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Cullen/Frost (CFR) Down Despite In-Line Q2 Earnings, Costs Up
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Cullen/Frost Bankers, Inc. (CFR - Free Report) reported earnings per share of $1.72 in second-quarter 2019, in line with the Zacks Consensus Estimate. Results compare favorably with the prior-year quarter figure of $1.68 per share.
Top-line strength and higher loan balance were reflected in the quarter. Further, a strong balance-sheet position and lower provisions were driving factors. However, elevated expenses were a major drag, escalating investors’ concerns. Therefore, shares of Cullen/Frost declined 2.19%, following the release.
The company reported net income available to common shareholders of $109.6 million compared with $109.3 million recorded in the prior-year quarter.
Revenue Growth Offset Escalated Expenses
The company’s total revenues were $360.4 million in the second quarter, up 4.3% from the prior-year quarter. The revenue figure, however, lagged the Zacks Consensus Estimate of $364.6 million.
Net interest income on a taxable-equivalent basis climbed 6.6% year over year to $277.8 million. Additionally, net interest margin expanded 21 basis points (bps) year over year to 3.85%.
Non-interest income totaled $82.6 million, down 2.9% from the year-ago quarter. This decrease came in mainly due to lower other charges, commissions and fees, along with other non-interest income.
Non-interest expenses of $203.2 million flared up 7.6% year over year. Increase in almost all the cost components led to elevated expenses in the reported quarter.
Strong Balance Sheet
As of Jun 30, 2019, total loans were $14.5 billion, slightly up sequentially. Total deposits amounted to $26 billion, down 1.1% from the prior quarter.
Credit Quality: A Marked Improvement
Credit metrics improved during the June-end quarter. As of Jun 30, 2019, provision for loan losses decreased 22.9% on a year-over-year basis to $6.4 million. Further, net charge-offs, annualized as a percentage of average loans shrunk 1 basis point year over year to 0.22%. Allowance for loan losses, as a percentage of total loans, was 0.93%, down 17 bps from the prior-year quarter.
Non-performing assets were $76.4 million, down 37.8% from the year-ago quarter.
Steady Profitability and Capital Ratios
As of Jun 30, 2019, Tier 1 risk-based capital ratio was 12.94% compared with 13.02% recorded at the end of the prior-year quarter. Total risk-based capital ratio was 14.60%, up from 14.85% as of Jun 30, 2018. Furthermore, leverage ratio inched up to 9.40% from 9.02% as of Jun 30, 2018.
Return on average assets and return on average common equity were 1.40% and 12.60%, respectively, compared with 1.43% and 14.03% witnessed in the prior-year quarter.
Capital Deployment Update
Cullen/Frost’s board of directors announced a new stock-repurchase plan worth $100 million.
Our Viewpoint
Cullen/Frost displayed an impressive performance during the April-June period. Growth in loan balance indicates continued organic growth. Though escalating expenses might continue to depress the company’s bottom-line growth, it remains well poised to benefit from easing margin pressure and higher net interest income.
Cullen/Frost Bankers, Inc. Price, Consensus and EPS Surprise
Driven by top-line strength, Synovus Financial (SNV - Free Report) reported a positive earnings surprise of 1.01% in the second quarter. Adjusted earnings of $1.00 per share beat the Zacks Consensus Estimate of 99 cents. Also, the reported figure came in 8.4% higher than the prior-year quarter tally.
Riding on higher revenues, Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 2.1% in second-quarter 2019. Adjusted earnings per share came in at 96 cents, beating the Zacks Consensus Estimate of 94 cents. Also, the bottom line improved 9.1% year over year.
BOK Financial (BOKF - Free Report) delivered a positive earnings surprise of 7.2% in the second quarter of 2019. Earnings per share of $1.93 outpaced the Zacks Consensus Estimate of $1.80. The bottom line also compared favorably with the prior-year quarter’s reported earnings of $1.75. Top-line strength, aided by rising net interest and fee income, was recorded. Further, loans balance improved. However, rise in expenses and provisions were headwinds.
