, which have outperformed expectations.
The bank's recent quarterly results have been more positive than anticipated, especially concerning NII trends, which have been a recent concern for investors.
Despite this, Citi foresees very limited additional upside for NII over the next year due to Zions Bancorp's asset-sensitive balance sheet and a declining interest rate environment.
During the earnings call, the bank provided an optimistic outlook on the potential for deposit repricing. However, Citi analysts believe that as the banking industry experiences improved loan growth trends, the competition for pricing will intensify.
In other recent news, Zions Bancorporation (NASDAQ:ZION) has reported a notable increase in net earnings for the third quarter of 2024, rising by $14 million to reach a total of $204 million. This growth is largely due to higher revenues and reduced expenses. The bank's customer deposits also saw an increase, particularly in non-interest-bearing deposits, while loan growth remained modest.
Zions Bancorporation's acquisition of four FirstBank branches in California, still awaiting regulatory approval, is expected to add substantial deposits and loans to the bank's portfolio. The Common Equity Tier 1 ratio of Zions improved, and diluted earnings per share saw a 7% increase from the previous quarter.
In terms of future expectations, analysts predict stable to slightly increasing loan growth in Q3 2025. They also anticipate a reasonable performance from the bank's $13.5 billion CRE portfolio and a projected 1.4% increase in net interest income for Q3 2025.
However, the bank has seen an increase in classified loans due to challenges in the multifamily segment and non-performing assets rose by $103 million, primarily from commercial and industrial credits.
Despite these concerns, the bank's credit quality remains strong, with low annualized net charge-offs, and the capital markets segment had a record quarter, showing potential for continued growth.
InvestingPro Insights
Zions Bancorp's recent performance aligns with some key insights from InvestingPro. The bank's P/E ratio of 12.01 suggests a relatively attractive valuation, which could support Citi's increased price target. Additionally, InvestingPro Tips highlight that Zions has maintained dividend payments for 54 consecutive years and has raised its dividend for 11 consecutive years, indicating a strong commitment to shareholder returns despite the challenging interest rate environment mentioned in the article.
The bank's profitability, as noted by InvestingPro, with a return on assets of 0.75% and operating income margin of 34.72% for the last twelve months, underscores its well-managed expense base mentioned by Citi analysts. However, the InvestingPro Tip pointing out weak gross profit margins aligns with Citi's concerns about limited additional upside for net interest income.
Investors seeking a more comprehensive analysis can access 7 additional InvestingPro Tips for Zions Bancorp, providing further insights into the bank's financial health and market position.
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