Strong C&I, fee-income growth help Zions weather margin pressure

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Declining interest rates took a toll on Zions Bancorp.’s profit margin in the third quarter, but the Salt Lake City company still beat earnings expectations thanks to strong loan and fee-income growth.

Net income at the $70.1 billion-asset company dropped 0.5% in the quarter compared with the same period last year to $214 million. Earnings per share of $1.17 were 9 cents better than the mean estimate of analysts compiled by FactSet Research Systems.

Net interest income increased 0.4% to $567 million. Net loans and leases rose 7% to $48.8 billion, fueled by a 7% increase in commercial and industrial lending, to $25.3 billion. But lower rates cut into Zions’ margin, as the net interest margin narrowed 15 basis points to 3.48%.

Chairman and CEO Harris Simmons said it’s difficult for banks to record profit growth in a declining-rate environment.

“Given the challenging interest rate environment in which banks currently operate, we’re pleased with the quarter’s overall results,” Simmons said in a news release. “As we adjust to a lower interest rate environment and anticipate the resulting continued pressure on interest margins, we will continue to take steps to carefully manage operating expenses in the year ahead.”

Noninterest income increased 7% to $146 million capital markets and foreign exchange fees, and on higher originations of residential mortgages.

Noninterest expense dropped 1% to $415 million, primarily due to lower Federal Deposit Insurance Corp. premiums.

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Earnings Commercial lending Commercial banking Zions Bancorp.
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