Zions: Financial Loser
The broad indexes were mixed, as investors digested some mediocre, but stale, housing data, a strong earnings report from AT&T (T) , and IBM's (IBM) announcement that it would increase its quarterly dividend by a dime to 85 cents and authorized $7 billion in share buybacks. Big Blue's shares rose 1% to close at $200.00.
AT&T reported first-quarter earnings of $3.6 billion, or 60 cents a share, beating the consensus estimate of a 57-cent profit, among analysts polled by Thomson Reuters. The company's first-quarter revenue of $31.82 billion increased 2% year-over-year, but was just shy of the consensus estimate of $31.85 million. AT&T's shares rose 4% to close at $31.72.
Standard & Poor's reported that its S&P/Case-Shiller Home Price Indices "showed annual declines of 3.6% and 3.5% for the 10- and 20-City Composites, respectively," in February, which was "an improvement over the annual rates posted for the month of January, -4.1% and -3.9%, respectively."
On a brighter note, S&P said that five of the 20 surveyed metropolitan areas "saw positive annual returns, including "Denver, Detroit, Miami, Minneapolis and Phoenix."
The KBW Bank Index (I:BKX) rose 1% to close at 47.83, with all 24 index components -- except for Zions -- seeing gains.
Zions Bancorporation late on Monday reported first-quarter net income available to common shareholders of $25.5 million, or 14 cents a share, compared to $44.4 million, or 24 cents a share in the first quarter, and $14.8 million, or eight cents a share, in the first quarter of 2011.
Excluding "the noncash effects of the discount amortization on conversion of subordinated debt and additional accretion (net of expense) on acquired loans ($15.0 million, $0.08 per share), and the accelerated amortization of discount on the $700 million redemption of Troubled Asset Relief Program ("TARP") preferred stock ($19.6 million, $0.11 per share) in the first quarter," Zions said its net operating earnings were $60.1 million or 33 cents a share, beating the consensus EPS estimate of 25 cents.
Zions on March 28 repaid the government $700 million in TARP money, and plans to repay the remaining $700 million during the second half of this year.
KBW analyst Brian Klock said late on Monday that excluding other-than-temporary impairments on securities and "FDIC items," the company's "Core EPS was 23c."
Klock rates Zions "Market Perform," with a $22 price target, and said the company's net interest margin "was lower sequentially, but in-line with expectation and while management had indicated large loan run-off in early January, soft originations were not enough to overcome that run-off and loans declined 5% annualized."