Zions Bancorp Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Net Earnings: $452 million, or $3.05 per share, boosted by a $215 million pretax gain from Visa Class B-1 shares and a $37 million unrealized gain from an SBIC investment.

Adjusted EPS: Excluding exceptional items, EPS was $1.74, up 10% from $1.58 year-over-year.

Net Interest Margin (NIM): Stable at 3.27%, up 10 basis points year-over-year.

Loan Growth: Average loans grew 4.7% annualized, primarily in commercial lending.

Deposits: Average customer deposits increased 4.0% quarter-over-quarter.

Credit Quality: Modest credit losses at 6 basis points annualized; nonperforming assets ratio stable at 48 basis points.

2Strategic Updates and Business Highlights

Capital Markets Growth: Continued focus on expanding the Capital Markets division, with investments in talent and technology since its launch in 2020.

Acquisition: Agreement to acquire Basis Investment Group's multifamily lending business, expected to close in Q3 2026, aimed at enhancing commercial real estate services.

New Products: Launched the Business Beyond Account for small businesses, complementing the Gold Account for consumers, with over 10,000 accounts opened this year.

Fee Income: Customer-related noninterest income increased to $182 million, reflecting broad-based growth, particularly in capital markets.

3Forward Guidance and Outlook

Net Interest Income (NII): Expected to moderately increase, with potential for upper single-digit growth if one or more interest rate hikes occur over the next 12 months.

Expense Management: Anticipated positive operating leverage of 100-150 basis points for the full year 2026, despite some increases in technology and professional service costs.

Loan and Deposit Growth: Continued moderate growth expected, with a focus on granular deposits.

4Challenges and Points of Concern

Competitive Pressures: Intense competition in both deposit pricing and loan spreads, leading to potential margin compression.

Funding Costs: Concerns about rising funding costs due to competitive pressures on deposits, with reliance on wholesale funding highlighted.

Legal Expenses: Increased loan-related legal costs noted, particularly related to the Cantor Fund, which may continue to impact expenses.

5Notable Q&A Insights

Deposit Strategy: Management emphasized ongoing targeted deposit campaigns and the importance of granular deposits, with about $6.5 billion in off-balance sheet deposits that could be brought back on balance sheet.

NII Sensitivity: Clarified that NII guidance includes expectations for one interest rate hike, with potential for better performance if more hikes occur.

Capital Management: Plans for continued capital returns to shareholders, with expectations for increased buybacks and dividends if economic conditions remain favorable.

Market Outlook: Management expressed cautious optimism regarding future growth, emphasizing the importance of maintaining a disciplined approach to lending and deposit growth. This summary encapsulates Zions Bancorp's financial performance, strategic initiatives, future outlook, and challenges faced during Q2 2026, providing a comprehensive overview for stakeholders.