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3 Things You Must Watch in Zions Bancorp's Earnings

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Zions Bancorp (NASDAQ: ZION  ) will be releasing first-quarter earnings after the market closes on Monday, with analysts expecting earnings of $0.39 per share on revenues of $559.9 million. However, investors should look beyond these numbers and pay special attention to three areas of the upcoming release:

1. Asset quality improvement
At the end of the previous quarter, Zions reported $745.6 million in nonperforming lending assets, a 30% decline over the course of 2012. The bank shouldn't rest on those laurels, however, as these nonperforming assets account for just under 2% of all loans and leases. While not a terrible percentage, this is an area that the bank has room to improve.

One way that the bank can improve this ratio is by increasing lending activity. With the credit crunch that was brought upon by the financial crisis, most lenders have tightened requirements to receive loans, lending money to the best candidates. We can assume that new loans have a lower risk profile than previous loans and would be less likely to become nonperforming, which would only help to strengthen the bank's balance sheet.

2. Net interest margin
Like most banks, Zions has seen some compression in its net interest margin over the past year, and acknowledges that it could feel similar pressure going forward. This all important measure declined 34 basis points from December 2011 to December 2012, putting pressure on the bank to find income elsewhere to continue to grow profits. While it would be surprising to see the bank maintain or even improve its current NIM, limiting the decline to less than 10 basis points would be a victory in my eyes.

3. Dividend news
Zions could never be mistaken for an income stock with its paltry $0.04 per share annual dividend, joining the likes of Bank of America and Citigroup in paying a nominal dividend. Nevertheless, the bank paid back the money it received as part of TARP during 2012, removing a large liability from the company and freeing up additional capital to return to shareholders. It could be quite some time before the bank feels secure enough to raise the dividend, but that doesn't mean that I won't be keeping an eye out for any dividend news from the company.

What it all means
Zions Bancorp is a fraction of the size of most banks, but it is still one of the largest banks out there with over $55 billion in total assets. Like many banks, it is still fighting through some of the difficulties associated with the banking crisis of 2008. Its first-quarter earnings could be a step in the right direction at putting those troubles behind them once and for all, so we'll have a better idea of how the bank fared Monday afternoon.

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