We are reaffirming our Neutral recommendation on BOK Financial Corporation following a detailed analysis of the company’s second quarter 2011 earnings results and the current economic environment.
BOK Financial’s second quarter earnings came in at $69.0 million or $1.00 per share, beating the Zacks Consensus Estimate by 2 cents. The results also compared favorably with the prior-quarter earnings of $64.8 million or 94 cents per share and prior-year quarter earnings of $63.5 million or 93 cents per share.
Results primarily reflect a decrease in loan loss provisions and improved credit quality. Increase in fees and commissions revenue also supported top-line growth.
Strategic expansions and the local-leadership based business model of BOK Financial, which has peers such as Cullen/Frost Bankers Inc. and First Financial Bankshares Inc. , have aided its expansion into a leading financial service provider from a small bank in Oklahoma.
Itsadherence to conservative underwriting standards resulted in sturdy asset quality with very low charge-off levels, which in turn bolstered its performance. Besides, its diverse revenue mix and favorable geographic footprint backed its growth. A sturdy capital position as well as capital deployment efforts bode well and boost investors’ confidence.
Yet, with a protracted economic recovery, we expect revenue growth to be restricted. Also, regulatory issues remain our concern and a highly liquid balance sheet restricts margin improvement.
Therefore, the risk and reward profile seems somewhat balanced for BOK Financial and we reiterate our Neutral recommendation.
BOK Financial shares are maintaining a Zacks #3 Rank, which translates into a short-term Hold recommendation.