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Commerce Bancshares (CBSH) Stock Up 3% Despite Q1 Earnings Lag

Zacks Equity Research

Commerce Bancshares, Inc.’s CBSH first-quarter 2020 earnings per share of 44 cents lagged the Zacks Consensus Estimate of 50 cents. Also, the bottom line represents a decline of 45.7% from the prior-year quarter.

Results were primarily hurt because of a significant increase in provisions. Moreover, higher expenses and lower net interest income (NII) were the undermining factors. Nevertheless, improvement in non-interest income supported results to some extent. Moreover, the balance sheet position remained strong during the quarter. Probably because of these positives, shares of the company gained 3% following the release.

Net income attributable to common shareholders was $49.6 million, down 47.7% from the prior-year quarter.

Revenues Stable, Expenses Rise

Total revenues were $324.7 million, reflecting no change from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $323.5 million.

NII was $201.1 million, down 1.2% year over year. Net yield on interest-earning assets declined to 3.33% from 3.52% recorded in the prior-year quarter.

Non-interest income was $123.7 million, up 2% year over year. The rise was due to an improvement in almost all fee income components, except for loan fees and sales, and other revenues.

Non-interest expenses rose 1.2% year over year to $193.7 million. The rise was due to an increase in all expense components, except for costs related to supplies and communication, and other expenses.

The efficiency ratio increased to 59.17% from 58.76% reported in the year-ago quarter. A rise in efficiency ratio indicates lower profitability.

Balance Sheet Strong

As of Mar 31, 2020, total loans were $15.1 billion, up 2.3% from the prior quarter. Total deposits as of the same date were $20.8 billion, up 1.2% from the previous quarter.

Total stockholders’ equity was $3.3 billion as of Mar 31, 2020, reflecting a rise of 3.7% from the prior quarter end.

Credit Quality: A Mixed Bag

Provision for credit losses for the reported quarter was $58 million, up significantly from $12.5 million recorded in the prior-year quarter.

The ratio of net loan charge-offs to average loans was 0.30%, down from 0.34% witnessed in the prior-year quarter. Allowance for loan losses as a percentage of total loans was 1.14%, unchanged year over year.

Capital Ratios Mixed, Profitability Ratios Worsen

As of Mar 31, 2020, Tier I leverage ratio was 11.13%, down from 11.67% recorded in the year-ago quarter. However, tangible common equity to tangible assets ratio grew to 11.13% from 11.06%.

At the end of the reported quarter, return on average assets was 0.80%, down from 1.58% witnessed in the year-ago quarter. Return on average common equity was 6.48%, down from 13.64% recorded in the prior-year quarter.

Our Take

Commerce Bancshares’ revenues are likely to be hampered to an extent in the near term due to lower interest rates amid the Federal Reserve's accommodative policy stance. Moreover, persistently increasing operating expenses (as witnessed in the first quarter as well) will likely hurt the bottom line.

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise
 

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise

Commerce Bancshares, Inc. price-consensus-eps-surprise-chart | Commerce Bancshares, Inc. Quote

Currently, Commerce Bancshares carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

The Bank of New York Mellon Corporation’s BK first-quarter 2020 earnings per share of $1.05 surpassed the Zacks Consensus Estimate of 90 cents. Moreover, the figure reflects a rise of 11.7% from the prior-year quarter.

PNC Financial PNC reported first-quarter 2020 earnings per share of $1.95, surpassing the Zacks Consensus Estimate of $1.38 amid the coronavirus outbreak-related concerns. The bottom line, however, reflects a 25.3% decline from the prior-year reported figure.

CIT Group Inc.’s CIT first-quarter 2020 adjusted loss per share was $2.43 against the Zacks Consensus Estimate for earnings of 83 cents. The reported figure excluded certain noteworthy items.

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The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
 
Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report
 
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
 
CIT Group Inc. (CIT) : Free Stock Analysis Report
 
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