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BOK Financial (BOKF) Rides on Loan & Credit Quality as Costs Rise
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BOK Financial Corporation (BOKF - Free Report) is well-poised to grow organically, given its steady loan demand. High interest rates, robust deposit balance and solid credit quality will continue to support its financials. However, the rise in expenses and high debt level remain concerns for the company.
BOK Financial has been witnessing constant loan growth owing to its diverse business model and an increase in loans to individuals. It is focused on diversifying its loan portfolio to energy, healthcare and service lending. Similarly, deposits have showcased a growing trend over the past few years. Given the strong loan pipeline and deposit balance, the company will be well-poised for organic growth. In 2024, management expects loans to grow in the mid-to-upper single-digit range and modest growth in deposit balances.
Owing to the higher rates environment, BOKF’s net interest income (NII) witnessed steady growth over the years. However, despite the high interest rate regime, net interest margin (NIM) declined in the recent past due to deposit repricing. Given the improvement in loan balances, along with the current high interest rate regime, both metrics are likely to perform well in the near term. However, the rising funding costs might weigh on both. Following the restructuring of the available-for-sale loan portfolio in the fourth quarter of 2023, management expects both NII and NIM to benefit from the same in the upcoming period.
BOK Financial has an encouraging credit quality metrics. The company has been witnessing a sharp decline in its non-performing assets as well as net charge-offs (NCOs) in the past. The metrics have been better than the pre-pandemic levels. With a history of outperformance during credit cycles, BOK Financial is believed to be well-positioned amid expectations of an economic slowdown.
Shares of the company have gained 4.3% over the past six months against the industry’s decline of 10.2%.
Image Source: Zacks Investment Research
BOKF currently carries a Zacks Rank #2 (Buy).
Despite the above-mentioned tailwinds, the bank has been witnessing an elevated expense base over the years. The expenses are expected to remain high due to its ongoing investments in technological advancements. Management anticipates expenses to rise in the mid-single digit range in 2024.
As of Mar 31, 2023, the company had a total debt of $8.1 billion, whereas cash and due from banks, as well as interest-bearing cash and cash equivalents, aggregated to $1.43 billion. The company’s debt levels seem unmanageable, given its comparatively low liquidity level. BOK Financial is, therefore, unlikely to meet its debt obligations if the economic situation deteriorates.
Other Stocks to Consider
Some other top-ranked bank stocks worth mentioning are UMB Financial Corporation (UMBF - Free Report) and First Financial Bancorp. (FFBC - Free Report) .
UMB Financial’s earnings estimates for 2024 have been revised upward by 14.4% in the past 60 days. The company’s shares have gained 40.1% over the past year. At present, UMBF sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
First Financial’s 2024 earnings estimates have been revised upward by 5.2% in the past 60 days. The stock has gained 2.6% over the past year. Currently, FFBC also sports a Zacks Rank #1.
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BOK Financial (BOKF) Rides on Loan & Credit Quality as Costs Rise
BOK Financial Corporation (BOKF - Free Report) is well-poised to grow organically, given its steady loan demand. High interest rates, robust deposit balance and solid credit quality will continue to support its financials. However, the rise in expenses and high debt level remain concerns for the company.
BOK Financial has been witnessing constant loan growth owing to its diverse business model and an increase in loans to individuals. It is focused on diversifying its loan portfolio to energy, healthcare and service lending. Similarly, deposits have showcased a growing trend over the past few years. Given the strong loan pipeline and deposit balance, the company will be well-poised for organic growth. In 2024, management expects loans to grow in the mid-to-upper single-digit range and modest growth in deposit balances.
Owing to the higher rates environment, BOKF’s net interest income (NII) witnessed steady growth over the years. However, despite the high interest rate regime, net interest margin (NIM) declined in the recent past due to deposit repricing. Given the improvement in loan balances, along with the current high interest rate regime, both metrics are likely to perform well in the near term. However, the rising funding costs might weigh on both. Following the restructuring of the available-for-sale loan portfolio in the fourth quarter of 2023, management expects both NII and NIM to benefit from the same in the upcoming period.
BOK Financial has an encouraging credit quality metrics. The company has been witnessing a sharp decline in its non-performing assets as well as net charge-offs (NCOs) in the past. The metrics have been better than the pre-pandemic levels. With a history of outperformance during credit cycles, BOK Financial is believed to be well-positioned amid expectations of an economic slowdown.
Shares of the company have gained 4.3% over the past six months against the industry’s decline of 10.2%.
Image Source: Zacks Investment Research
BOKF currently carries a Zacks Rank #2 (Buy).
Despite the above-mentioned tailwinds, the bank has been witnessing an elevated expense base over the years. The expenses are expected to remain high due to its ongoing investments in technological advancements. Management anticipates expenses to rise in the mid-single digit range in 2024.
As of Mar 31, 2023, the company had a total debt of $8.1 billion, whereas cash and due from banks, as well as interest-bearing cash and cash equivalents, aggregated to $1.43 billion. The company’s debt levels seem unmanageable, given its comparatively low liquidity level. BOK Financial is, therefore, unlikely to meet its debt obligations if the economic situation deteriorates.
Other Stocks to Consider
Some other top-ranked bank stocks worth mentioning are UMB Financial Corporation (UMBF - Free Report) and First Financial Bancorp. (FFBC - Free Report) .
UMB Financial’s earnings estimates for 2024 have been revised upward by 14.4% in the past 60 days. The company’s shares have gained 40.1% over the past year. At present, UMBF sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
First Financial’s 2024 earnings estimates have been revised upward by 5.2% in the past 60 days. The stock has gained 2.6% over the past year. Currently, FFBC also sports a Zacks Rank #1.