Zions Still Has Attractive Long-Term Drivers After This Rally

The last three months have been good to banks, as investors have grown increasingly confident in a more benign credit loss outlook and an improving macro environment in 2021. As one of the more notably undervalued banks in its "weight class", in no small part due to weaker credit and pre-provision profit growth expectations, Zions Bancorporation (ZION) has certainly benefited from this shift in sentiment.

Zions has risen more than 45% since my last update, handily outperforming many of its peers, and while I no longer see the same scale of undervaluation as I did before, I do still see Zions as priced for double-digit total returns from here. The bank sector no longer offers the sort of risk-adjusted rewards (valuations were at decade-plus lows back in the fall of 2020), but if Zions can leverage its aggressive PPP loan participation and multiyear tech upgrade cycle, these shares could have better long-term upside than many peers.

 

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Zions Still Has Attractive Long-Term Drivers After This Rally