Yahoo Finance Cullen/Frost (CFR) Stock Down 5.2% Despite Q1 Earnings Beat
Shares of Cullen/Frost Bankers, Inc. CFR declined 5.2% despite better-than-expected first-quarter 2024 earnings. Adjusted earnings per share (excluding the impact of FDIC surcharge) were $2.15, down 20.4% from the prior-year quarter. Nonetheless, the bottom line surpassed the Zacks Consensus Estimate of $2.13.
Results were primarily aided by a rise in non-interest income and higher loan balances during the quarter. However, a rise in non-interest expenses and credit loss expenses and reduced net interest income (NII) were significant drags.
The company reported net income available to common shareholders of $134 million, down from $176 million in the prior-year quarter. This included FDIC special assessment charges of $7.7 million. On an adjusted basis, net income available to common shareholders was $140.1 million, down 20.4% year over year.
Revenues Decline, Expenses Rise
The company’s total revenues were $522.7 million in the first quarter, down 1.6% year over year. Also, the top line missed the Zacks Consensus Estimate of $524.9 million.
NII on a taxable-equivalent basis declined 3.4% to $411.4 million year over year. Nonetheless, net interest margin (NIM) expanded 1 basis point (bp) year over year to 3.48%. Our estimates for NII and NIM were $419.6 million and 3.62%, respectively.
Non-interest income improved 5.8% to $111.4 million year over year. The rise was due to an increase in all components except insurance commission and fees, as well as interchange and card transaction fees. Our estimate for non-interest income was $110.4 million.
Non-interest expenses of $326.2 million increased 14.4% year over year. The rise was due to an increase in all the components. Our estimate for non-interest expenses was $323 million.
As of Mar 31, 2024, total loans were $19.39 billion, up 3% sequentially. Total deposits amounted to $40.81 billion, down 2.7% from the previous quarter. Our estimates for total loans and total deposits were $18.17 billion and $41.45 billion, respectively.
Credit Quality Improves
As of Mar 31, 2024, the company recorded credit loss expenses of $13.7 million compared with $9.1 million in the prior-year quarter.
Nonetheless, the allowance for credit losses on loans, as a percentage of total loans, was 1.29%, down 3 bps.
Further, net charge-offs, annualized as a percentage of average loans, were down 6 bps year over year to 0.15%.
Capital Ratios Improve & Profitability Ratios Decline
As of Mar 31, 2024, the Tier 1 risk-based capital ratio was 13.89%, up from 13.74% at the end of the year-earlier quarter. The total risk-based capital ratio was 15.35%, up from 15.22% as of the prior-year quarter. The common equity Tier 1 risk-based capital ratio was 13.41%, up from the year-ago quarter’s 13.24%.
The leverage ratio increased to 8.44% from 7.69%.
Return on average assets and return on average common equity were 1.09% and 15.22% compared with 1.39% and 22.59% 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
Texas Capital Bancshares, Inc. TCBI reported first-quarter 2024 EPS of 62 cents (excluding non-recurring items), which beat the Zacks Consensus Estimate of 59 cents. However, earnings compared unfavorably with 70 cents reported in the year-ago quarter.
TCBI's results benefited from an increase in non-interest income and higher loan and deposit balances. Additionally, strong capital position and lower provisions were other positives. However, a decline in NII and an increase in expenses were the undermining factors.
Citizens Financial Group CFG reported first-quarter 2024 EPS of 65 cents, missing the Zacks Consensus Estimate of 75 cents. The bottom line declined from $1 reported in the year-ago quarter.
Underlying EPS for the first quarter of 2024 was 79 cents, down from $1.10 reported in the year-ago quarter.
CFG’s results were adversely impacted by lower NII and a rise in provisions and operating expenses. However, an increase in non-interest income and lower allowance for credit losses offered some support.
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