It has been about a month since the last earnings report for BOK Financial (BOKF). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BOK Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
BOK Financial's Q4 Earnings Miss Estimates on High Costs
BOK Financial reported a negative earnings surprise of 15.7% in fourth-quarter 2019. Earnings per share of $1.56 lagged the Zacks Consensus Estimate of $1.85. Further, the bottom line compares unfavorably with the prior-year quarter’s $1.65.
Expenses and provisions escalated in the quarter. Moreover, loans declined and pressure on margin was visible. Yet, top-line strength on fee income growth and rise in deposits were driving factors.
Net income came in at $110.4 million compared with the $108.5 million recorded in the year-ago quarter.
For 2019, net income was $500.8 million or $7.03 per share compared with the $445.6 million or $6.63 reported in 2018.
Revenues Climb, Costs Up, Loans Down
For 2019, revenues were $1.8 billion, up 12.5% year over year. The revenue figure comes in line with the Zacks Consensus Estimate.
Revenues in the fourth quarter came in at $449.6 million, up around 1% year over year. The revenue figure, however, missed the Zacks Consensus Estimate of $454.8 million.
Net interest revenues totaled $270.2 million, down 5.4% year over year. Further, net interest margin (NIM) shrunk 60 basis points year over year to 2.88%.
BOK Financial’s fees and commissions revenues amounted to $179.4 million, up 12.1% on a year-over-year basis. Higher fiduciary and asset management revenues, brokerage and trading revenues, transaction card revenues, along with elevated mortgage banking revenues, primarily led to this upswing. This was partly offset by lower deposit service charges and fees, along with reduced other revenues.
Total other operating expenses were $288.8 million, up 1.5% year over year. This uptick mainly stemmed from higher personnel expenses and mortgage banking costs.
Efficiency ratio increased to 63.65% from the prior years’ 63.25%. Generally, a higher ratio indicates decline in profitability.
Total loans as of Dec 31, 2019, were $21.8 billion, down 2.2% sequentially. As of the same date, total deposits amounted to $27.6 billion, up 5.7% sequentially.
Credit Quality: A Mixed Bag
During the December-end quarter, provisions for credit losses of $19 million more than doubled from the prior-year quarter. The combined allowance for credit losses was 0.97% of outstanding loans as of Dec 31, 2018, up from 0.96% in the year-ago period.
Additionally, non-performing assets totaled $293.8 million or 1.35% of outstanding loans and repossessed assets as of Dec 31, 2019, up from $267.2 million or 1.23% in the prior-year period. Net charge-offs were $12.5 million, up 1.6% year over year.
Capital Position
Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. As of Dec 31, 2019, the common equity Tier 1 capital ratio was 11.39% as compared with 10.92% as of Dec 31, 2018.
Tier 1 and total capital ratios on Dec 31, 2019, were 11.39% and 12.94%, respectively, compared with 10.92% and 12.50% as of Dec 31, 2018. Leverage ratio was 8.40% compared with 8.96% as of Dec 31, 2018.
Share Repurchase Update
During the October-December period, the company repurchased 280,000 million common shares at an average price of $81.59 per share.
2020 Outlook
Management expects 3-4% average loan growth for the consolidated entity with lower growth in Energy. Average deposits are expected to cover loan growth for the year.
Net interest revenue is expected to remain relatively flat compared to 2019; given overall lower interest rates for the year.
Stable NIM from the current level or slight improvement if overall interest rate environment remains flat.
Revenues from fee-generating businesses are expected to grow mid-single digits, particularly continued growth in Brokerage & Trading and assets under management in Wealth.
Efficiency ratio is expected to be slightly above 60%, as fee revenues grow faster than net interest revenue.
Per management, day 2 CECL provision levels will provide for loan growth and will be influenced by changing economic outlooks. Management is not expecting any significant changes in the historical loss rates during 2020 that drive the company’s models. Management expects the pretax transition adjustment to range between $60 and $65 million.
Tax rate are anticipated to be 21% of pre-tax income.
