Zions Bancorporation Earnings Call Signals Durable Momentum

Zions Bancorporation, National Association (N.A) ((ZION)) has held its Q1 earnings call. Read on for the main highlights of the call.

Zions Bancorporation, N.A. struck an upbeat tone on its latest earnings call, emphasizing robust year‑over‑year gains in profitability, margin and fee income, alongside exceptionally clean credit metrics and healthy deposit growth at quarter‑end. Management acknowledged softer quarter‑to‑quarter trends and seasonal expenses but argued that structural earnings power and strategy execution outweigh the temporary headwinds.

Strong Year‑over‑Year Earnings Growth

Net earnings climbed to $232 million, or $1.56 per diluted share, marking a 37% jump versus the same quarter last year. The improvement was driven by higher revenue, a lower provision for credit losses and a more favorable effective tax rate, underscoring the bank’s improved earnings quality.

Net Interest Income and Margin Expansion

Taxable equivalent net interest income rose 6% year‑over‑year to $662 million, with net interest margin improving 17 basis points to 3.27%. Management highlighted better asset yields and balance‑sheet repositioning as key supports for margin, even as funding costs remain elevated across the industry.

Steady Loan Growth Led by Commercial Lending

Average loans increased 2.4% on an annualized basis during the quarter and 2.5% year‑over‑year, with commercial lending as the primary engine. Underlying origination activity was stronger than headline numbers, which were dampened by mortgage sales and accounting changes.

Deposit and Funding Progress

Period‑end customer deposits rose by $1.3 billion, or 1.8%, from year‑end, offering investors comfort on core funding stability. Total funding costs fell 8 basis points sequentially to 1.68% as management repriced deposits and reduced reliance on higher‑cost wholesale funding.

Resilient Credit Quality

Credit metrics remained a key bright spot, with net charge‑offs at just 3 basis points of average loans on an annualized basis. Nonperforming assets fell to 48 basis points, while the 1.16% allowance for credit losses covered nonaccrual loans by a robust 239%.

Capital Strength and Tangible Book Growth

The bank’s Common Equity Tier 1 ratio held steady at 11.5%, providing a solid capital cushion for growth and capital return. Tangible book value per share surged 19% year‑over‑year, reflecting strong earnings and balance‑sheet normalization after prior rate‑driven pressures.

Fee Income Momentum and Capital Markets Build‑Out

Adjusted customer‑related noninterest income reached $174 million, up about 10% year‑over‑year excluding CVA, with Capital Markets cited as an outsized contributor. Management is investing heavily in investment banking, sales and trading and real estate capital markets, supported by strong pipelines heading into the second quarter.

Strategic Acquisitions and New Products

Zions agreed to acquire Basis Investment Group’s Fannie Mae and Freddie Mac lending programs, enhancing its CRE capabilities and agency platform. New offerings such as the consumer “Gold” account, a pilot small‑business product and strong SBA 7(a) growth signal a push to deepen relationships and diversify revenue.

Liquidity Management and Securities Cash Flows

The investment securities portfolio generated $493 million of principal and prepayment cash flows, of which $299 million was reinvested. With an effective price sensitivity of roughly 3.7 years, the portfolio is being used as a key on‑balance‑sheet liquidity lever and a tool to balance interest‑rate risk.

Positive Operating Leverage Trajectory

Adjusted pre‑provision net revenue reached $301 million, up 13% versus a year earlier, demonstrating operating leverage already running ahead of full‑year goals. Management reiterated its 2026 target of 100–150 basis points of positive operating leverage and noted that intra‑quarter trends looked even stronger than the reported average.

Quarter‑over‑Quarter Earnings and EPS Slippage

Sequentially, earnings fell 11%, with diluted EPS easing to $1.56 from $1.76 in the prior quarter, as revenue dipped and seasonal factors kicked in. Two fewer days in the quarter, sharply lower securities gains and typical first‑quarter compensation items were the primary drivers of the short‑term pullback.

NII and Margin Pressure Versus Prior Quarter

Net interest income declined $21 million sequentially, a 3% drop, as NIM compressed 4 basis points to 3.27%. Earning‑asset yields fell faster than funding costs, and loan repricing reflected earlier rate cuts, illustrating the lagged effect of the rate environment on quarterly results.

PPNR Moderation on a Linked‑Quarter Basis

Adjusted pre‑provision net revenue of $301 million was down 9% from the prior quarter, reflecting lower day‑count‑adjusted NII and fewer securities gains. Management framed the pullback as seasonal and rate‑driven rather than structural, pointing to the strong year‑over‑year improvement as the more important trend.

Expense Growth and Compensation Seasonality

Adjusted noninterest expense rose to $558 million, higher both sequentially and year‑over‑year, largely due to seasonal compensation costs. Additional spending on marketing, technology, outsourced services and incentives also pushed expenses up as the bank invests for growth and competitive positioning.

Average Deposit Softness Amid Competition

While period‑end deposits were higher, average deposits fell $540 million from the prior quarter, with about half driven by lower brokered balances and the rest by seasonal outflows. Management noted that deposit competition and repricing remain industry‑wide challenges that will continue to shape funding dynamics.

CRE Pricing and C&I Watchlist Concerns

The bank acknowledged pricing pressure across parts of commercial real estate, even as headline CRE credit metrics improved. In Commercial and Industrial lending, criticized balances ticked up slightly, with restaurants and other consumer‑exposed businesses singled out as segments requiring close monitoring.

Factors Masking Underlying Loan Growth

Reported loan growth was muted by the sale of more than $500 million of held‑for‑sale residential mortgages, which removed balances from the books. An accounting netting change affecting roughly $100 million of loans further constrained the reported figures, obscuring stronger underlying origination trends.

Capital Deployment and the CET1 Trade‑Off

CET1 stayed flat quarter‑over‑quarter as earnings were partially offset by $77 million of share repurchases, dividend payouts and higher risk‑weighted assets. Management noted that pending acquisitions, including the agency lending deal, will temporarily consume capital until approvals and integration are completed.

Guidance and Outlook

Looking ahead, management expects net interest income to grow about 7–8% over the next year, assuming no rate changes, with margin expansion and continuing loan growth as key drivers. Customer‑related fee income and noninterest expense are both projected to rise moderately, but the bank still targets 100–150 basis points of positive operating leverage in 2026, supported by strong capital, deposit growth and potential regulatory capital relief.

Zions’ latest call paints a picture of a bank leaning into growth and fee diversification while carefully managing credit and capital, even as quarterly earnings ebb with seasonality and rate noise. For investors, the combination of solid year‑over‑year momentum, low credit losses and a clear path to positive operating leverage offers a constructive medium‑term story despite near‑term volatility.