Zions Bancorporation, National Association Q1 FY2026 earnings call

• Capital markets: Invested in talent, tech, etc. Acquired Basis Investment Group's programs to enhance commercial real estate service. - Consumer and small business: Launched Gold Account, piloted 'beyond the business' for small businesses. - Financials: Net earnings up y-o-y, net interest margin down q-o-q but up y-o-y, average loans grew, customer deposits up period end, adjusted pre-provision net revenue and non-interest income had changes, adjusted non-interest expense increased, credit quality strong, capital position strong.

Capital markets division is a driver of fee income growth. Launched in 2020, invested in talent, tech, etc. Acquired Basis Investment Group's Fannie and Freddie lending programs, etc. Consumer and small business franchises: new Gold Account for consumers, companion 'beyond the business' for small businesses piloted in Q1 and to roll out broadly. Financial results: Net earnings $232 million, $1.56 per diluted share, up 37% y-o-y. Net interest margin 3.27%, down 4 bps q-o-q. Average loans grew 2.4% annualized, led by commercial lending. Average customer deposits had modest seasonal decline, but period end grew $1.3 billion. Adjusted pre-provision net revenue $301 million, declined 9% q-o-q but up 13% y-o-y. Adjusted customer-related non-interest income $174 million, up 10% y-o-y. Adjusted non-interest expense $558 million, increased q-o-q and y-o-y. Credit quality strong, net charge-offs 3 bps of average loans, nonperforming assets ratio 48 bps. Capital position strong, common equity tier one ratio 11.5%.

• For first quarter of 2027, adjusted customer-related fee income is moderately increasing, currently expect results towards top end of range. - Adjusted non-interest expense is moderately increasing. - Expect positive operating leverage for full year 2026 in range of 100 to 150 basis points. - If no rate changes over next 12 months, estimate net interest income growth of about 7% to 8% which would exceed guide.

• Q: On margin side, loan yield compressed, any other impact to loan yields in the quarter and new money loan yields.

A: Benchmark rate change was biggest contributor, fixed rate loan portfolios have 72 basis point spread on front look. - Q: On deposit cost side, trajectory of deposit pricing, competition and CD rolls.

A: Some trailing repricing on term deposits, strategic initiatives to drive deposits, bringing off-balance sheet deposits back on balance sheet accretive to broker deposits. - Q: On buyback side, level of buybacks for rest of year.

A: Prospect of share purchases still on table subject to Board approval. - Q: On guidance, feeling about annual guide for 2026 and upside.

A: Firming up that things talked about last quarter are better. - Q: On loan outlook, 2Q pipeline and CNI.

A: Pipeline looking healthy, activity in small business, middle market, corporate banking syndications, CRE activity, pricing pressure in CRE. - Q: On deposit balances, sequential increase in non-interest-bearing deposits and customer acquisitions on gold and beyond the business accounts.

A: Business beyond product too new to have impact in 1Q, rolled out in AZ and CO, opened 4,000 new accounts in 1Q, hopeful to ramp up to 20,000 for year. - Q: On capital markets fees, trends and 2Q pipeline.

A: Tough quarter to compare y-o-y due to large M&A transaction fee, strength in syndications, interest rate hedging, new commodity hedging practice, solid pipelines into 2Q. - Q: On Basel three end game benefit, quantification.

A: Scoping on standardized approach suggests 9% to 10% RWA relief, contributing about 93 basis points to CET1. - Q: On CNI pricing environment, CRE pricing pressure.

A: Competitive market, some price competition in CRE. - Q: On managing credit, areas of concern.

A: Focus on commercial industrial space, watching expenses in certain areas like restaurants and consumer-focused businesses. - Q: On NII comments, reference of 7-8% growth and POL.

A: 7-8% growth with no rate cuts is on standard guide, POL for 2026 still comfortable in no rate cut scenario depending on deposit growth and driving through lower-cost bonds. - Q: On expenses and growth initiatives, relationship to fee income and core systems.

A: Incremental investment not significant, core systems helping get things done faster, example with PPP, real-time data and one data system. - Q: On M&A and acquisitions, types expected and regulatory environment.

A: Waiting for strategic fits, agency lending business acquisition fits, pleased with current bank regulation proposals. - Q: On agency businesses and lending appetite, energy lending.

A: Agency businesses shouldn't use much balance sheet, energy lending has good credit metrics, pricing, and commodity hedging activity. - Q: On AI, near-term opportunity and risks.

A: Using AI for appraisal review, document review, credit review, improving productivity, not seeing threat as overplayed yet.