ZION - Zions Bancorporation downgraded to Neutral at Janney on reduced NIM guidance

2023-06-15 10:47:47 ET

Janney analyst Timothy Coffey downgraded Zions Bancorporation ( NASDAQ: ZION ) to Neutral from Buy after the bank lowered its net interest margin guidance due to higher deposit costs.

On Monday, Zions ( ZION ) said it now expects Q2 2023 net interest margin trending toward 2.85%, which is down ~48 basis points from Q1 2023, Coffey pointed out in a note to clients. Cost of total deposits exited May at 1.40%, up ~93 bps sequentially, he added.

The analyst now estimates that Q2 net interest income could fall ~13% from Q1 2023, sharper than the NII decline of ~7% that management had indicated.

"In our opinion, this is a trend that could persist for several more quarters," Coffey wrote. "ZION was slow to increase deposit costs until very recently and the FOMC has indicated Fed Fund rates could increase by at least 50 bps later this year. Remixing of deposits could exasperate the issue."

The Janney analyst currently estimates a below 3.00% net interest margin for 2023 and has eliminated share repurchases from his model.

Zions ( ZION ) stock gained 1.0% in Thursday morning trading; that's after the stock fell 42% year-to-date.

Coffey's Neutral rating contrasts with the SA Quant rating of Sell and the average Wall Street analyst's rating of Buy.

SA analyst The Asian Investor is more optimistic about the bank, seeing strong recovery potential.

For further details see: