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Cullen/Frost (CFR) Q3 Earnings and Revenues Beat Estimates

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Cullen/Frost (CFR) Q3 Earnings and Revenues Beat Estimates

Cullen/Frost (CFR) records annually higher revenues along with improved loan balance in Q3.

Cullen/Frost Bankers CFR delivered a positive earnings surprise of 3.5% in third-quarter 2018. Earnings per share of $1.78 surpassed the Zacks Consensus Estimate of $1.72. Further, the reported figure compares favorably with $1.41 in the prior-year quarter.

Top-line strength and lower provisions were reflected in the quarter. Further, increase in loans and expansion of margin were other positives. However, expenses continued to escalate.

The company reported net income available to common shareholders of $115.8 million, up 27% from $91.1 million recorded in the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Total revenues came in at $353.3 million, up 2.1% from the prior-year quarter. Also, revenues surpassed the Zacks Consensus Estimate of $337.4 million.

Net interest income on a taxable-equivalent basis climbed slightly year over year to $265.7 million. The upswing was primarily attributable to the rise in earning assets. Also, net interest margin expanded 25 basis points (bps) year over year to 3.66% (assuming tax rate to be 21% in prior-year quarter).

Non-interest income totaled $87.7 million, up 7.4% from the year-ago quarter. The increase was mainly due to higher trust and investment management fees, other income and insurance commissions and fees, partially offset by lower interchange and debit card transaction fees.

Non-interest expenses of $193.7 million jumped 3.7% year over year. Increase in personal and technology-related costs led to elevated expenses in the reported quarter.

Balance Sheet Position

As of Sep 30, 2018, total loans were $13.8 billion, up 8.7%. However, total deposits amounted to $26.3 billion, flat year over year.

Credit Quality: A Mixed Bag

As of Sep 30, 2018, provision for loan losses decreased 75.9% on a year-over-year basis to $2.7 million. Allowance for loan losses, as a percentage of total loans, was 1%, down 20 bps from the prior-year quarter. Also, non-performing assets were $86.4 million, down 42.4% from the year-ago quarter.

However, net charge-offs, annualized as a percentage of average loans expanded 24 bps year over year to 0.44%.

Profitability and Capital Ratios

As of Sep 30, 2018, Tier 1 risk-based capital ratio was 13.63% compared with 13.14% recorded at the end of the prior-year quarter. Total risk-based capital ratio was 15.44%, up from 15.19% as of Sep 30, 2017. Leverage ratio inched up to 9.19% from 8.39% as of Sep 30, 2017.

Return on average assets and return on average common equity were 1.49% and 14.40%, respectively, compared with 1.19% and 11.71% witnessed in the prior-year quarter.

Our Viewpoint

Cullen/Frost delivered impressive performance in the third quarter. Rise in loan balance and expansion of margin indicates continued organic growth. Though escalating expenses might continue to dampen the company’s bottom-line growth, it remains well poised to benefit from strong revenue base and lower provisions.

Cullen/Frost Bankers, Inc. Price, Consensus and EPS Surprise

Cullen/Frost Bankers, Inc. Price, Consensus and EPS Surprise | Cullen/Frost Bankers, Inc. Quote

Currently, the stock 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

First Republic Bank’s FRC third-quarter 2018 earnings per share came in at $1.19, missing the Zacks Consensus Estimate of $1.20. However, the reported figure inched up 1.7% from the year-ago tally.

UMB Financial UMBF recorded a positive earnings surprise of 3.6% in third-quarter 2018. Net operating earnings of $1.16 per share beat the Zacks Consensus Estimate of $1.12. The reported figure compares favorably with the prior-year quarter’s earnings of 98 cents.

Fifth Third Bancorp FITB delivered a positive earnings surprise of 1.6% in third-quarter 2018. Adjusted earnings per share of 64 cents surpassed the Zacks Consensus Estimate by a penny. However, including certain one-time items, the bottom line came in at 61 cents, down 55% year over year.

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