On Monday, Zions Bancorp (NASDAQ:ZION) experienced a revision in its financial outlook as Citi adjusted the bank’s stock price target. The new price target is set at $48.00, down from the previous $53.00, while the analyst at Citi has chosen to keep a Neutral rating on the stock.
The adjustment comes as Citi revises its model in preparation for the third-quarter earnings. The firm’s earnings per share (EPS) estimates for Zions Bancorp in 2025 remain below the consensus, primarily due to a NIM (net interest margin) outlook that is less optimistic than the consensus.
Citi’s analyst points to the forward curve, which suggests more rate cuts than what was projected at the end of 2024. Consequently, the anticipated net interest income (NII) upside for the third quarter of 2025 is now at 2.2% over the same quarter in the previous year, which is a significant decrease from the earlier guidance of a 6.3% increase.
Additionally, Citi has slightly lowered its outlook for Zions Bancorp’s loan loss provisions (LLP), citing an improved credit outlook associated with lower interest rates. This modest adjustment to the LLP forecast is part of the rationale behind the reduced price target.
The new price target of $48 takes into account an 11.25% cost of equity and a 13.5% normalized return on tangible common equity (ROTCE). These financial metrics are essential in evaluating the bank’s performance and potential for shareholder returns.
Zions Bancorp, as with other financial institutions, is navigating a complex economic environment where interest rate projections and credit outlooks can significantly impact their financial modeling and future earnings potential.
In other recent news, Zions Bancorporation (NASDAQ:) reported notable earnings and revenue results, with net earnings of $190 million and diluted earnings per share of $1.28 for the second quarter of 2024. The company has also declared dividends for both common and preferred shareholders, demonstrating its financial stability. In terms of mergers, Zions Bancorporation has announced an agreement to acquire four FirstBank branch locations through its subsidiary, California Bank & Trust, expanding its footprint in the Coachella Valley.
Analyst firms have also been active in their assessments of Zions Bancorporation. Morgan Stanley upgraded Zions Bancorp’s stock from Underweight to Equalweight, acknowledging the bank’s potential to benefit from a changing interest rate environment. However, Jefferies and Wells Fargo have revised their price targets for Zions Bancorporation, while Argus Research downgraded its rating from Buy to Hold due to valuation concerns.
These are recent developments for Zions Bancorporation. The company anticipates a slight to moderate increase in financial performance in Q2 2025 compared to Q2 2024, according to analysts’ projections. The bank’s sensitivity to liabilities, which is expected to be advantageous as deposit rates decrease, is also worth noting as it may lead to an improved net interest margin.
InvestingPro Insights
Adding to Citi’s analysis, recent data from InvestingPro provides further context on Zions Bancorp’s financial position. The bank currently has a P/E ratio of 11.2, suggesting it may be undervalued compared to industry peers. This aligns with Citi’s Neutral rating, as the stock could have room for growth.
InvestingPro Tips highlight that Zions has maintained dividend payments for an impressive 54 consecutive years, demonstrating a strong commitment to shareholder returns. This consistency is particularly noteworthy given the challenging economic conditions banks have faced in recent years.
However, another InvestingPro Tip indicates that Zions suffers from weak gross profit margins, which could explain Citi’s cautious stance on the bank’s net interest margin outlook. This weakness in margins may contribute to the analyst’s less optimistic projections for net interest income growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Zions Bancorp, providing a deeper understanding of the bank’s financial health and market position.
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