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Cullen/Frost's (CFR) Unit Lowers Management Fees for Funds

Zacks Equity Research

Frost Investment Advisors, LLC, an indirect subsidiary of Cullen/Frost Bankers, Inc. CFR, announced considerable reduction of management fees in quite a few mutual funds that it manages. Frost's Value, Growth and Mid Cap Equity funds lowered fees to 0.50%, a reduction of 15 basis points (bps). Frost’s Credit Fund dropped its fees 10 bps to 0.50%. This change was effective from Sep 1, 2017. The move was the result of a decision passed in 2015 to remove sales charges or front-end loads on its Investor Class shares.

According to Tom Stringfellow, president and chief investment officer of Frost Investment Advisors, the decline in fees was in line with its “effort to offer excellence at a fair price.” The reduction was also done with the aim to attract investors.

As of Jun 30, 2017, Frost Investment Advisors managed mutual fund assets worth $3.47 billion. In April 2008, it started offering mutual funds to institutional investors and then stretched out its offer of retail shares in June 2008. It now offers 10 different managed strategies as mutual funds to both institutional and retail investors.

A key strength at Cullen/Frost, the parent company of Frost Investment Advisors, is organic growth as reflected by the company’s revenue growth story. Revenues witnessed a compound annual growth rate of 5.9% over the last five years (2012-2016), with the trend continuing in first six months of 2017 as well. Moreover, we believe that lowering of fees by the subsidiary will attract more clients, pushing the total volume higher. This is expected to boost the non-interest income and margin. Hence, we believe the company is well positioned to maintain its increasing revenue trend going forward.

Shares of Cullen/Frost have gained 26.6% over the last 12 months compared with the industry’s rally of 21%.

Zacks Rank & Stocks to Consider

Currently, Cullen/Frost carries a Zack Rank #4 (Sell).

Some better-ranked stocks from the finance space are E*TRADE Financial Corporation ETFC, AeroCentury Corp. ACY and KB Financial Group Inc. KB, each sporting a Zacks #1 Rank (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

E*TRADE Financial witnessed an upward earnings estimate revision of 14.2% for the current year, in the last 60 days. Its share price increased 43.7% in the past 12 months.

Shares of AeroCentury have gained 55.9% in a year. The Zacks Consensus Estimate for current-year earnings has been revised 9.9% upward over the last 60 days for this leasing company.

KB Financial Group has witnessed 18.9% upward earnings estimate revision for the current year, in the past 60 days. Moreover, its shares have gained 36.5% over the past 12 months.

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