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BOK Financial's Inorganic Strategies Impress, Expenses Rise

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On Jun 26, we issued an updated research report on BOK Financial Corporation (BOKF - Free Report) . The company exhibits strength in several areas including loans and deposits, and capital position. Also, its inorganic growth strategies are anticipated to yield positive results. However, it continues to face challenges from an increasing expense base.

Shares of the company have gained 17.6% in a year’s time, outperforming 6.2% growth of the industry it belongs to.

Moreover, the Zacks Consensus Estimate for 2018 earnings has been revised slightly upward over the last 30 days. It currently carries a Zacks Rank #3 (Hold).

BOK Financial has significantly bolstered its growth prospects over the years through strategic acquisitions. Recently, the company announced that it is merging with Denver-based CoBiz Financial, strengthening its foothold in Colorado and Arizona. BOK Financial expects the deal to be 6% accretive to earnings in 2019 and 9% in 2020. Moreover, its involvement in such inorganic growth activities reflects its strong capital position.

Consistent improvement in its loan and deposit balances highlights BOK Financial’s organic growth. For full-year 2018, the company expects mid-single digit loan growth. Apart from rising loan balances, pressure on the company’s net interest margin has been easing due to the Fed interest rates hikes. This has also benefited BOK Financial’s top line.  

However, the company faces operational risks from escalating costs. Operating expenses saw a CAGR of 5.1% over the last five years (ended 2017). This trend continued in first-quarter 2018 as well. Such consistent rise in expenses despite its focus on expense management is likely to deter bottom-line growth.

Though BOK Financial has been announcing dividend hikes every year, its debt/equity ratio seems unfavorable compared with the broader industry. Further, the company’s performance in the past few quarters has been quite fluctuating. Hence, we believe that these capital deployment activities might not be sustainable.

Stocks to Consider

Luther Burbank Corporation's (LBC - Free Report) Zacks Consensus Estimate for earnings for 2018 was revised 6.4% upward, in the last 60 days. Also, its share price has increased 5.2% in the past 12 months. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers (CFR - Free Report) currently carries a Zacks Rank #2. The stock’s 2018 earnings estimates were revised nearly 1% upward, in the last 30 days. Further, the company’s shares have gained 21.6% in a year’s time.

M&T Bank Corporation (MTB - Free Report) Zacks Consensus Estimate for earnings for the current year have been revised slightly upward, over the last 30 days. In the past year, its shares have gained 7.2%. Also, it carries a Zacks Rank of 2.

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