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Commerce Bancshares (CBSH) Stock Up 1.2% on Q4 Earnings Beat

Zacks Equity Research

Shares of Commerce Bancshares, Inc. CBSH ) gained 1.2% following the release of fourth-quarter 2018 results. Earnings per share of 96 cents surpassed the Zacks Consensus Estimate by a penny. The figure also reflects an improvement of 17.1% from the year-ago tally.

Results primarily benefited from improvement in total revenues. Moreover, lower provisions and non interest expenses supported the bottom line to quite an extent. Improvement in capital and profitability ratios was another positive for the company.

Net income attributable to common shareholders was $109.7 million, up 16.2% from the prior-year quarter.

Earnings per share for 2018 came in at $3.78, up 37% from the prior year. The figure also outpaced the Zacks Consensus Estimate of $3.77. Net income available to common shareholders was $424.5 million, up 36.8% from 2017.

Revenues Grow, Expenses Decline

Total revenues for the quarter came in at $345.31 million, reflecting a year-over-year increase of 11.6%. In addition, the reported figure outpaced the Zacks Consensus Estimate of $335.66 million.

Total revenues for 2018 were $1.33 billion, reflecting a year-over-year increase of 10.9%. The annual revenue figure, however, lagged the Zacks Consensus Estimate of $1.37 billion.

Net interest income for the quarter came in at $212.2 million, up 11.7% year over year.    

Non-interest income was $133 million, up 11.5% year over year. This upside stemmed from improvement in almost all components except loan fees and sales.

Non-interest expenses decreased 9.7% year over year to $188.6 million. Other than salaries and employee benefits, marketing and data processing, and software, all expense components declined.

Efficiency ratio for the quarter under review decreased to 54.53% from 67.40% reported in the year-ago quarter. Fall in efficiency ratio indicates better profitability.

Loans Improve Marginally, Deposits Fall

As of Dec 31, 2018, total loans were $14.1 billion, up 1.1% from the prior-quarter level. However, total deposits, as of the same date, were $20.3 billion, down marginally from the previous quarter.

Total stockholders’ equity was $2.9 billion as of Dec 31, 2018, reflecting rise of 8% from the third quarter.

Credit Quality: A Mixed Bag

Provision for loan losses decreased 3.1% year over year to $12.3 million for the quarter under review. Additionally, allowance for loan losses, as a percentage of total loans, came in at 1.13%, contracting 1 bps year over year. However, the ratio of net loan charge-offs to average loans was 0.34%, up from 0.32% witnessed in the prior-year quarter.

Capital & Profitability Ratios Improve

As of Dec 31, 2018, Tier I leverage ratio was 11.52%, up from 10.39% recorded in the year-earlier quarter. Moreover, tangible common equity to tangible assets ratio grew to 10.45% from 9.84% as of Dec 31, 2017.

At the end of the reported quarter, return on average assets was 1.75%, up from 1.50% witnessed in the year-ago quarter. Return on average common equity was 15.85%, up from 14.17% in the prior-year quarter.

Our Take

Commerce Bancshares’s top-line growth remains on track, driven by continued rise in loan balances and higher interest rates. Furthermore, the company’s efforts to boost its fee income will likely continue driving top-line growth. Nevertheless, its significant exposure to real estate loans might pose near-term risks.

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise


Commerce Bancshares, Inc. Price, Consensus and EPS Surprise | Commerce Bancshares, Inc. Quote

Currently, Commerce Bancshares 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

Washington Federal’s WAFD first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s SNV fourth-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation’s HWC fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. The reported figure, however, came in 30.2% higher than the year-ago tally.

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