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Cullen/Frost (CFR) Down Despite In-Line Q2 Earnings, Costs Up
Cullen/Frost Bankers, Inc. (CFR - Free Report) reported earnings per share of $1.72 in second-quarter 2019, in line with the Zacks Consensus Estimate. Results compare favorably with the prior-year quarter figure of $1.68 per share.
Top-line strength and higher loan balance were reflected in the quarter. Further, a strong balance-sheet position and lower provisions were driving factors. However, elevated expenses were a major drag, escalating investors’ concerns. Therefore, shares of Cullen/Frost declined 2.19%, following the release.
The company reported net income available to common shareholders of $109.6 million compared with $109.3 million recorded in the prior-year quarter.
Revenue Growth Offset Escalated Expenses
The company’s total revenues were $360.4 million in the second quarter, up 4.3% from the prior-year quarter. The revenue figure, however, lagged the Zacks Consensus Estimate of $364.6 million.
Net interest income on a taxable-equivalent basis climbed 6.6% year over year to $277.8 million. Additionally, net interest margin expanded 21 basis points (bps) year over year to 3.85%.
Non-interest income totaled $82.6 million, down 2.9% from the year-ago quarter. This decrease came in mainly due to lower other charges, commissions and fees, along with other non-interest income.
Non-interest expenses of $203.2 million flared up 7.6% year over year. Increase in almost all the cost components led to elevated expenses in the reported quarter.
Strong Balance Sheet
As of Jun 30, 2019, total loans were $14.5 billion, slightly up sequentially. Total deposits amounted to $26 billion, down 1.1% from the prior quarter.
Credit Quality: A Marked Improvement
Credit metrics improved during the June-end quarter. As of Jun 30, 2019, provision for loan losses decreased 22.9% on a year-over-year basis to $6.4 million. Further, net charge-offs, annualized as a percentage of average loans shrunk 1 basis point year over year to 0.22%. Allowance for loan losses, as a percentage of total loans, was 0.93%, down 17 bps from the prior-year quarter.
Non-performing assets were $76.4 million, down 37.8% from the year-ago quarter.
Steady Profitability and Capital Ratios
As of Jun 30, 2019, Tier 1 risk-based capital ratio was 12.94% compared with 13.02% recorded at the end of the prior-year quarter. Total risk-based capital ratio was 14.60%, up from 14.85% as of Jun 30, 2018. Furthermore, leverage ratio inched up to 9.40% from 9.02% as of Jun 30, 2018.
Return on average assets and return on average common equity were 1.40% and 12.60%, respectively, compared with 1.43% and 14.03% witnessed in the prior-year quarter.
Capital Deployment Update
Cullen/Frost’s board of directors announced a new stock-repurchase plan worth $100 million.
Our Viewpoint
Cullen/Frost displayed an impressive performance during the April-June period. Growth in loan balance indicates continued organic growth. Though escalating expenses might continue to depress the company’s bottom-line growth, it remains well poised to benefit from easing margin pressure and higher net interest income.
Cullen/Frost Bankers, Inc. Price, Consensus and EPS Surprise
Cullen/Frost Bankers, Inc. price-consensus-eps-surprise-chart | Cullen/Frost Bankers, Inc. Quote
Currently, Cullen/Frost holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Southwest Banks
Driven by top-line strength, Synovus Financial (SNV - Free Report) reported a positive earnings surprise of 1.01% in the second quarter. Adjusted earnings of $1.00 per share beat the Zacks Consensus Estimate of 99 cents. Also, the reported figure came in 8.4% higher than the prior-year quarter tally.
Riding on higher revenues, Citizens Financial Group (CFG - Free Report) delivered a positive earnings surprise of 2.1% in second-quarter 2019. Adjusted earnings per share came in at 96 cents, beating the Zacks Consensus Estimate of 94 cents. Also, the bottom line improved 9.1% year over year.
BOK Financial (BOKF - Free Report) delivered a positive earnings surprise of 7.2% in the second quarter of 2019. Earnings per share of $1.93 outpaced the Zacks Consensus Estimate of $1.80. The bottom line also compared favorably with the prior-year quarter’s reported earnings of $1.75. Top-line strength, aided by rising net interest and fee income, was recorded. Further, loans balance improved. However, rise in expenses and provisions were headwinds.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>