BOK Financial (BOKF) Aided by Loan Growth Despite Higher Costs
BOK Financial Corporation BOKF is poised to benefit from loan growth and high rates in the near term. Its capital distribution initiatives seem sustainable. Improving asset quality is another tailwind.However, the persistently escalating cost base is affecting the bank’s bottom-line growth. Lower transaction volumes affecting brokerage and trading revenues, and limited liquidity are other concerns.
BOK Financial has been witnessing continuous loan growth on a diverse business model and increased loans to individuals. The company has been focused on diversifying its loan portfolio to energy, healthcare and service lending. Given the strong loan pipeline, BOKF will be well-poised for organic growth. Management expects loan growth in the high-single digits for 2023, while deposits are expected to be stable or grow modestly.
Given the high interest rates and decent loan growth, BOK Financial’s net interest income and net interest margin are expected to witness moderate growth due to increased funding costs.
We find the improved asset quality trends at BOK Financial encouraging. The trailing 12 months’ net charge-off ratio stood at 13 basis points (bps) as of the third-quarter 2023 end. With a history of outperformance during credit cycles, BOK Financial is believed to be well-positioned amid expectations of an economic slowdown.
BOKF has a steady capital distribution plan in place. The company has been hiking dividends every year, with the latest hike of 1.9% to 54 cents per share being announced in November 2022. Also, the company has a share repurchase authorization of five million (announced in November 2022). It expects to execute share buybacks opportunistically, while maintaining its strong capital position.
However, the bank is exposed to operational risks. Operating expenses escalated, seeing a CAGR of 0.9% over the last three years (2019-2022) due to a rise in personnel, data processing, and net occupancy and equipment costs. The upward trajectory persisted in the first nine months of 2023. Any further escalation in costs is expected to cause operational inefficiency and might hinder bottom-line expansion.
As of Sep 30, 2023, the company had a total debt (comprising funds purchased and repurchase agreements, as well as other borrowings) of $8.9 billion, whereas cash and due from banks, as well as interest-bearing cash and cash equivalents, aggregated to $1.37 billion. The company’s debt level seems unmanageable, given a comparatively low cash balance.
Lastly, changing global financial market situations and general economic conditions could affect BOK Financial’s businesses. Notably, brokerage and trading revenues constituted more than 30% of fees and commissions in the first nine months of the current year. Therefore, any potential reduction or normalization in transaction volumes might affect the top line in the coming quarters.
Over the past month, BOKF shares have gained 7.8% compared with the industry’s rise of 19.2%.
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BOKF currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank Stocks Worth a Look
A couple of better-ranked stocks from the banking space are Independent Bank IBCP and Park National PRK.
Earnings estimates for IBCP have been revised marginally upward to $2.87 for 2023 over the past week. The company’s shares have gained 55.9% over the past six months. IBCP currently carries a Zacks Rank #2 (Buy).
Park National’s earnings estimates have been unchanged for 2023 over the past 30 days at $8.21. In six months’ time, PRK shares have risen 31.6%. The company has a Zacks Rank #2 at present.
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BOK Financial Corporation (BOKF) : Free Stock Analysis Report
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