Net interest income rose to $672 million as the margin held at 3.33%. Management guided for higher NII in the second half on loan pipeline strength.
Zions Bancorp beat second-quarter earnings estimates Wednesday as net interest income rose on loan growth and a stable margin.
The Salt Lake City-based lender reported net income of $212 million, or $1.44 a share, compared with $199 million, or $1.35, in the first quarter and $185 million, or $1.24, a year earlier. Analysts polled by FactSet had expected $1.36.
Net interest income climbed to $672 million from $659 million in the prior quarter and $647 million a year ago. The net interest margin widened two basis points to 3.33%. Average loans grew at an annualized 2.1% from the first quarter, led by commercial and industrial lending, the bank said.
Deposit costs rose to 1.78% from 1.70%. The pace of increase slowed. Harris Simmons, chairman and chief executive, said on the call that deposit betas are stabilizing and that the bank expects funding costs to remain "well behaved" through the second half.
Credit quality weakened modestly. Net charge-offs were $36 million, or 0.34% of average loans, up from $30 million, or 0.29%, in the prior quarter. Nonperforming assets increased. The provision for credit losses rose to $39 million from $33 million. Chief Credit Officer Derek Steward attributed the increase to a few isolated commercial credits and said overall credit trends remain manageable.
Expenses fell slightly. The efficiency ratio improved to 58.3% from 59.4%. The bank kept its full-year expense growth guidance at 1.5% to 2%. The common equity Tier 1 ratio stood at 10.8%.
Management guided for higher net interest income in the third and fourth quarters, citing loan pipeline strength and a stable margin outlook. Simmons said the bank sees "modest but consistent" loan growth through year-end, with commercial demand supported by reshoring and infrastructure projects. CFO R. Richards added that securities portfolio cash flows provide reinvestment flexibility.
The bank did not update its share repurchase plans. It paid $76 million in common dividends during the quarter.
Zions shares rose 1.2% in after-hours trading following the release. The stock has gained 8% this year, roughly in line with the KBW Nasdaq Bank Index.
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