Zions Bancorporation's Q1 Results Spark Analysts to Reassess Growth Outlook Amid Tax Headwinds and Economic Uncertainty
15min read Zions Bancorporation (NASDAQ:ZION) delivered mixed first-quarter 2025 results, showing strong year-over-year growth but falling short of consensus expectations due to a one-time tax charge and macroeconomic headwinds. The earnings release, announced on April 21, 2025, triggered analysts to revise their forecasts and price targets, reflecting both optimism about strategic initiatives and caution over lingering risks.
Key Financial Highlights: Growth Amid Challenges
The bank reported net earnings of $169 million, or $1.13 per diluted share, marking an 18% year-over-year increase from Q1 2024’s $0.96 per share. However, earnings declined sequentially from Q4 2024’s $1.34 per share, primarily due to a $0.11 per share tax charge tied to Utah tax law changes. Excluding this adjustment, diluted EPS would have been $1.24, a 29% jump from the prior-year period.
Net interest margin expanded by 16 basis points (bps) to 3.10%, driven by a 26-bps decline in deposit costs, while adjusted pre-provision net revenue (PPNR) rose 10% year-over-year to $267 million. However, customer-related income dropped 10% sequentially due to lower capital market fees, and average deposits fell 1.9% from Q4 2024 levels.
The bank’s strategic moves, including the acquisition of four California branches from FirstBank—adding $630 million in deposits and $420 million in loans—highlighted efforts to strengthen its presence in the Coachella Valley. Yet, average loan growth was modest, rising just 0.5% sequentially and 3% year-over-year, amid tepid commercial and industrial (C&I) lending.
Analyst Reactions: Trimmed Targets, Caution on Macroeconomic Risks
Analysts responded to the results with a mix of revisions, primarily cutting price targets due to the EPS miss and heightened uncertainty around trade policies and business investment. Notable adjustments include:
- Wells Fargo’s Mike Mayo: Lowered the price target from $58 to $47, maintaining an Equal-Weight rating.
- Stephens & Co.’s Terry McEvoy: Reduced the target from $54 to $52, keeping an Equal-Weight stance.
- Baird’s David George: Trimmed the target from $58 to $55, retaining a Neutral rating.
The consensus EPS estimate for FY 2025 now sits at $5.28, with Q2 2025 expectations at $1.31. The Zacks Rank #3 (Hold) reflects inconsistent near-term earnings revisions, as analysts weigh margin improvements against macroeconomic risks.
Operational Challenges and Strategic Priorities
While credit quality remained strong—nonperforming assets at 0.51% and net charge-offs at 0.11%—management noted rising 30–89 day past-due loans and concerns about trade policy impacts on business investment. To manage costs, Zions reduced headcount by 3% from 2023 levels, aiming to preserve profitability amid a volatile environment.
The bank’s Common Equity Tier 1 (CET1) ratio of 10.8% underscores solid capital adequacy, but the efficiency ratio—though improved seasonally—remains elevated, signaling ongoing cost pressures.
Conclusion: Balanced Outlook with Risks Ahead
Zions Bancorporation’s Q1 results reveal a company navigating a complex landscape of tax-driven headwinds and strategic opportunities. While its margin expansion and branch acquisitions demonstrate operational resilience, the EPS miss and sequential declines in deposits and customer-related income highlight execution challenges.
Analysts’ revised price targets reflect tempered optimism, with the $47–$55 range now the consensus. Investors should monitor two key factors:
1. Loan Growth: C&I lending remains sluggish, but commercial real estate (CRE) opportunities could offset this.
2. Macro Risks: Trade policy uncertainties and elevated past-due loans may constrain near-term performance.
With a CET1 ratio above 10% and a top-10 middle-market banking ranking, Zions retains structural strengths. However, its year-to-date underperformance (-18.4% vs. the S&P 500’s -10.2%) suggests investors are demanding clearer signs of sustainable growth.
In the coming quarters, the bank’s ability to stabilize deposits, leverage its California acquisitions, and navigate trade-related headwinds will be critical. For now, Zions remains a hold—a story of incremental progress amid persistent risks.
