Following the second-quarter 2021 results, shares of
Cullen/Frost Bankers, Inc. ( CFR Quick Quote CFR - Free Report) have gained 1.22%. The company reported earnings per share of $1.80, surpassing the Zacks Consensus Estimate of $1.60. Results also compare favorably with the prior-year quarter figure of $1.47 per share.
Rise in revenues and deposit balances were major tailwinds in the quarter. Moreover, honed credit quality and sound capital positions drove bottom-line growth. However, elevated expenses and margin contraction were major drags.
The company reported net income available to common shareholders of $116.4 million compared with the $93.1 million recorded in the prior-year quarter.
Revenues Increase, Expenses Flare Up
The company’s total revenues were $371.24 million in the second quarter, up 6.9% from the prior-year quarter. The revenue figure also surpassed the Zacks Consensus Estimate by 3.71%.
Net interest income on a taxable-equivalent basis increased 3.8% year over year to $279.9 million. Additionally, net interest margin contracted 48 basis points (bps) year over year to 2.65%.
Non-interest income climbed 17.6% to $91.2 million on a year-over-year basis. This primarily resulted from increase in trust and investment management fees, the number of customer accounts as well as a rise in estate fees.
Non-interest expenses of $215.3 million flared up 7.8% year over year. Rise in salaries and wage expenses, donation expenses, advertising expenses, fraud losses, and other expenses resulted in increased expenses in the reported quarter.
As of Jun 30, 2021, total loans were $17.25 billion, down 2.5% sequentially. Total deposits amounted to $38.3 billion, up 8.1% from the prior quarter.
Credit Quality: A Mixed Bag
Credit metrics improved during the June-end quarter. As of Jun 30, 2021, the company did not record any credit loss expense compared with the $27.2 million recorded in the prior-year quarter. Further, net charge-offs, annualized as a percentage of average loans, shrunk 90 bps year over year to 0.04%. Allowance for loan losses, as a percentage of total loans, was 1.54%, up 15 bps from the prior-year period.
Higher Profitability and Capital Ratios
As of Jun 30, 2021, Tier 1 risk-based capital ratio was 14.21% compared with the 12.48% recorded at the end of the year-earlier quarter. Total risk-based capital ratio came in at 16.17%, up from 14.43% as of Jun 30, 2020. Furthermore, leverage ratio edged down to 7.6% from 8.01% as of Jun 30, 2020. Common equity tier 1 risk-based capital ratio came in at 13.60% compared with the previous-year quarter’s 12.48%.
Return on average assets and return on average common equity were 1.02% and 11.18%, respectively, compared with the 0.99% and 9.60% witnessed in the prior-year quarter.
Cullen/Frost is well positioned for revenue growth, given the steady improvement in deposit balances, liquidity position as well as efforts to boost fee income. However, rising expenses, along with lower rates, are major concerns.
Nevertheless, with gradual improvement in economic conditions, the company is expected to perform better in the quarters ahead.
Currently, Cullen/Frost carries a Zacks Rank #3 (Hold). You can see
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