Updated with market close information and more on other banks' third-quarter results.
NEW YORK (
(ZION - Get Report)
was the big loser among major U.S. financial companies on Tuesday, with shares down nearly 7% to close at $27.86.
Zions -- based in Salt Lake City -- late on Monday reported third-quarter earnings applicable to common stockholders of $209.7 million, or $1.12 a share, compared to earnings of $55.4 million, or 30 cents a share, during the second quarter, and $62.3 million, or 34 cents a share, during the third quarter of 2013. The results for the most recent quarter included an after-tax benefit of $126 million, or 68 cents a share, from the redemption of $800 million in preferred stock that had a carrying value of $926 million.
The company's underlying trends were clearly of major concern to investors. Net interest income declined to $415.2 million during the third quarter from $430.7 million the previous quarter and $438.2 million a year earlier. The net interest margin -- the spread between the average rate earned on loans and investments and the average cost for deposits and borrowings -- narrowed to 3.22% in the third quarter from 3.44% in the second quarter and 3.58% in the third quarter of 2013.
"Net interest income was primarily impacted this quarter by lower income from FDIC-supported loans, which accounted for nearly 95% of the sequential quarterly decline," according to Zions, which was referring to loans acquired from failed banks that have loss-share coverage from the
Federal Deposit Insurance Corp.
The margin decline reflected slow loan growth and stood in contrast to some other regional lenders, including
Regions Financial Corp.
(RF - Get Report)
of Birmingham, Ala., which on Tuesday reported an
expanding net interest margin and strong commercial and industrial loan growth
. Regions' positives weren't enough to outweigh investors' concerns over an increase in core expenses, and the company's shares were down 3% to close at $9.73.
Zions reported that its average loans and leases -- excluding loans with FDIC coverage -- during the third quarter grew 1% sequentially and 2% year over year to $37.8 billion. Quarter-end commercial and industrial (C&I) loan balances were flat quarter over quarter, but up 10% from a year earlier to $19.4 billion.
BMO analysts Lana Chan and Peter Winter in a client note on Tuesday reiterated their "Outperform" rating for Zions, but lowered their price target for the shares to $32 from $33 and lowered their 2014 earnings estimate for the bank to $1.85 a share from $1.95. The cuts were made "to reflect slower loan growth and further margin pressure, partly offset by a wider negative loan-loss provision," the analysts wrote.