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Cullen/Frost (CFR) Q2 Earnings and Revenues Beat Estimates

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Following the second-quarter 2021 results, shares of Cullen/Frost Bankers, Inc. CFR have gained 1.22%. The company reported earnings per share of $1.80, surpassing the Zacks Consensus Estimate of $1.60. Results also compare favorably with the prior-year quarter figure of $1.47 per share.

Rise in revenues and deposit balances were major tailwinds in the quarter. Moreover, honed credit quality and sound capital positions drove bottom-line growth. However, elevated expenses and margin contraction were major drags.

The company reported net income available to common shareholders of $116.4 million compared with the $93.1 million recorded in the prior-year quarter.

Revenues Increase, Expenses Flare Up

The company’s total revenues were $371.24 million in the second quarter, up 6.9% from the prior-year quarter. The revenue figure also surpassed the Zacks Consensus Estimate by 3.71%.

Net interest income on a taxable-equivalent basis increased 3.8% year over year to $279.9 million. Additionally, net interest margin contracted 48 basis points (bps) year over year to 2.65%.

Non-interest income climbed 17.6% to $91.2 million on a year-over-year basis. This primarily resulted from increase in trust and investment management fees, the number of customer accounts as well as a rise in estate fees.

Non-interest expenses of $215.3 million flared up 7.8% year over year. Rise in salaries and wage expenses, donation expenses, advertising expenses, fraud losses, and other expenses resulted in increased expenses in the reported quarter.

Balance Sheet

As of Jun 30, 2021, total loans were $17.25 billion, down 2.5% sequentially. Total deposits amounted to $38.3 billion, up 8.1% from the prior quarter.

Credit Quality: A Mixed Bag

Credit metrics improved during the June-end quarter. As of Jun 30, 2021, the company did not record any credit loss expense compared with the $27.2 million recorded in the prior-year quarter. Further, net charge-offs, annualized as a percentage of average loans, shrunk 90 bps year over year to 0.04%. Allowance for loan losses, as a percentage of total loans, was 1.54%, up 15 bps from the prior-year period.

Higher Profitability and Capital Ratios

As of Jun 30, 2021, Tier 1 risk-based capital ratio was 14.21% compared with the 12.48% recorded at the end of the year-earlier quarter. Total risk-based capital ratio came in at 16.17%, up from 14.43% as of Jun 30, 2020. Furthermore, leverage ratio edged down to 7.6% from 8.01% as of Jun 30, 2020. Common equity tier 1 risk-based capital ratio came in at 13.60% compared with the previous-year quarter’s 12.48%.

Return on average assets and return on average common equity were 1.02% and 11.18%, respectively, compared with the 0.99% and 9.60% witnessed in the prior-year quarter.

Our Viewpoint

Cullen/Frost is well positioned for revenue growth, given the steady improvement in deposit balances, liquidity position as well as efforts to boost fee income. However, rising expenses, along with lower rates, are major concerns.

Nevertheless, with gradual improvement in economic conditions, the company is expected to perform better in the quarters ahead.

CullenFrost Bankers, Inc. Price, Consensus and EPS Surprise

CullenFrost Bankers, Inc. Price, Consensus and EPS Surprise
CullenFrost Bankers, Inc. Price, Consensus and EPS Surprise

CullenFrost Bankers, Inc. price-consensus-eps-surprise-chart | CullenFrost Bankers, Inc. Quote

Currently, Cullen/Frost carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

Regions Financial RF reported second-quarter 2021 earnings of 77 cents per share, which surpassed the Zacks Consensus Estimate of 52 cents on impressive top-line strength. The bottom line compared favorably with the prior-year loss of 25 cents.

PNC Financial PNC delivered a second-quarter 2021 earnings surprise of 42.4% on substantial reserve release. Adjusted earnings per share of $4.50 outpaced the Zacks Consensus Estimate of $3.16.

Webster Financial WBS reported second-quarter 2021 earnings per diluted share of $1.21, which topped the Zacks Consensus Estimate of $1. The reported figure excluded noteworthy items such as charges related to mergers and strategic optimization initiatives.


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