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Analyst Blog

On Sep 20, 2013, we reiterated our long term Neutral recommendation on BOK Financial Corp. (BOKF - Analyst Report), based on its improved credit quality metrics and prudent expense management. However, a decline in revenues was the downside.

Why Neutral?

Despite the macroeconomic challenges, BOK Financial’s credit quality continues to improve. Credit metrics rose consistently in the first half of 2013 as the overall financial condition of businesses and consumers strengthened, together with resurgence in the housing market in many areas. Going forward, we expect asset quality to improve as well.

We also commend the company’s strategic acquisitions in the economically diverse markets comprising the Southwest, Midwest and Rocky Mountain states. Notably, 63% of BOK Financial’s consolidated net income for the second quarter of 2013 was derived from overseas markets.

However, BOK Financial’s second-quarter earnings of $1.28 per share lagged the Zacks Consensus Estimate as well as the prior-quarter figure. The lower-than-expected results were due to a decline in net interest revenue.

Over the last 60 days, the Zacks Consensus Estimate for 2013 declined 2.9%. For 2014, the Zacks Consensus Estimate fell 1.5% over the same time period. As a result, BOK Financial now has a Zacks Rank #3 (Hold).

We are concerned about the company’s top-line growth and margins, which continue to be impacted by the low rate environment and sluggish economic recovery. Additionally, regulatory issues are expected to limit the company’s flexibility with respect to business investments.

Other Banks Worth Considering

Some other banks in the same sector that are worth a look include BofI Holding, Inc. (BOFI - Snapshot Report), Tower Financial Corporation and WSFS Financial Corp. (WSFS - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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