Why Is BOK Financial (BOKF) Down 8.2% Since Last Earnings Report?
It has been about a month since the last earnings report for BOK Financial (BOKF). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BOK Financial due for a breakout? 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 catalysts.
BOK Financial Q2 Earnings Miss While Revenues Beat
BOK Financial second-quarter earnings per share of $2.27 missed the Zacks Consensus Estimate of $2.28. Nonetheless, the bottom line increased 15.8% from the prior-year quarter.
Results were aided by an improvement in net interest revenues, driven by higher rates and loan growth. Also, total fees and commissions witnessed a rise. However, an increase in expenses and provisions was a matter of concern.
Net income attributable to shareholders was $151.3 million, up 13.9% year over year.
Revenues Improve, Expenses Rise
Quarterly net revenues of $531.3 million (including net interest revenues and total other operating revenues) were up 20% year over year. Further, the top line surpassed the Zacks Consensus Estimate of $521.1 million.
Net interest revenues were $322.3 million, up 17.6% year over year. NIM expanded 24 bps to 3%.
Total fees and commissions were $200.5 million, up 15.6%. The rise was driven by an increase in almost all fee income components, except for transaction card revenues, and deposit service charges and fees.
Total other operating expenses were $318.7 million, up 16.5%. This was caused by an increase in almost all cost components, except for printing, postage and supplies expenditures, amortization of intangible assets, mortgage banking costs and other expenses.
The efficiency ratio decreased to 58.75% from the prior year’s 60.79%. A decline in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2023, total loans were $23.24 billion, up 2.1% sequentially. As of the same date, total deposits amounted to $33.29 billion, up 2.2%.
Credit Quality – Mixed Bag
Allowance for loan losses was 1.13% of outstanding loans as of Jun 30, 2023, flat year over year. Moreover, the company recorded net charge-offs of $6.7 million against recoveries of $0.8 million in the prior-year quarter.
Further, it recorded provisions for credit losses of $17 million in the reported quarter. In the prior-year quarter, the company did not record any provisions.
Nonetheless, non-performing assets were $136.5 million or 0.59% of outstanding loans and repossessed assets as of Jun 30, 2023, down from $332.8 million or 1.56% recorded in the year-ago period.
Capital Ratios and Profitability Ratios Improve
As of Jun 30, 2023, the common equity Tier 1 capital ratio was 12.13%, up from 11.61% as of Jun 30, 2022. Tier 1 and total capital ratios were 12.13% and 13.24%, up from 11.63% and 12.59%, respectively, as of Jun 30, 2022.
The leverage ratio was 9.75%, up from 9.12% as of Jun 30, 2022.
Return on average equity was 12.28% compared with the year-earlier quarter’s 11.27%. Return on average assets was 1.27%, up from 1.13% in the year-ago quarter.
2023 Outlook
The company expects loan growth in the upper single digit, supported by economic conditions in its geographic footprints, along with business in-migration from other markets. It projects total deposits to be stable or to grow modestly. Further, the loan to deposit ratio is to remain in the low 70’s.
Management assumed a 25 bps increase in interest rates in third-quarter 2023 before Federal Reserve pauses the hike. NII is projected to be around $1.3 billion and total fees and commissions revenues are anticipated to reach $800 million.
It expects NIM to decline due to funding pressure as interest bearing deposit betas are likely to increase.
Quarterly expenses are suggested to be near or slightly above the second quarter of 2023 reported level and the efficiency ratio is expected to move slightly above 60% for the remainder of the year.
Management estimates quarterly provision expenses similar to that in the recent quarters.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, BOK Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, 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.
Outlook
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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BOK Financial Corporation (BOKF) : Free Stock Analysis Report
