It has been about a month since the last earnings report for BOK Financial (BOKF - Free Report) . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BOK Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
BOK Financial Q1 Earnings Beat Estimates on High Revenues
BOK Financial delivered a positive earnings surprise of 5.5% in first-quarter 2019. Earnings per share of $1.54 outpaced the Zacks Consensus Estimate of $1.46. The bottom line, however, compares unfavorably with the prior-year quarter’s reported tally of $1.61. Results include certain one-time items.
Top-line strength, aided by rising net interest as well as fee income, was recorded. Further, loans and deposits balance improved. However, expenses and provisions climbed in the quarter, displaying investors’ concerns. Therefore, shares of BOK Financial declined 1.35% following the earnings release.
Net income attributable to shareholders came in at $110.6 million compared with $105.6 million reported in the year-ago quarter.
Revenues, Costs, Loan & Deposits Rise
Revenues in the first quarter came in at $435.4 million, up 15.9% year over year. Yet, the figure lagged the Zacks Consensus Estimate of $446.1 million.
Net interest revenues totaled $278.1 million, up 26.6% year over year. Net interest margin (NIM) expanded 31 basis points year over year to 3.30%.
BOK Financial’s fees and commissions revenues amounted to $160.6 million, slightly up on a year-over-year basis. Higher brokerage and trading revenues, fiduciary and asset management revenues, along with deposit service charges and fees, primarily led to the rise. This was partly offset by transaction card revenues, along with reduced mortgage banking revenues and other revenues.
Total other operating expenses were $287.2 million, up 17.5% year over year. The upswing mainly resulted from rise in almost all components of expenses.
Efficiency ratio improved to 64.8% from 65% a year ago. Generally, a lower ratio indicates improved profitability.
Net loans as of Mar 31, 2019, were $21.6 billion, up around 1% sequentially. As of the same date, total deposits amounted to $25.3 billion, marginally up sequentially.
Credit Quality: A Mixed Bag
During the Mar-end quarter, provisions for credit losses of $8 million were seen as against credit provision of $5 million in the prior-year quarter. Yet, the combined allowance for credit losses was 0.95% of outstanding loans as of Mar 31, 2019, down from 1.32% posted in the year-ago period.
Additionally, non-performing assets totaled $261.5 million or 1.20% of outstanding loans and repossessed assets as of Mar 31, 2019, down from $278.1 million or 1.60% recorded at the end of the prior-year period. Net charge offs were $10.1 million, up significantly from $1.3 million in the year-earlier quarter.
Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. As of Mar 31, 2019, the common equity Tier 1 capital ratio was 10.71% as compared with 12.06% as of Mar 31, 2018.
Tier 1 and total capital ratios on Mar 31, 2019, were 10.71% and 12.24%, respectively, compared with 12.06% and 13.49% as of Mar 31, 2018. Leverage ratio was 8.76% compared with 9.40% as of Mar 31, 2018.
Share Repurchase Update
During the January-March quarter, the company repurchased 705,609 million common shares at average price of $85.85 per share.
Management expects mid-single digit loan growth for the consolidated entity formed after competition of BOK Financial and CoBiz Financial merger.
Marginal growth in net interest margin is projected as the company expects no rate hikes in 2019.
Revenues from fee-generating businesses are anticipated to be slightly up with CoBiz embedded on a sequential basis.
Though, provision for credit losses are expected to be linked to loan growth, the company still expected to be at a level similar to the past quarters.
Efficiency ratio is expected to be approximately 60% in 2019.
Blended federal and state effective tax rate are anticipated to be 22-23%.
CoBiz integration costs are completed, while remaining cost synergies, including $4 million per quarter in personnel, is expected going forward.
Management expects 7% accretion in 2019 from CoBiz.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
Currently, BOK Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BOK Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.