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ZB

ZIONS BANCORPORATION, NATIONAL ASSOCIATION /UT/ (ZION)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid profitability with diluted EPS $1.34 and adjusted PPNR up 19% YoY; NIM expanded for the fourth straight quarter to 3.05% as deposit costs fell faster than asset yields .
  • Credit costs rose: provision $41M and annualized NCOs 0.24%, largely due to a single C&I credit; NPAs fell to 0.50%, while classified loans increased to 4.83% (CRE-driven) but are expected to be manageable given low LTVs and strong sponsor support .
  • Guidance implies continued positive operating leverage in 2025: NII moderately increasing and modeled +6.8% in 4Q25 vs 4Q24 under the forward curve, deposit beta ~58%; adjusted noninterest expense slightly-to-moderately increasing; loan balances slightly increasing .
  • Strategic catalysts: capital markets fee momentum (record quarter), deposit repricing discipline, AOCI run-off trajectory (~$700M improvement by 4Q25 adds ~75 bps to TCE), and liability optimization (preferred redemption, new subordinated notes lifting 1Q25 EPS by ~$0.02–$0.03) .

What Went Well and What Went Wrong

What Went Well

  • “Net interest margin expanded for a fourth consecutive quarter… primarily because interest-bearing liabilities repriced downward faster than earning asset yields” (NIM 3.05% in Q4) .
  • Strong fee momentum: customer-related noninterest income up 15% YoY, led by capital markets (up 95% YoY in Q4) and higher commercial account fees .
  • CEO: “Adjusted taxable-equivalent revenue increased 9% relative to year-ago… adjusted noninterest expense increased 4%, resulting in a 19% increase in adjusted PPNR” .

What Went Wrong

  • Provision and charge-offs rose: provision $41M; annualized NCOs 0.24% with ~two-thirds from a single C&I credit; classified loans rose to $2.87B (4.83%) .
  • CRE downgrades in multifamily, industrial, office driven by slower leasing, higher costs, and rates; criticized loans 5.9% of total; classified CRE +$609M QoQ .
  • EPS slipped QoQ to $1.34 from $1.37 as higher credit costs and slightly higher NIE offset better revenue; preferred redemption impacted net earnings by ~$6M .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Diluted EPS ($)$1.28 $1.37 $1.34
Net Interest Margin (%)2.98% 3.03% 3.05%
Net Interest Income ($MM)$597 $620 $627
Noninterest Income ($MM)$179 $172 $193
Total Revenue (GAAP) ($MM)$776 (NII+NII) $792 (620+172) $820 (627+193)
Adjusted PPNR ($MM)$278 $299 $312
Efficiency Ratio (Adj) (%)64.5% 62.5% 62.0%
Provision for Credit Losses ($MM)$5 $13 $41
Annualized NCOs / Avg Loans (%)0.10% 0.02% 0.24%

Segment/noninterest income breakdown:

Noninterest Income Category ($MM)Q4 2023Q3 2024Q4 2024
Commercial account fees$43 $46 $47
Card fees$26 $24 $24
Retail & business banking$17 $18 $17
Loan-related fees & income$16 $17 $20
Capital markets fees$19 $28 $37
Wealth management fees$14 $14 $14
Other customer-related fees$15 $14 $14
Total customer-related NII$150 $161 $173

KPIs and balance sheet:

KPIQ2 2024Q3 2024Q4 2024
Loans & leases ($B, period-end)$58.4 $58.9 $59.4
Total deposits ($B, period-end)$73.8 $75.7 $76.2
Cost of total deposits (%)2.11% 2.14% 1.93%
CET1 ratio (%)10.6% 10.7% 10.9%
NPAs / Loans + OREO (%)0.45% 0.62% 0.50%
Classified loans ($B)$1.26 $2.09 $2.87
ACL / Loans (%)1.24% 1.25% 1.25%
Efficiency ratio (Adj) (%)64.5% 62.5% 62.0%

