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Cullen/Frost (CFR) Stock Rallies 3.7% on Q1 Earnings Beat

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Following the first-quarter 2021 results, shares of Cullen/Frost Bankers, Inc. (CFR - Free Report) have gained 3.72%. The company reported earnings per share of $1.77, surpassing the Zacks Consensus Estimate of $1.42. Results also compare favorably with the prior-year quarter figure of 75 cents per share.

Rise in loans and deposit balances were major tailwinds in the quarter. Moreover, honed credit quality, reduced expenses and sound capital positions contributed to bottom-line growth. However, lower revenues and margin contraction were major drags.

The company reported net income available to common shareholders of $113.9 million compared with the $47.2 million recorded in the prior-year quarter.

Revenues Down, Expenses Decline

The company’s total revenues were $357.2 million in the first quarter, down 26% from the prior-year quarter. The revenue figure also lagged the Zacks Consensus Estimate of $360.48 million.

Net interest income on a taxable-equivalent basis slipped 1.7% year over year to $264 million. Additionally, net interest margin contracted 84 basis points (bps) year over year to 2.72%.

Non-interest income declined more than double to $93.3 million on a year-over-year basis. The primary cause of this decrease was a $6-million gain realized on the sale of certain non-hedge related, short-term put options on U.S. Treasury securities with an aggregate notional amount of $500 million in the first quarter of 2020.

Non-interest expenses of $210.1 million decreased 6.3% year over year. Fall in salaries and wages, employee benefits, intangible amortization and other expenses resulted in reduced expenses in the reported quarter.

Strong Balance Sheet

As of Mar 31, 2021, total loans were $17.9 billion, up 2.3% sequentially. Total deposits amounted to $36.9 billion, up 5.5% from the prior quarter.

Credit Quality Improved

Credit metrics improved during the March-end quarter. As of Mar 31, 2021, the company recorded $63,000 as credit loss expense, compared with the $175.2 million recorded in the prior-year quarter. Further, net charge-offs, annualized as a percentage of average loans, shrunk 100 bps year over year to 0.04%. Allowance for loan losses, as a percentage of total loans, was 1.46%, down 26 bps from the prior-year quarter.

Strengthened Profitability and Capital Ratios

As of Mar 31, 2021, Tier 1 risk-based capital ratio was 14.07% compared with the 12.02% recorded at the end of the prior-year quarter. Total risk-based capital ratio was 16.07%, up from 13.97% as of Mar 31, 2020. Furthermore, leverage ratio edged down to 7.97% from 8.84% as of Mar 31, 2020. Common equity tier 1 risk-based capital ratio was 13.45% compared with the previous-year quarter’s 12.02%.

Return on average assets and return on average common equity were 1.09% and 11.13%, respectively, compared with the 0.57% and 4.88% witnessed in the prior-year quarter.

Our Viewpoint

Cullen/Frost displayed a lukewarm performance during the first quarter. Though improvement in loan and deposit balances indicates strong liquidity, declining revenues might keep eroding the company’s bottom line. Further, margin pressure is concerning.

Nevertheless, with gradual improvement in economic conditions, the company is expected to perform better in the quarters ahead.

CullenFrost Bankers, Inc. Price and EPS Surprise

CullenFrost Bankers, Inc. Price and EPS Surprise

CullenFrost Bankers, Inc. price-eps-surprise | CullenFrost Bankers, Inc. Quote

Currently, Cullen/Frost sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Banks

Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2021 (ended Mar 31) earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 49 cents. Further, the figure reflects a year-over-year rise of 19.1%.

Commerce Bancshares Inc.’s (CBSH - Free Report) first-quarter 2021 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 96 cents. Also, the bottom line surged significantly from the 42 cents earned in the prior-year quarter.

Ares Capital Corporation’s (ARCC - Free Report) first-quarter 2021 core earnings of 43 cents per share surpassed the Zacks Consensus Estimate of 42 cents. Moreover, the bottom line reflected a rise of 4.9% from the prior-year quarter reported number.

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