ZION Q2 Deep Dive: Core Banking Momentum and Margin Expansion Drive Results

Regional banking company Zions Bancorporation (NASDAQ:ZION) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 8% year on year to $838 million. Its non-GAAP profit of $1.58 per share was 20.9% above analysts’ consensus estimates.

Is now the time to buy ZION? Find out in our full research report (it’s free).

StockStory’s Take

Zions Bancorporation delivered a second quarter marked by expanding margins and revenue growth, supported by strong loan activity and disciplined cost control. Management attributed the positive momentum to net interest margin expansion, enhanced customer fee growth, and a well-managed expense base. CEO Harris Simmons cited, “continued expansion of net interest margin, customer fee growth and well-managed expenses” as key drivers. The company also benefited from steady gains in small business banking and a successful rollout of new deposit products, helping offset competitive deposit pressures and economic uncertainties.

Looking ahead, Zions Bancorporation’s guidance emphasizes further growth in loan balances and continued positive operating leverage. Management believes that ongoing asset repricing, targeted marketing efforts, and investments in revenue-generating personnel will underpin future performance. CFO Ryan Richards noted, “Our outlook for net interest income... is moderately increasing... supported by continued earnings asset remix, growth in loans and deposits and fixed rate asset repricing.” The company is investing in digital infrastructure and capital markets capabilities, while also monitoring potential regulatory changes and macroeconomic factors that could influence loan demand and funding costs.

Key Insights from Management’s Remarks

Management cited growth in core earnings as a result of loan expansion, improved asset mix, and targeted investments in customer relationships, particularly in small business and mass affluent segments.

• Net interest margin expansion: The sixth consecutive quarter of net interest margin growth was driven by lower funding costs, a favorable shift in earning asset composition, and fixed-rate asset repricing, according to CFO Ryan Richards. This helped offset deposit competition and contributed to improved profitability.
• Small business and consumer focus: CEO Harris Simmons highlighted a strategic push into small business banking and the rollout of the consumer gold account, designed for the mass affluent market. Early results in Nevada showed a 78% increase in product sales versus its predecessor, with average balances around $30,000.
• Loan growth across segments: The bank saw notable loan growth, particularly in commercial and industrial lending, with both increased utilization and new originations cited by Chief Credit Officer Derek Steward. Consumer mortgage and home equity segments also contributed, supported by targeted initiatives and increased activity in commercial real estate.
• Capital markets and fee income: President Scott McLean detailed the ongoing expansion of Zions’ capital markets business, including loan syndications, interest rate risk management, and new offerings like oil and gas derivatives. Management believes this segment is on track to double revenue in four to five years.
• Expense management and technology investment: Management pointed to disciplined expense control, with adjusted noninterest expenses decreasing sequentially but rising year-over-year due to higher incentive compensation. Investments in AI and digital infrastructure, such as the TCS BaNCS core system, are enabling process automation and improved integration for both M&A and future digital asset initiatives.

Drivers of Future Performance

Management expects loan and fee income growth, disciplined expense investments, and ongoing asset repricing to shape future results, while remaining cautious about macroeconomic and regulatory risks.

• Loan growth and asset remix: Management projects modestly increasing loan balances led by commercial lending, supported by active calling programs and new producer hires. The ongoing remix from lower-yielding securities to higher-yielding loans is expected to support net interest income, though management notes results may be influenced by trade policy developments and overall economic conditions.
• Expense discipline and targeted investment: The company intends to maintain positive operating leverage, with expense growth primarily directed toward revenue-generating roles and marketing. Technology investments, particularly in AI-driven automation, are expected to deliver cost efficiencies and redirect staff toward higher-value tasks, helping balance expense pressures.
• Deposit and funding dynamics: Zions plans to further reduce reliance on brokered deposits and short-term borrowings, focusing on core deposit growth through new products and enhanced customer engagement. However, management cautions that funding costs and deposit competition remain key risks, and future net interest margin gains are likely to come more from asset repricing than deposit cost declines.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be monitoring (1) the rollout and adoption of the consumer gold account across additional markets, (2) the pace and sustainability of commercial and small business loan growth, and (3) ongoing progress in reducing funding costs and brokered deposits. We will also track the impact of digital infrastructure investments and regulatory changes on the bank’s ability to capture growth opportunities.

Zions Bancorporation currently trades at $56.93, in line with $56.59 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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