Guidance Changes

MetricPeriodPrevious Guidance (Q3 2024)Current Guidance (Q4 2024)Change
Net Interest IncomeFY 2025 vs FY 2024Slightly to moderately increasing Moderately increasing; modeled +6.8% in 4Q25 vs 4Q24, deposit beta ~58% Raised
Customer-related noninterest incomeFY 2025 vs FY 2024Moderately increasing Moderately increasing (broad-based; capital markets outsized) Maintained
Adjusted noninterest expenseFY 2025 vs FY 2024Slightly increasing Slightly to moderately increasing (technology, marketing, revenue investments) Raised
Loan balances (period-end)FY 2025 vs FY 2024Stable to slightly increasing Slightly increasing (commercial-led; CRE/mortgage managed down) Maintained/clarified
Common equityFY 2025 vs FY 2024Increasing organically Increasing organically; AOCI accretion expected Maintained
Dividend (common)Nearest quarter$0.41 (Q3 declared) $0.43 declared for Feb 20, 2025 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Core modernization / technologySubstantive completion of FutureCore conversions; real-time platform (BaNCS) Ongoing benefits inferred via efficiency improvements “Transformation of our core systems to a modern, real-time architecture improving banker productivity and customer experience” Executed; benefits scaling
Capital markets & fee growthMixed; capital markets down YoY but gains on business sale boosted NII Capital markets up; customer-related fees increased Record customer fees; capital markets +95% YoY in Q4 Positive momentum
NIM/Rate sensitivityNIM 2.98%; NII sensitivity slightly-to-moderately increasing NIM 3.03%; NII expected slight increase into 3Q25 NIM 3.05%; modeled 4Q25 NII +6.8% with ~58% interest-bearing deposit beta Improving
CRE exposure & creditLow NCOs; increasing criticized/classified; strong LTVs Classified +$829M QoQ; multifamily pressures Classified +$777M QoQ (multi/industrial/office); low nonaccruals/delinquencies; ACL strong Elevated classifications; manageable losses
Regulatory/Capital (AOCI)AOCI loss improving; TBV rising AOCI burndown path; TBV up Management expects AOCI back into capital; glide path supports buyback caution; TBV up ~20% YoY Monitoring policy; capital building
Macro/business sentiment—Stable deposits; loan growth modest Frontline seeing increased small business optimism; energy C&I up ~$100M QoQ Improving sentiment

Management Commentary

  • CEO Harris Simmons: “Adjusted taxable-equivalent revenue increased 9%… resulting in a 19% increase in adjusted pre-provision net revenue… Net loan losses were higher… with two-thirds… attributable to a single C&I credit… We’re optimistic that the coming year will produce sustained growth, continued improvement in our net interest margin, and increased profitability.” .
  • CFO Ryan Richards: “[NIM] expanded by 2 bps sequentially due primarily to the lower cost of funding… Customer-related noninterest income was $173M… record performance… Adjusted noninterest expense increased $10M… Our outlook for net interest income for full year 2025 is moderately increasing…” .
  • Credit Officer Derek Steward on the C&I charge-off: “It was a longtime client… purchased by a private equity company… pushing to grow a little faster… along with management challenges… led to the loss… really nothing else like it in our portfolio” .
  • Capital actions: “Redeemed $374M of preferred stock… called $88M of subordinated debt… replaced with $500M of lower-cost subordinated notes… positively impact EPS starting in 1Q25 by $0.02 to $0.03” .

Q&A Highlights

  • Deposit betas: Interest-bearing deposit spot beta ~58%; management expects continued disciplined repricing with lag effects if rate cuts occur .
  • AOCI and capital: Management anticipates AOCI inclusion in capital under Basel III endgame; TBV improving; buybacks likely tempered until more clarity .
  • NIM trajectory: Mid-3% NIM seen as achievable with a more naturally sloped curve; timing uncertain .
  • Balance sheet deployment: Securities cash flows used to lower wholesale funding and support organic loan growth; reinvestment to taper portfolio runoff .
  • CRE classifications: Broad-based increases in multifamily and industrial due to construction delays, longer lease-up, higher costs; granular across footprint; loss content mitigated by low LTVs and guarantors .

Estimates Context

  • Wall Street consensus (S&P Global) EPS and revenue estimates for Q4 2024 were unavailable due to a data retrieval limit; therefore, comparisons to consensus cannot be provided at this time. Values retrieved from S&P Global were unavailable.

Key Takeaways for Investors

  • Margin tailwind: The decline in deposit costs (cost of deposits down 21 bps QoQ to 1.93%) and modeled rate sensitivity support NII growth into 2025; monitor deposit beta execution amid changing rate paths .
  • Fee diversification: Capital markets and treasury-related fees are scaling, reducing reliance on spread income and providing upside in fee revenue across 2025 .
  • Credit risk watchlist: Elevated classified CRE (4.83%) warrants ongoing monitoring, but nonaccruals remain low (0.50%) and ACL coverage is stable; loss content expected to be limited given underwriting .
  • Capital trajectory: CET1 up to 10.9%; AOCI accretion path adds to TCE; liability optimization (preferred redemption, sub debt issuance) supports EPS accretion in 1Q25 .
  • Dividend signal: Common dividend increased to $0.43, reflecting confidence in earnings and capital; sustainability hinges on credit outcomes and NII path .
  • Trading implications: Near-term stock catalysts include continued NIM expansion, fee momentum, and clarity on Basel III endgame/AOCI; risks include further CRE grade migration or unexpected credit events .
  • Medium-term thesis: Positive operating leverage with moderated expense growth and improving funding costs; watch for sustained loan growth in C&I and disciplined CRE/mortgage runoff .