Why Zions Bancorporation NA (NASDAQ: ZION) stock is under pressure

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Zions Bancorporation NA (NASDAQ: ZION) stock lost over 1.7% on July 20th, 2020 and fell over 0.5% in the pre-market session of July 21st, 2020 (Source: Google finance) post weak second quarter of 2020 performance. The firm’s Net interest income fell to $563 million, against $569 million while NIM lost 3.23%, from 3.54% in the prior corresponding period. The yield on interest earning assets fell 46 basis points to 3.41%, against the first quarter of 2020, and fell 83 basis points against second quarter of 2019. Pre-provision net revenue fell 10% yoy to $256 million, while Adjusted PPNR lost 2% yoy to $300 million, up 2%. Efficiency ratio fell to 57.3%, from 59.0%.  Nonperforming assets surged 36% yoy to $344 million, hurting investor sentiment. Earnings were mainly hurt by a $28 million charge related with the termination of pension plan. However, the elevated risk credits are 97% secured, and when secured by real estate, the median loan to value was 52% the current loan balance in the most recent appraisal, and only 3% of the loan secured by real estate have a loan to value ratio in excess of 90%.

Non-interest-bearing deposit position is worth less as rates fell and the contribution of these non-interest-bearing sources of funds lost 16 basis points in the second quarter. The firm intends to ill continue to work to enhance the spreads on loans and lower the deposit pricing.

The bank also recorded a Derivative valuation loss of $12 million, or $0.06 per share, on client-related interest rate swaps. The Bank repurchased and retired $429 million principal amount of its senior notes and recognized a net gain of less than $1 million during the quarter. The Weighted average diluted shares fell to 8.6 million from the first quarter of 2020, on the back of lower average Bank common share price and the expiration of 29.2 million ZIONW warrants on May 22, 2020. The firm acquired more than 10,000 new small business customers during the past three months. However, the technology team’s productivity has been moderately impacted due to ongoing pandemic.

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