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Mar 31, 2020
Zions Q1 2020 Earnings Report
Zions Bancorporation reported a decline in net earnings and EPS due to increased provision for credit losses, but highlighted well-controlled operating expenses and a resilient net interest margin.
Key Takeaways
Zions Bancorporation, N.A. reported first quarter 2020 net earnings of $6 million, a significant decrease compared to $205 million in the same quarter of the previous year. Diluted EPS also declined to $0.04 from $1.04 year-over-year. The decrease was primarily due to a substantial increase in the provision for credit losses, driven by the anticipated economic downturn related to the effects of COVID-19. Despite the earnings decline, the bank highlighted well-controlled operating expenses and a relatively resilient net interest margin.
Net earnings decreased to $6 million, with diluted EPS at $0.04, significantly lower than 1Q19.
Net interest income was $548 million, compared with $576 million in the prior year.
The company adopted CECL and recorded a provision for credit losses of $258 million, compared to $4 million in the prior year.
The CET1 Capital ratio was 10.0%, compared with 11.3% in the prior year.
Zions
Zions
Forward Guidance
Zions Bancorporation faces an uncertain economic environment due to the COVID-19 pandemic, but is equipped with a strong capital and reserve position.
Positive Outlook
- Well-controlled operating expenses, decreased 5% from last year
- Net interest margin remained relatively resilient when compared to the prior quarter
- Very modest realized loan losses
- Materially strengthened allowance for credit losses
- Payment deferral arrangements established for adversely affected clients
Challenges Ahead
- Challenging economic environment due to the COVID-19 pandemic
- Potential impacts on customers’ ability to make timely payments on obligations
- Potential impacts on fee income revenue due to reduced loan origination activity and card swipe income
- Potential impacts on operating expense due to alternative approaches to doing business
- Uncertainty regarding the Bank’s ability to meet operating leverage goals