Zions Bank earnings are down but its outlook is stable, leaders say

The number of overdue loans continues to shrink, executives said as second-quarter earnings were released.

(Chris Samuels | The Salt Lake Tribune) Zions Bank hasn't quite bounced back from a tumultuous first quarter, but executives said stability is approaching.

Zions Bancorporation earned less in the second quarter of 2023 than the first, but its leaders said they remained optimistic about the institution’s financial future.

“The environment seems to have stabilized,” Zions Bancorp Chairman and CEO Harris Simmons said in an earnings update Wednesday. “We’re pleased to see the operating environment stabilizing, and we expect to see continued improvement in the months ahead.”

The lending institution reported $166 million in net earnings, or $1.11 per share, this quarter, which ended June 30. It reported $198 million in the first quarter.

That meant earnings fell just short of the Zacks Consensus Estimate compiled from analysts, which was $1.13 per share.

But bank officials said the number of overdue loans continues to shrink and the number of uninsured deposits — those which would be vulnerable to a bank failure — is “falling back toward regular levels.”

Deposits are also growing, officials said, and are worth more to customers.

According to the earnings report, total deposits increased 7.4%, and customer deposits grew by 3.2% this quarter. For Zions, the total cost of those deposits increased from .47% to 1.27% in the last quarter, which means depositors are earning more per dollar.

Zions and other banks are recovering from a turbulent start to the year. Stocks tanked in March after two big banks failed, and Moody’s Investment Services downgraded Zions Bancorps in April, making it harder for the bank to borrow money.

But Scott McLean, Zions Bancorporation president and COO, said the company is in a stable and predictable place, due to its ability to pull multiple “levers” — from attracting high-interest brokered deposits, which increase liquidity; to handling reciprocal deposits, which help banks take in large deposits by then spreading them across institutions to keep customers under the limit covered by federal insurance; to collecting earnings from its banking services.

In other words: The bank is maximizing all of its available revenue streams, McLean said, and is in a better place than it was before the pandemic.

The size of its lending portfolio has decreased, but officials said the current portfolio is still earning more, proportionally, than it did pre-pandemic.

Meanwhile, the net interest income, or what it earns through lending, is still expected to decrease, but only slightly. The outlook is more stable than last quarter, McLean said.

“I actually think we’re getting close to — barring an unforeseen event — the lower edge” of those decreases, he said.

Correction • 3:40 p.m. July 20, 2023: This story has been updated to attribute quotes about the bank’s ability to maximize revenue streams to the correct executive. Scott Anderson, Zions Bank’s president and CEO, was not on the earnings call.