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Texas Capital's (TCBI) Strategic Plan to Aid Amid Cost Woes
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Texas Capital Bancshares, Inc. (TCBI - Free Report) is making efforts to drive revenues on expanded product offerings and higher coverage in the potential markets. However, the rising expense level is limiting the near-term bottom-line expansion.
Backed by an elevated level of net interest income (NII) and higher non-interest income, TCBI’s revenues have witnessed a compound annual growth rate (CAGR) of 2.1% over the last five years (2017-2021). The above-mentioned efforts will further drive revenue momentum in the upcoming period.
Balance-sheet strength remains a key positive for Texas Capital and it continues to perform well on a variety of metrics. Also, the bank’s relationship-based business model is likely to increase its market share, thereby driving loan and deposit growth in the upcoming period. Also, we believe that the company's loan pipeline and deposits are well-positioned to grow further, backed by an improving U.S. economy.
The company’s capital ratios remain above the levels required to be considered well-capitalized and have been enhanced with the additional capital raised since 2008. We believe that Texas Capital’s strong capital position would help it undertake opportunistic expansions in the foreseeable future.
Though TCBI’s costs declined in 2021 and the company identified more than $130 million of cost-saving opportunities, the expense base is expected to remain elevated in the near term. This is due to efforts to hire experienced bankers, upgrade technology and expand footprints. These moves might boost Texas Capital’s growth in the long term, but the rising expense level is limiting the near-term bottom-line expansion. Notably, management expects low-double-digit expense growth for this year.
As of Dec 31, 2021, Texas Capital's total debt (comprising long-term debt and other borrowings) of $3.13 billion witnessed a volatile trend over the last few quarters. The times-interest-earned ratio of 9 also witnessed a volatile trend over the last few quarters. The company’s cash and due from banks as of Dec 31, 2021, were $180.6 million. Given the unsound liquidity position, its debt seems unmanageable. The company's significantly low cash levels will be insufficient if the economic situation worsens.
Deterioration in the credit quality remains a headwind to Texas Capital. Although the company recorded a declining trend in non-performing assets and net charge-offs in 2021, both metrics increased in 2016, with some moderation in 2017 and 2018, and again saw an elevation in 2019 and 2020, with quarterly volatility. Any decline in credit quality will affect its performance.
Over the past three months, shares of this Zacks Rank #3 (Hold) companyhave rallied 12.5% compared with the industry’s growth of 10.2%.
Image: Shutterstock
Texas Capital's (TCBI) Strategic Plan to Aid Amid Cost Woes
Texas Capital Bancshares, Inc. (TCBI - Free Report) is making efforts to drive revenues on expanded product offerings and higher coverage in the potential markets. However, the rising expense level is limiting the near-term bottom-line expansion.
Backed by an elevated level of net interest income (NII) and higher non-interest income, TCBI’s revenues have witnessed a compound annual growth rate (CAGR) of 2.1% over the last five years (2017-2021). The above-mentioned efforts will further drive revenue momentum in the upcoming period.
Balance-sheet strength remains a key positive for Texas Capital and it continues to perform well on a variety of metrics. Also, the bank’s relationship-based business model is likely to increase its market share, thereby driving loan and deposit growth in the upcoming period. Also, we believe that the company's loan pipeline and deposits are well-positioned to grow further, backed by an improving U.S. economy.
The company’s capital ratios remain above the levels required to be considered well-capitalized and have been enhanced with the additional capital raised since 2008. We believe that Texas Capital’s strong capital position would help it undertake opportunistic expansions in the foreseeable future.
Though TCBI’s costs declined in 2021 and the company identified more than $130 million of cost-saving opportunities, the expense base is expected to remain elevated in the near term. This is due to efforts to hire experienced bankers, upgrade technology and expand footprints. These moves might boost Texas Capital’s growth in the long term, but the rising expense level is limiting the near-term bottom-line expansion. Notably, management expects low-double-digit expense growth for this year.
As of Dec 31, 2021, Texas Capital's total debt (comprising long-term debt and other borrowings) of $3.13 billion witnessed a volatile trend over the last few quarters. The times-interest-earned ratio of 9 also witnessed a volatile trend over the last few quarters. The company’s cash and due from banks as of Dec 31, 2021, were $180.6 million. Given the unsound liquidity position, its debt seems unmanageable. The company's significantly low cash levels will be insufficient if the economic situation worsens.
Deterioration in the credit quality remains a headwind to Texas Capital. Although the company recorded a declining trend in non-performing assets and net charge-offs in 2021, both metrics increased in 2016, with some moderation in 2017 and 2018, and again saw an elevation in 2019 and 2020, with quarterly volatility. Any decline in credit quality will affect its performance.
Over the past three months, shares of this Zacks Rank #3 (Hold) companyhave rallied 12.5% compared with the industry’s growth of 10.2%.
Image Source: Zacks Investment Research
Stocks to Consider
A couple of better-ranked stocks from the finance space are Webster Financial (WBS - Free Report) and First Business Financial Services (FBIZ - Free Report) . Webster and FBIZ both carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for Webster’s current-year earnings has been revised 1.4% upward over the past 60 days.
WBS’s shares have risen 25.9% in the past six months.
First Business recorded an upward revision in earnings estimates of 9.3% for 2022 over the past 60 days.
The FBIZ stock has jumped 20% in the past year.