Why Is BOK Financial (BOKF) Down 2.1% Since Last Earnings Report?
A month has gone by since the last earnings report for BOK Financial (BOKF). Shares have lost about 2.1% 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 Q1 Earnings & Revenue Beat, Cost rise Y/Y
BOK Financial’s first-quarter earnings per share of $2.43 surpassed the Zacks Consensus Estimate of $2.29. The bottom line increased significantly from the prior-year quarter’s 95 cents.
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 in the quarter under review. However, an increase in expenses and provisions were a matter of concern.
Net income attributable to shareholders was $162.4 million, up meaningfully year over year from $62.5 million.
Revenues Improve, Expenses Rise
Quarterly net revenues of $530.2 million (including net interest revenues and total other operating revenues) were up 48.8% year over year. The top line surpassed the Zacks Consensus Estimate of $524.2 million.
Net interest revenues were $352.3 million, up 31.3% year over year. The net interest margin expanded 101 basis points (bps) year over year to 3.45%.
Total fees and commissions were $186 million, up 90.5% year over year. The rise was driven by an increase in almost all fee income components, except for mortgage banking revenues, and deposit service charges and fees.
Total other operating expenses were $305.8 million, up 10.2% year over year. The rise was due to an increase in almost all cost components, except for net occupancy and equipment, amortization of intangible assets, mortgage banking costs, and other expenses.
The efficiency ratio decreased to 56.38% from the prior year’s 75.07%. A decline in the efficiency ratio indicates an improvement in profitability.
As of Mar 31, 2023, total loans were $22.75 billion, up 0.9% sequentially. As of the same date, total deposits amounted to $32.58 billion, down 5.5% from the prior quarter.
Credit Quality Improves
Non-performing assets were $132.9 million, or 0.58% of outstanding loans and repossessed assets as of Mar 31, 2023, down from $352.9 million or 1.70% recorded in the prior-year period.
Allowance for loan losses was 1.10% of outstanding loans as of Mar 31, 2023, down 9 bps year over year. Moreover, the company recorded net charge-offs of $0.8 million, down from $6 million in the prior-year quarter.
However, it recorded provisions of $16 million in the reported quarter. In the prior-year quarter, the company did not record any provisions.
Capital Ratios and Profitability Ratios Improve
As of Mar 31, 2023, the common equity Tier 1 capital ratio was 12.19%, up from 11.30% as of Mar 31, 2022. Tier 1 and total capital ratios on Mar 31, 2023, were 12.20% and 13.21%, respectively, up from 11.31% and 12.25% as of Mar 31, 2022. The leverage ratio was 9.94%, up from 8.47% as of Mar 31, 2022.
Return on average equity was 13.61% compared with the year-earlier quarter’s 4.93%. Return on average assets was 1.43%, up from 0.50% in the year-ago quarter.
Share Repurchase Update
In the reported quarter, the company repurchased 447,071 shares at an average price of $98.64 per share.
2023 Outlook
The company expects loan growth in the mid-to-upper single-digit range.
NII is expected to be in the range of $1.35-$1.4 billion and total fees and commissions revenues are anticipated to reach $750 million. It also expects the net interest margin to decline in 2023, due to funding pressures.
Quarterly expenses are expected to be near or slightly below the fourth quarter of 2022 reported level and the efficiency ratio is expected around 57 for the remainder of the year. Management expects quarterly provision expenses similar to that in the first quarter of 2023. Additionally, net charge-offs are expected to continue to be low.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 11.79% due to these changes.
VGM Scores
At this time, BOK Financial has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, BOK Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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BOK Financial Corporation (BOKF) : Free Stock Analysis Report
