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It has been about a month since the last earnings report for BOK Financial (BOKF). Shares have added about 7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BOK Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BOK Financial Lags Q1 Earnings Estimates, Stock Rises
BOK Financial reported net income per share of 88 cents lagged the Zacks Consensus Estimate of $1.29 for the first quarter of 2020. Further, the bottom line compared unfavorably with the prior-year quarter’s earnings per share of $1.54.
Contracting margin and deteriorating credit quality were concerning. Nonetheless, top-line growth, lower expenses and rise in deposits were driving factors.
Net income was $62.1 million compared with $110.6 million recorded in the year-ago quarter.
Revenues Climb, Costs & Loans Decline
Adjusted revenues in the first quarter were $441.7 million, up 3.7% year over year. The revenue figure, however, missed the Zacks Consensus Estimate of $448.2 million.
Net interest revenues totaled $261.4 million, down 6% year over year. Further, NIM shrunk 50 basis points year over year to 2.80%.
BOK Financial’s fees and commission revenues amounted to $192.7 million, up 20% on a year-over-year basis. Higher fiduciary and asset management revenues, brokerage and trading revenues, transaction card revenues, and elevated mortgage banking revenues primarily led to the upswing. This was partly offset by lower deposit service charges and fees along with reduced other revenues.
Total other operating expenses were $268.6 million, down 6.5% year over year. This mainly stemmed from lower personnel expenses.
Efficiency ratio improved to 58.62% from the prior year’s 64.80%. Generally, a lower ratio indicates improving profitability.
Total loans as of Mar 31, 2020, were $22.5 billion, up 3.2% sequentially. As of the same date, total deposits amounted to $29.2 billion, up 15.4% sequentially.
Credit Quality Deteriorates
During the March-end quarter, provisions for credit losses of $93.8 million compared with $8 million in the prior-year quarter. The combined allowance for loan losses was 1.40% of outstanding loans as of Mar 31, 2019, up from 0.94% in the year-ago period.
Additionally, non-performing assets totaled $292 million or 1.30% of outstanding loans and repossessed assets as of Mar 31, 2020, up from $261.5 million or 1.20% in the prior-year period. Net charge-offs were $17.2 million, up 7.1% year over year.
Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. As of Mar 31, 2020, the common equity Tier 1 capital ratio was 10.98% as compared with 10.71% as of Mar 31, 2019.
Tier 1 and total capital ratios on Mar 31, 2020, were 10.98% and 12.58%, respectively, compared with 10.71% and 12.24% as of Mar 31, 2019. Leverage ratio was 8.16% compared with 8.76% as of Mar 31, 2019.
Share Repurchase Update
During the January-March period, the company repurchased 442,000 million common shares at an average price of $75.52 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -5.79% due to these changes.
At this time, BOK Financial has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise BOK Financial has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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