Management will continue to provide sufficient capital for loan and balance-sheet growth, a competitive dividend payment, and a modest level of opportunistic share repurchases. Capital ratios are expected to improve slightly over the course of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, BOK Financial has a poor Growth Score of F, a grade with the same score on the momentum front. 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, BOK Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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BOK Financial (BOKF) Down 1.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for BOK Financial (BOKF). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BOK Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
BOK Financial's Q4 Earnings Miss Estimates on High Costs
BOK Financial reported a negative earnings surprise of 15.7% in fourth-quarter 2019. Earnings per share of $1.56 lagged the Zacks Consensus Estimate of $1.85. Further, the bottom line compares unfavorably with the prior-year quarter’s $1.65.
Expenses and provisions escalated in the quarter. Moreover, loans declined and pressure on margin was visible. Yet, top-line strength on fee income growth and rise in deposits were driving factors.
Net income came in at $110.4 million compared with the $108.5 million recorded in the year-ago quarter.
For 2019, net income was $500.8 million or $7.03 per share compared with the $445.6 million or $6.63 reported in 2018.
Revenues Climb, Costs Up, Loans Down
For 2019, revenues were $1.8 billion, up 12.5% year over year. The revenue figure comes in line with the Zacks Consensus Estimate.
Revenues in the fourth quarter came in at $449.6 million, up around 1% year over year. The revenue figure, however, missed the Zacks Consensus Estimate of $454.8 million.
Net interest revenues totaled $270.2 million, down 5.4% year over year. Further, net interest margin (NIM) shrunk 60 basis points year over year to 2.88%.
BOK Financial’s fees and commissions revenues amounted to $179.4 million, up 12.1% on a year-over-year basis. Higher fiduciary and asset management revenues, brokerage and trading revenues, transaction card revenues, along with elevated mortgage banking revenues, primarily led to this upswing. This was partly offset by lower deposit service charges and fees, along with reduced other revenues.
Total other operating expenses were $288.8 million, up 1.5% year over year. This uptick mainly stemmed from higher personnel expenses and mortgage banking costs.
Efficiency ratio increased to 63.65% from the prior years’ 63.25%. Generally, a higher ratio indicates decline in profitability.
Total loans as of Dec 31, 2019, were $21.8 billion, down 2.2% sequentially. As of the same date, total deposits amounted to $27.6 billion, up 5.7% sequentially.
Credit Quality: A Mixed Bag
During the December-end quarter, provisions for credit losses of $19 million more than doubled from the prior-year quarter. The combined allowance for credit losses was 0.97% of outstanding loans as of Dec 31, 2018, up from 0.96% in the year-ago period.
Additionally, non-performing assets totaled $293.8 million or 1.35% of outstanding loans and repossessed assets as of Dec 31, 2019, up from $267.2 million or 1.23% in the prior-year period. Net charge-offs were $12.5 million, up 1.6% year over year.
Capital Position
Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. As of Dec 31, 2019, the common equity Tier 1 capital ratio was 11.39% as compared with 10.92% as of Dec 31, 2018.
Tier 1 and total capital ratios on Dec 31, 2019, were 11.39% and 12.94%, respectively, compared with 10.92% and 12.50% as of Dec 31, 2018. Leverage ratio was 8.40% compared with 8.96% as of Dec 31, 2018.
Share Repurchase Update
During the October-December period, the company repurchased 280,000 million common shares at an average price of $81.59 per share.
2020 Outlook
Management expects 3-4% average loan growth for the consolidated entity with lower growth in Energy. Average deposits are expected to cover loan growth for the year.
Net interest revenue is expected to remain relatively flat compared to 2019; given overall lower interest rates for the year.
Stable NIM from the current level or slight improvement if overall interest rate environment remains flat.
Revenues from fee-generating businesses are expected to grow mid-single digits, particularly continued growth in Brokerage & Trading and assets under management in Wealth.
Efficiency ratio is expected to be slightly above 60%, as fee revenues grow faster than net interest revenue.
Per management, day 2 CECL provision levels will provide for loan growth and will be influenced by changing economic outlooks. Management is not expecting any significant changes in the historical loss rates during 2020 that drive the company’s models. Management expects the pretax transition adjustment to range between $60 and $65 million.
Tax rate are anticipated to be 21% of pre-tax income.
Management will continue to provide sufficient capital for loan and balance-sheet growth, a competitive dividend payment, and a modest level of opportunistic share repurchases. Capital ratios are expected to improve slightly over the course of 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, BOK Financial has a poor Growth Score of F, a grade with the same score on the momentum front. 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, BOK Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.