Key Stats for Zions Stock
- Price Change for $ZION stock: 3%
- Current Share Price: $52
- 52-Week High: $63
- $ZION Stock Price Target: $62
What Happened?
Zions (ZION) stock jumped over 3% after the regional bank reported third-quarter earnings that crushed expectations despite a $60 million loan loss disclosed just days earlier.
The Utah-based lender earned $1.54 per share on revenue of $872 million, topping analyst estimates of $1.39 per share and $831 million in revenue.
The relief rally came after Zions stock lost $1 billion in market value last Thursday when the bank disclosed it had been defrauded by two borrowers who allegedly manipulated loan structures and eliminated collateral protections.
The initial disclosure sparked panic selling across regional banks on fears of broader sector problems.
ZION stock plunged 13% that day and dragged the entire market lower, with the Dow Jones Industrial Average falling 300 points.
Monday’s earnings report showed the fraud was indeed isolated and the core business remains healthy.
- Net interest margin expanded for the seventh consecutive quarter, reaching 3.28%, up 11 basis points from the prior quarter.
- Customer fees grew $10 million while adjusted expenses declined $1 million.
- Average loans increased 2.1% annualized and customer deposits grew 3.1% compared to the previous quarter.
Net charge-offs totaled $56 million, or 37 basis points of loans, in the quarter, $50 million of which came from the fraud-related charge-off. Excluding that incident, net charge-offs were just four basis points annualized.
Credit quality actually improved across the rest of the portfolio, with classified loan balances declining $282 million.
The fraud involved loans California Bank & Trust, a Zions subsidiary, made in 2016 and 2017 to two investment vehicles called Cantor Group II and Cantor Group IV.
The funds were supposed to purchase distressed residential and commercial mortgage loans. Zions believed it had first-priority claims on collateral, meaning the bank’s claim was superior to other creditors.
Instead, according to a lawsuit filed on Wednesday, borrowers Andrew Stupin and Gerald Marcil allegedly subordinated those deeds without the bank’s knowledge.
The underlying properties were transferred to other entities or went into foreclosure, eliminating the collateral.
The new senior lenders who replaced Zions turned out to be the same managers of the Cantor funds or their affiliates. “In effect, CB&T’s losses became Defendants’ gains,” the lawsuit states.
Zions discovered the fraud after Western Alliance sued a related Cantor fund managed by the same leadershipm which prompted the bank to investigate its own exposure.
Zions charged off $50 million of the combined loan balances and established full reserves against the remaining $10 million. Management has initiated legal action to recover the funds from the guarantors.
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What the Market Is Telling Us About ZION Stock
The bounce in Zions stock reflects relief that last week’s selloff was overdone. The market initially feared the fraud might signal systemic problems in regional bank lending or undisclosed issues elsewhere in the sector.
However, management emphasized this was an isolated incident involving specific borrowers with no further exposure. Chief Credit Officer Derek Steward said Zions reviewed the entire portfolio and found no similar loans or issues.
Pre-provision net revenue of $352 million improved 11% from the prior quarter and 18% year-over-year as revenue growth outpaced expense growth. The efficiency ratio improved to 59.6%, which inducates the bank is executing well operationally despite a challenging environment.
The net interest margin has now grown for seven straight quarters as fixed assets reprice higher and the deposit mix improves.
Management guided for net interest income to be “moderately increasing” in third-quarter 2026 compared to this year, supported by continued asset remix, loan and deposit growth, and fixed asset repricing.
- Delinquency rates remained flat sequentially while write-off rates declined.
- Nonperforming assets stayed relatively low at 0.54% of loans.
- Classified loan balances dropped $282 million, driven by improvements in both commercial real estate and C&I portfolios.
- The allowance for credit losses held steady at 1.2% of loans with 213% coverage of nonaccruals.
However, the fraud raises questions about internal controls and collateral monitoring processes. While Zions has a strong credit history over decades, one miss of this magnitude creates uncertainty about whether other problems could be hiding.
Management guided for “slightly to moderately increasing” loan balances over the next year, led by commercial loans. C&I loans actually declined in the quarter on a spot basis despite decent production, offset by paydowns and payoffs. The commercial real estate portfolio continues to shrink as projects pay off or refinance at lower rates.
The Common Equity Tier 1 ratio sits at 11.3%, well above the level where management would consider buybacks. CFO Ryan Richards suggested Zions won’t approach peer capital levels for roughly another 12 months, which indictaes limited capital returns to shareholders in the near term despite strong profitability.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!