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Cullen/Frost (CFR) Rises 4% on Q4 Earnings & Revenue Beat

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Following the better-than-expected fourth-quarter 2021 results, shares of Cullen/Frost Bankers, Inc. (CFR - Free Report) have gained 3.99%. The company reported earnings per share of $1.54, surpassing the Zacks Consensus Estimate of $1.34. Results also compare favorably with the prior-year quarter figure of $1.38 per share.

A rise in revenues and deposit balances was a major tailwind in the quarter. Moreover, improved credit quality and sound capital positions were positives. However, elevated expenses and margin contraction were major drags.

The company reported net income available to common shareholders of $99.4 million compared with $88.3 million recorded in the prior-year quarter.

For the year, earnings per share were $6.76, comparing favorably with the year-ago earnings per share of $5.10. Net income available to common shareholders was $435.9 million, up from $322.6 million in 2020.

Revenues Increase, Expenses Flare Up

The company’s total revenues were $373.1 million in the fourth quarter, up 4.5% from the prior-year quarter. The revenue figure also surpassed the Zacks Consensus Estimate of $353 million.

In 2021, revenues were down 4.6% from the prior-year level to $1.46 billion.

The net interest income (NII) on a taxable-equivalent basis decreased marginally year over year to $264 million. Additionally, net interest margin (NIM) contracted 51 basis points (bps) year over year to 2.31%.

The non-interest income climbed 19.4% to $109.1 million on a year-over-year basis. This primarily resulted from an increase in all components, apart from insurance commissions and fees.

Non-interest expenses of $238.6 million flared up 7% year over year. A rise in all the components resulted in the upswing, partially offset by a decrease in intangible amortization in the reported quarter.

As of Dec 31, 2021, total average loans were $15.98 billion, down 1.3% sequentially. Total average deposits amounted to $41.02 billion, up 4.9% from the prior quarter.

Credit Quality Decent

Credit metrics improved in the fourth quarter. As of Dec 31, 2021, the company did not record any credit loss expenses compared with $13.8 million recorded in the prior-year quarter. Further, net charge-offs, annualized as a percentage of average loans, shrunk 23 bps year over year to 0.07%.

Yet, the allowance for credit losses on loans, as a percentage of total loans, was 1.52%, up 1 bp from the prior-year period.

Capital Position Improves, Profitability Ratios Mixed

As of Dec 31, 2021, the tier 1 risk-based capital ratio was 13.70%, improving from 13.47% recorded at the end of the year-earlier quarter. The total risk-based capital ratio was 15.45%, up from 15.44% as of Dec 31, 2020. Common equity tier 1 risk-based capital ratio was 13.13%, higher than the previous-year quarter’s 12.86%. However, the leverage ratio edged down to 7.34% from 8.07% as of Dec 31, 2020.

Return on average assets and return on average common equity were 0.81% and 9.26%, respectively, compared with 0.86% and 8.55% witnessed in the prior-year quarter.

Our Viewpoint

Cullen/Frost is well-positioned for revenue growth, given the steady improvement in deposit balances, liquidity position and efforts to boost the fee income. However, rising expenses, along with lower rates, are major concerns.

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

CullenFrost Bankers, Inc. Price, Consensus and EPS Surprise

 

CullenFrost Bankers, Inc. Price, Consensus and EPS Surprise

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

Currently, Cullen/Frost carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of $1.19 for fourth-quarter 2021, surpassing the Zacks Consensus Estimate of 91 cents. Moreover, results compare favorably with the prior-year quarter’s $1.14.

Robust capital position and lower expenses were the driving factors for TCBI. Moreover, the provision for credit losses recorded benefits. Yet, a fall in NII and fee income plus pressed margins were deterrents. Further, Texas Capital’s results reflect a decline in both loans and deposit balances.

Webster Financial (WBS - Free Report) reported fourth-quarter 2021 adjusted earnings per share of $1.31, which surpassed the Zacks Consensus Estimate of $1.10. The reported figure excluded noteworthy items, such as charges related to mergers, strategic optimization and debt prepayment expenses.

Higher NII and fee income drove Webster Financial’s results. Moreover, declining costs, growth in loan balances and impressive capital ratios were positives. Also, the reserve release in the quarter was a tailwind. However, lower NIM and deposit balance were the key concerns for WBS.

Synovus Financial (SNV - Free Report) reported fourth-quarter 2021 adjusted earnings of $1.35 per share, which beat the Zacks Consensus Estimate of $1.1. Also, the bottom line compares favorably with earnings of $1.08 per share recorded in the year-ago quarter.

Synovus’ results were driven by rising NII and fee income, lower expenses, and the reversal of provisions. SNV's solid loan and deposit balances stoked organic growth. However, shrinking NIM and deteriorating capital position were the undermining factors.