Regional banking company Zions Bancorporation (NASDAQ: ZION) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 7.1% year on year to $795 million. Its non-GAAP profit of $1.13 per share was 4.6% below analysts’ consensus estimates.

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StockStory’s Take

Zions Bancorporation’s first quarter reflected stable underlying fundamentals, with management pointing to improved net interest margin and disciplined deposit pricing as key drivers. CEO Harris Simmons acknowledged the challenging environment, referencing persistent economic uncertainty and the impact of new tariffs on client sentiment, particularly among middle market and small business customers. While non-performing assets remained steady and loan losses were low, the company faced headwinds in customer-related fee income due to a sequential decline in capital markets activity and seasonal outflows affecting deposit balances. Simmons described the quarter as one in which “prognostication about loan growth, unemployment, the path of interest rates and other drivers... seems especially challenging at the present moment.”

Looking ahead, Zions Bancorporation’s forward guidance is shaped by heightened uncertainty around trade policy, interest rate movements, and the broader economic outlook. Management anticipates only modest loan growth, with CFO Ryan Richards noting that customer demand remains cautious amid ongoing tariff discussions. Simmons emphasized the bank's intent to maintain positive operating leverage and improve efficiency, stating, “managing risk and uncertainty is a core part of what we do.” The focus will remain on close client relationships and careful expense management, with Richards adding that expense growth will be closely monitored should revenue pressures intensify.

Key Insights from Management’s Remarks

Management highlighted several factors shaping the quarter’s results, including cost discipline in deposit pricing, loan growth trends, and ongoing uncertainty from external factors such as tariffs and regulatory changes.

• Deposit cost reductions: The average cost of interest-bearing deposits declined by 26 basis points compared to the previous quarter, driven by active repricing strategies and lower term deposit rates. This contributed to a fifth consecutive quarter of net interest margin improvement.
• Customer fee income volatility: Customer-related fee income fell sequentially, primarily due to a decrease in capital market fees following a strong prior quarter. Despite this, management described the latest quarter as the third best for capital markets in the bank’s history, and expects future fee income to be more stable.
• Branch acquisition impact: The acquisition of four branches in the Coachella Valley late in the quarter added approximately $630 million in deposits and $420 million in loans, expanding Zions’ footprint in Southern California and bringing in new employees and customer relationships.
• Loan growth composition: Average loans grew modestly, with commercial loan demand remaining subdued as clients respond cautiously to tariff and economic policy uncertainty. Growth in commercial real estate (CRE) was driven by funding of prior construction commitments rather than new originations, and the bank expects this dynamic to shift as payoffs begin to outpace new loans.
• Expense management focus: Adjusted non-interest expenses rose due to seasonal compensation and payroll taxes, but headcount reductions and ongoing process improvements are expected to help moderate future expense growth, providing flexibility if revenue growth slows.

Drivers of Future Performance

Management’s outlook centers on disciplined expense control, modest loan growth, and managing through macroeconomic and policy-related headwinds.

• Muted loan demand outlook: Management expects only slight increases in loan balances over the next year, attributing this to client hesitancy in making long-term investments amid uncertainty about tariffs and broader economic conditions. CEO Harris Simmons remarked that “a lot of those animals have gone into the caves…waiting to see what happens with trade policy.”
• Revenue sensitivity to rates and fees: Future net interest income is projected to rise modestly as deposit costs continue to decline and some repricing benefits are realized. However, volatility in capital markets and client fee activity could impact the pace of revenue growth, with the bank modeling various interest rate scenarios to account for these risks.
• Expense flexibility and operating leverage: Management is committed to positive operating leverage, with CFO Ryan Richards reaffirming plans for revenue growth to outpace expense increases, even if that means pulling back on discretionary spending. Efficiency gains are expected to come from ongoing headcount reductions and process improvement initiatives.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) whether Zions can sustain improvements in deposit costs and net interest margin as interest rates and competitive dynamics evolve; (2) early indications of loan growth or contraction, especially in commercial and CRE portfolios, as clients respond to shifting trade and economic policies; and (3) management’s ability to hold expenses in check and deliver positive operating leverage. Developments in tariff policy and regulatory changes will also be important signposts for the bank’s risk profile and profitability.

Zions Bancorporation currently trades at $48.58, up from $43.63 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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