Zions Bancorp 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

We’ve substantially upgraded our credit rating process over the last several years

“During the past several years, we have substantially upgraded our credit rating process and reviews. We’ve enhanced credit monitoring, we’ve greatly enhanced our concentration risk management, and of course introduced stress testing and refined that process several times.”

Construction loans have dropped significantly

“At the end of 2009, construction and land development loans, plus CDOs equaled $8.3 billion, or about 240% of our tier one common equity. Today, such assets equal only about $3 billion or about 56% of tier one common.”

We’re expecting continued improvements in credit

“Regarding provision expense, given our expectation of continued improvements in the credit metrics that drive the ALLL methodology, we expect provision expense to remain modestly negative in the near term, although any reserve releases in this and future quarters are expected to be significantly smaller than those in the second and third quarters of this year.”

We’re watching capital markets closely

“We’re closely watching the recent turmoil in capital markets and abroad. While we do not see anything that would cause the quantitative portion of our models to reverse course, we note that the rate of reserve release from the qualitative portion could slow down, depending on what we see in the external environment.”

Good growth in corporate cards

“We’re seeing good growth in commercial cards. We’re seeing revenue increasing there at a pretty good clip. We continue to see growth in our treasury management income. Mortgage banking is something we’re focused on doing more of, but it’s obviously a tough market to be actually gaining traction in. But we expect that through the cycle we’ll be doing more of that. And wealth management has been another area of focus for us.”

Service charges on consumer accounts probably not much growth there

“probably one of the risks on the horizon for anybody who’s really heavily consumer oriented is going to be overdraft income, and so we’re not trying to push that pedal any further. We think that that’s probably not going to be a growth area. Service charges on deposit accounts generally is not going to see a lot of growth”

The federal reserve is putting increased emphasis on upgrading systems

“I would note that the Federal Reserve is placing renewed emphasis on all banks, if you look at the CCAR 2015 instructions that just came out. Look at the range of practices document that they published last year. They’re focusing ever more intently on the quality of bank systems, noting that many are antiquated and need to be upgraded. They cannot meet the data requirements with the versatility that they expect going forward.”

Branches don’t look like they add a whole lot of value right now because deposits don’t add a lot of value

“I think all banks are wrestling with right now, we’re in this very low interest rate environment, and the nominal value of branches today, in a lot of cases, doesn’t look great, because the value you attribute to deposits is not very significant today.”