Yahoo Finance Cullen/Frost (CFR) Gains 6.6% on Q1 Earnings Beat, Revenues Rise
Cullen/Frost Bankers, Inc.’s CFR shares gained 6.6% following the earnings release. CFR reported first-quarter 2023 earnings per share of $2.70, up from $1.50 in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of $2.55.
A rise in net interest income (NII) on higher loan balances and rising rates were major tailwinds in the quarter. However, elevated expenses and deteriorating credit quality were major drags.
The company reported net income available to common shareholders of $175.9 million, up from $97.4 million in the prior-year quarter.
Revenues Increase, Expenses Flare Up
The company’s total revenues were $531.1 million in the first quarter, up 42% from the prior-year quarter. The top line also surpassed the Zacks Consensus Estimate of $512.9 million.
NII on a taxable-equivalent basis jumped 56.4% to $425.8 million. Additionally, NIM expanded 114 basis points (bps) year over year to 3.47%.
Non-interest income improved 3.8% to $105.3 million primarily due to an increase in insurance commissions and fees, interchange and card transaction fees, and other charges, commissions and fees.
Non-interest expenses of $285.14 million flared up 19.4%. A rise in all the components, except for intangible amortization, resulted in the upswing.
As of Mar 31, 2023, total loans were $17.48 billion, up 1.9% sequentially. Total deposits amounted to $42.18 billion, down 4.3%.
Credit Quality Deteriorates
As of Mar 31, 2023, the company recorded credit loss expenses of $9 million compared with no credit loss expenses recorded in the prior-year quarter. Further, net charge-offs, annualized as a percentage of average loans, expanded 5 bps year over year to 0.21%.
However, the allowance for credit losses on loans, as a percentage of total loans, was 1.32%, down 17 bps.
Capital Ratios & Profitability Ratios Improve
As of Mar 31, 2023, the Tier 1 risk-based capital ratio was 13.74%, up from 13.32% recorded at the end of the year-earlier quarter. The total risk-based capital ratio was 15.22%, up from 14.97% as of the prior-year quarter.
The common equity Tier 1 risk-based capital ratio was 13.24%, up from the previous-year quarter’s 12.78%. The leverage ratio increased to 7.69% from 7.08%.
Return on average assets and return on average common equity were 1.39% and 22.59% compared with 0.79% and 9.58% witnessed in the prior-year quarter, respectively.
Our Viewpoint
Cullen/Frost is well-positioned for revenue growth, given the steady improvement in loan balances, higher interest rates and its efforts to boost fee income. However, rising expenses may affect the bottom line to some extent in the near term.
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 carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
BOK Financial Corporation’s BOKF first-quarter earnings per share of $2.43 surpassed the Zacks Consensus Estimate of $2.29. The bottom line increased significantly from the prior-year quarter’s 91 cents.
BOKF’s results were aided by an improvement in net interest revenues, driven by higher rates and loan growth. Also, total fees and commissions witnessed a rise in the quarter under review. However, increased expenses and provisions were concerning.
Bank OZK’s OZK first-quarter 2023 earnings per share of $1.41 missed the Zacks Consensus Estimate of $1.43. The bottom line, however, reflects a rise of 38.2% from the year-earlier quarter.
OZK’s results were adversely impacted by lower non-interest income, higher expenses, and a rise in provision for credit losses on worsening economic outlook. Yet, there was an improvement in NII, driven by higher loan balances and rising rates. Also, the company witnessed a rise in deposit balance in the quarter.
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