By Josh Beckerman And Julie Steinberg
Zions Bancorp. said its earnings edged down in the most recent
quarter as a key measure of lending profitability declined and the
bank strengthened its reserves to cushion against potential
weakness in its portfolio of energy loans.
Earnings came in above Wall Street estimates.
Chairman and Chief Executive Harris Simmons, on a call with
analysts on Monday, said the results were in line with the bank's
expectations.
The bank posted earnings of $75.3 million, down from $76.2
million in the prior-year period. On a per-share basis, earnings
fell to 37 cents from 41 cents.
Analysts had expected 36 cents a share, according to Thomson
Reuters.
Zions Bancorp, like other regional banks, has been monitoring
its energy-loan portfolio in light of a sustained drop in oil
prices. The bank on Monday said loans related to oil and gas
totaled $3.16 billion as of the first quarter, or about 7.9% of
total loans, up from 7.7% of total loans the previous quarter.
Mr. Simmons said the bank last fall began reviewing its energy
relationships and that further downgrades were expected in coming
weeks. Still, there were no energy-related charge-offs this
quarter.
As of the first quarter, about $65 million, or 2.1%, of loan
balances related to oil and gas were nonperforming, up from $17
million, or 0.5% as of the fourth quarter.
During a six-month period beginning Sept. 30, Amegy Bank, one of
Zions's subsidiaries, bolstered its allowance for credit losses by
a net $55 million.
Zions in recent years has cleaned up its balance sheet, shedding
risky collateralized debt obligations, the kind that had featured
prominently in the 2008 financial crisis.
In the most recent quarter, it reclassified all of its remaining
held-to-maturity CDO securities, or about $79 million at amortized
cost, to available-for-sale securities. Such a move gives the bank
"flexibility" to manage the portfolio, departing Chief Financial
Officer Doyle Arnold said on the call. The Wall Street Journal
reported last month that the bank was considering selling off its
entire portfolio.
Net interest margin, an important measure of lending
profitability, fell to 3.22% from 3.31% a year earlier. Still, net
interest income at the Salt Lake City-based bank rose to $417.3
million from $416.5 million.
Noninterest income, or fee income generated from businesses like
wealth management, totaled $122 million, down from $138 million a
year earlier. Mr. Arnold on the call said fee income "remains a
major initiative for us" but that driving growth in that area is "a
challenge in this environment." He said he expects "core
components" of noninterest income to "increase modestly" over the
next few quarters.
Write to Josh Beckerman at josh.beckerman@wsj.com and Julie
Steinberg at julie.steinberg@wsj.com
Access Investor Kit for Zions Bancorp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US9897011071