BOK Financial (BOKF) Up 4.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for BOK Financial (BOKF). Shares have added about 4.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is BOK Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

BOK Financial Q2 Earnings Beat Estimates, Revenues Down

BOK Financial’s earnings per share of $2.40 handily surpassed the Zacks Consensus Estimate of $1.84. The bottom line compared favorably with the prior-year quarter’s 92 cents.

Results benefited from lower expenses, modest rise in net interest income and provision benefits. However, lower fees and commissions, and decline in loan and deposit balances were the undermining factors.

Net income attributable to shareholders was $166.4 million, up significantly from $64.7 million recorded in the year-ago quarter.

Revenues, Costs & Loans Balance Down

Net revenues of $471.8 million declined 7.7% year over year. The top line beat the Zacks Consensus Estimate of $451.4 million.

Net interest revenues were $280.3 million, up almost 1% year over year.  NIM shrunk 23 basis points (bps) to 2.60%.

Total fees and commissions amounted to $169.4 million, down 20.7%. The fall was largely due to lower brokerage and trading revenues, and mortgage banking revenues.

Total other operating expenses were $291.2 million, down 1.5%. The fall was mainly due to absence of charitable contributions to BOKF Foundation, lower personnel costs, net occupancy and equipment expenses, and mortgage banking costs.

Efficiency ratio rose to 64.20% from the prior year’s 59.68%. A rise in efficiency ratio indicates deterioration in profitability.

As of Jun 30, 2021, total loans were $21.4 billion, down 5% sequentially. As of the same date, total deposits amounted to $37.4 billion, down 1.1%.

Credit Quality: A Mixed Bag

Provisions for credit losses were a benefit of $35 million against the provision of $135.3 million in the prior-year quarter. Allowance for loan losses was 1.46% of outstanding loans as of Jun 30, 2021, down 34 bps year over year.

However, non-performing assets were $408.3 million or 1.90% of outstanding loans and repossessed assets as of Jun 30, 2021, up from the $405.3 million or 1.68% recorded in the prior-year period. Net charge-offs were $15.4 million, up 9.7% year over year.

Capital & Profitability Ratios Improve

As of Jun 30, 2021, the common equity Tier 1 capital ratio was 11.95%, up from 11.44% as of Jun 30, 2020. Tier 1 and total capital ratios on Jun 30, 2021, were 12.01% and 13.61%, respectively, compared with 11.44% and 13.43% as of Jun 30, 2020. Leverage ratio was 8.58%, up from 7.74% as of Jun 30, 2020.

Return on average equity was 12.58% compared with the year-earlier quarter’s 5.14%. Return on average assets was 1.33%, improving from the 0.52% recorded in the year-ago quarter.

Capital Deployment Activities

During the reported quarter, the company repurchased 492,994 shares at an average price of $88.84 per share and paid a regular cash dividend aggregating $35.9 million.

Outlook

Management estimates loan growth to slowly boost in line with the broader economic recovery this year, excluding the impact of any Paycheck Protection Program activity. Available-for-sale security portfolio yield might decrease as accelerated prepayments force reinvestment at lower rates.

Management anticipates NIM to continue to decline slightly largely from ongoing downward repricing in its available-for-sale securities portfolio.

Interest-bearing deposit costs will remain near a bottom at 14 bps.

Most fee revenue categories are expected to grow modestly, on a sequential basis.

Share repurchase activity is expected to continue.

Operating expenses are expected to flare up at a low single-digit pace.

Additionally, the overall loan loss reserve as a percent of loan balances is expected to continue migrating toward pre-pandemic levels. Management expects net charge-offs to be at or modestly better than the result of the first half of this year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, BOK Financial has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, BOK Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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