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Cullen/Frost (CFR) Rises 2.7% on Q1 Earnings & Revenue Beat

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Following the better-than-expected first-quarter 2022 results, shares of Cullen/Frost Bankers, Inc. (CFR - Free Report) have gained 2.7%. The company reported earnings per share of $1.51, surpassing the Zacks Consensus Estimate of $1.49. It declined 15.2% from the prior-year quarter figure.

A rise in revenues was backed by fee income growth. Also, growth in average loan and deposit balances was a major tailwind in the quarter. However, deterioration in credit quality and capital ratios were negatives. Elevated expenses and margin contraction were major drags.

The company reported net income available to common shareholders of $97.4 million compared with $113.9 million recorded in the prior-year quarter.

Revenues Increase, Expenses Flare Up

The company’s total revenues (on a taxable-equivalent basis) were $373.6 million in the first quarter, up 4.6% from the prior-year quarter. The revenue figure also surpassed the Zacks Consensus Estimate of $360.1 million.

The net interest income (NII) on a taxable-equivalent basis increased 3.1% year over year to $272.2 million. However, the net interest margin (NIM) contracted 39 basis points (bps) year over year to 2.33%.

The non-interest income climbed 8.8% to $101.4 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, other than insurance commissions and fees, resulted in the upswing in the reported quarter.

As of Mar 31, 2022, total average loans were $16.39 billion, up 2.5% sequentially. Total average deposits amounted to around $43 billion, up 4.7% from the prior quarter.

Credit Quality Deteriorates

As of Mar 31, 2022, the company did not record any credit loss expenses compared with $63,000 million recorded in the prior-year quarter.

Yet, the allowance for credit losses on loans, as a percentage of total loans, was 1.49%, up 3 bps from the prior-year period. Further, net charge-offs, annualized as a percentage of average loans, expanded 12 bps year over year to 0.16%.

Capital Ratios and Profitability Ratios Falls

As of Mar 31, 2022, the tier 1 risk-based capital ratio was 13.32%, down from 14.07% recorded at the end of the year-earlier quarter. The total risk-based capital ratio was 14.97%, down from 16.07% as of Mar 31, 2021. Common equity tier 1 risk-based capital ratio was 12.78%, lower than the previous-year quarter’s 13.43%. However, the leverage ratio edged down to 7.08% from 7.97% as of Mar 31, 2021.

Return on average assets and return on average common equity were 0.79% and 9.58%, respectively, compared with 1.09% and 11.13% 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 and low profitability ratios, 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

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in NII and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII and NIM, and a rise in expenses were the key undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline primarily due to a fall in fee income. Margin contraction and capital position deterioration played spoilsports for FITB.