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Reasons to Hold on to BOK Financial (BOKF) Stock For Now
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BOK Financial Corporation (BOKF - Free Report) continues to benefit from economic recovery that drives decent loan and deposit growth. However, mounting expenses and margin pressures are major near-term concerns.
BOK Financial’s loan growth has been decent over the past few years despite the competitive banking environment. It has recorded continued loan growth on a diverse business model and increase in loans to individuals, with a compound annual growth rate (CAGR) of 4.2% in the last five years (2017-2021). Moreover, deposits escalated at a five-year CAGR of 16.9% in 2021. Given the continuation of such a trend on improving economic conditions, the company is well poised for organic growth.
Also, the company has a strong balance sheet position with $712.1 million of cash and due from banks, and around $15 billion of secured wholesale borrowing capacity. This is sufficient to fund $168 million of long-term debt (including other borrowings and subordinated debentures) as of Dec 31, 2021. We believe that the company is well positioned in terms of its liquidity profile. Hence, it might be able to continue meeting debt obligations in the near term if the economic situation worsens.
Further, improved asset quality trends at BOK Financial are encouraging. Rebound in energy loan balances and commitments, and an increase in consolidation activities in the energy space are expected to boost energy loans in 2022. The company has been making efforts to diversify its loan portfolio to healthcare and service lending.
However, the company’s escalating operating expenses are a cause of concern. The same witnessed a 4.5% increase over the last five years (2017-2021) due to a rise in personnel, and data processing and communications costs. Any further escalation in costs could cause operational inefficiency and hinder bottom-line expansion in the near term.
Also, BOKF's net interest margin (NIM) declined from 2019 through 2021 due to a fall in rates. Though the Fed hiked the interest rate and has signaled more such moves in the near future, the overall low-interest-rate environment is expected to keep NIM growth and yield on floating-rate assets subdued.
Moreover, changing conditions of the global financial markets and general economic conditions could adversely affect BOK Financial’s businesses. The company’s brokerage and trading revenues constitute a major source of other operating revenues, and are dependent on the volume of transactions. Therefore, any potential reduction or normalization in transaction volumes imposes risk and might negatively affect earnings in the coming quarters.
Currently, BOK Financial carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have gained 2.6%, underperforming 8.1% growth recorded by the industry.
Over the past six months, shares of NRIM and BOH have declined 4.6% and 2.8%, respectively, whereas FBIZ has rallied 11.6%.
Over the past 30 days, the Zacks Consensus Estimate for First Business’s current-year earnings has been revised 1.4% upward, while the same for NRIM Bancorp has stayed constant. The same for Bank of Hawaii has been revised marginally upward.
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Reasons to Hold on to BOK Financial (BOKF) Stock For Now
BOK Financial Corporation (BOKF - Free Report) continues to benefit from economic recovery that drives decent loan and deposit growth. However, mounting expenses and margin pressures are major near-term concerns.
BOK Financial’s loan growth has been decent over the past few years despite the competitive banking environment. It has recorded continued loan growth on a diverse business model and increase in loans to individuals, with a compound annual growth rate (CAGR) of 4.2% in the last five years (2017-2021). Moreover, deposits escalated at a five-year CAGR of 16.9% in 2021. Given the continuation of such a trend on improving economic conditions, the company is well poised for organic growth.
Also, the company has a strong balance sheet position with $712.1 million of cash and due from banks, and around $15 billion of secured wholesale borrowing capacity. This is sufficient to fund $168 million of long-term debt (including other borrowings and subordinated debentures) as of Dec 31, 2021. We believe that the company is well positioned in terms of its liquidity profile. Hence, it might be able to continue meeting debt obligations in the near term if the economic situation worsens.
Further, improved asset quality trends at BOK Financial are encouraging. Rebound in energy loan balances and commitments, and an increase in consolidation activities in the energy space are expected to boost energy loans in 2022. The company has been making efforts to diversify its loan portfolio to healthcare and service lending.
However, the company’s escalating operating expenses are a cause of concern. The same witnessed a 4.5% increase over the last five years (2017-2021) due to a rise in personnel, and data processing and communications costs. Any further escalation in costs could cause operational inefficiency and hinder bottom-line expansion in the near term.
Also, BOKF's net interest margin (NIM) declined from 2019 through 2021 due to a fall in rates. Though the Fed hiked the interest rate and has signaled more such moves in the near future, the overall low-interest-rate environment is expected to keep NIM growth and yield on floating-rate assets subdued.
Moreover, changing conditions of the global financial markets and general economic conditions could adversely affect BOK Financial’s businesses. The company’s brokerage and trading revenues constitute a major source of other operating revenues, and are dependent on the volume of transactions. Therefore, any potential reduction or normalization in transaction volumes imposes risk and might negatively affect earnings in the coming quarters.
Currently, BOK Financial carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have gained 2.6%, underperforming 8.1% growth recorded by the industry.
Image Source: Zacks Investment Research
Banking Stocks to Consider
Some better-ranked stocks in the banking space are Bank of Hawaii (BOH - Free Report) , First Business Financial Services (FBIZ - Free Report) , and NorthrimBanCorp (NRIM - Free Report) . At present, FBIZ and NRIM both sport a Zacks Rank #1 (Strong Buy) while Bank of Hawaii carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past six months, shares of NRIM and BOH have declined 4.6% and 2.8%, respectively, whereas FBIZ has rallied 11.6%.
Over the past 30 days, the Zacks Consensus Estimate for First Business’s current-year earnings has been revised 1.4% upward, while the same for NRIM Bancorp has stayed constant. The same for Bank of Hawaii has been revised marginally upward.