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A month has gone by since the last earnings report for BOK Financial (BOKF). Shares have added about 7.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.
BOK Financial Tops on Q3 Earnings & Revenues
BOK Financial’s earnings per share of $2.74 handily surpassed the Zacks Consensus Estimate of $1.82. The bottom line increased 25% from the prior-year quarter.
Results benefited from lower expenses, a rise in the net interest income and provision benefits. However, lower fees and commissions, and a decline in the loan balance were the undermining factors.
Net income attributable to shareholders was $188.3 million, up 22.3% year over year.
Revenues Rise, Costs & Loans Balance Decline
Net revenues (including net interest revenues and other operating revenues) of $510.1 million improved 1.8% year over year. The top line beat the Zacks Consensus Estimate of $451.4 million.
Net interest revenues were $280.2 million, up 3.1% year over year. NIM shrunk 15 basis points (bps) to 2.66%.
Total fees and commissions amounted to $190.4 million, down 14.6%. The fall was largely due to lower brokerage and trading revenues, and mortgage banking revenues.
Total other operating expenses were $291.3 million, down 1.9%. The fall was mainly due to lower personnel costs, professional fees and services and mortgage banking costs.
The efficiency ratio rose to 61.23% from the prior year’s 59.57%. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Sep 30, 2021, total loans were $20.3 billion, down 5% sequentially. As of the same date, total deposits amounted to $38.5 billion, up 2.9%.
Credit Quality Strengthens
Provision for expected credit losses was a benefit of $23 million. Non-performing assets were $349 million or 1.71% of outstanding loans and repossessed assets as of Sep 30, 2021, down from $416.7 million or 1.75% recorded in the prior-year period. Net charge-offs were $7.8 million, down year over year from $22.4 million.
However, the allowance for loan losses was 1.36% of outstanding loans as of Sep 30, 2021, up 40 bps year over year.
Capital & Profitability Ratios Improve
As of Sep 30, 2021, the common equity tier 1 capital ratio was 12.26%, up from 12.07% as of Sep 30, 2020.
Tier 1 and total capital ratios on Sep 30, 2021, were 12.26% and 13.38%, respectively, compared with 12.07% and 14.05% as of Sep 30, 2020. The leverage ratio was 8.77%, up from 8.39% as of Sep 30, 2020.
Return on average equity was 13.78% compared with the year-earlier quarter’s 11.89%. Return on average assets was 1.51%, up from the 1.25% recorded in the year-ago quarter.
Share Repurchase Update
In the reported quarter, the company repurchased 478,141 shares at an average price of $85 per share.
Management estimates loan growth to slowly boost in line with the increased borrower demand and normalization in line utilization. Interest-bearing deposit costs will remain near the bottom at 13 bps. Fee revenue categories are expected to remain solid.
Management anticipates core NIM to stabilize, with slight adverse impact from the ongoing downward repricing trend in its available-for-sale securities portfolio.
Operating expenses are expected to be at levels similar to the prior ones. Additionally, the overall loan loss reserve as a percent of loan balances is expected to continue migrating toward the pre-pandemic levels.
Share repurchase activities are expected to continue.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, BOK Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise BOK Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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