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Commerce Bancshares (CBSH) Stock Down Despite Q2 Earnings Beat

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Commerce Bancshares Inc.’s CBSH second-quarter 2021 earnings per share of $1.38 surpassed the Zacks Consensus Estimate of $1.02 per share. Also, the bottom line improved significantly from 32 cents earned in the prior-year quarter.

Results were primarily supported by an improvement in revenues. The company recorded a provision benefit in the quarter, which was a major positive. However, an increase in non-interest expenses and a decline in loan balances were the headwinds. Probably because of these negatives, shares of the company lost 2.9% following the release.

Net income attributable to common shareholders was $162.3 million, up significantly from the year-ago quarter’s $37.6 million.

Revenues Improve, Expenses Rise

Total revenues were $347.1 million, up 8.3% year over year. However, the top line marginally lagged the Zacks Consensus Estimate of $347.9 million.

Net interest income was $208 million, up 2.4% year over year. However, net yield on interest-earning assets contracted 34 basis points (bps) to 2.60%.

Non-interest income was $139.1 million, reflecting a year-over-year rise of 18.4%. The upswing resulted from an increase in almost all fee income components, except for capital market fees and other fees.

Non-interest expenses increased 5.7% year over year to $198.1 million primarily due to a rise in all cost components, except for equipment costs, and supplies and communication costs.

The efficiency ratio decreased to 56.90% from 58.10% reported in the year-ago quarter. A fall in efficiency ratio indicates an improvement in profitability.

As of Jun 30, 2021, total loans were $15.6 billion, down from $16.4 billion recorded as of Mar 31, 2021. Total deposits as of the same date were $27.5 billion, up marginally from the prior-quarter end. Total stockholders’ equity was $3.5 billion as of Jun 30, 2021, up from $3.3 billion as of Mar 31, 2021.

Credit Quality Improves

Provision for credit losses was a benefit of $45.7 million in the reported quarter against a provision of $80.5 million witnessed in the prior-year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.02%, down from 0.21% recorded in the year-earlier quarter.

Total non-performing assets as of Jun 30, 2021, were $11.4 million, down 50.6% year over year.

Capital Ratios Deteriorate & Profitability Ratios Improve

As of Jun 30, 2021, Tier I leverage ratio was 9.36%, down from 9.88% recorded in the year-ago quarter. Tangible common equity to tangible assets ratio declined to 9.91% from the prior-year quarter’s 10.12%.

At the end of the second quarter, return on average assets was 1.93%, up from the year-ago period’s 0.54%. Return on average common equity was 19.12%, up from 4.77% in the prior-year quarter.

Our Take

Commerce Bancshares’ revenues are likely to continue to benefit from a rise in deposit balances and efforts to strengthen fee income sources. However, low interest rates continue to hurt its financials.

Commerce Bancshares, Inc. Price, Consensus and EPS Surprise

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

Performance of Other Banks

Fifth Third Bancorp FITB reported second-quarter 2021 adjusted earnings of 94 cents per share, beating the Zacks Consensus Estimate of 83 cents. Results compared favorably with the prior-year quarter’s earnings of 23 cents per share.

Comerica CMA delivered a second-quarter 2021 earnings surprise of 43.2%. Earnings per share of $2.32 easily surpassed the Zacks Consensus Estimate of $1.62. The bottom line compared favorably with 84 cents reported in the prior-year quarter.

M&T Bank Corporation MTB reported second-quarter 2021 negative earnings surprise of 6.76%. Net operating earnings per share of $3.45 lagged the Zacks Consensus Estimate of $3.70. The bottom line, however, compared favorably with $1.76 per share reported in the year-ago quarter.


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