Texas Capital Upped to Outperform - Analyst Blog
August 04 2011 - 7:45AM
Zacks
We have upgraded our recommendation on Texas Capital
Bancshares Inc. (TCBI) to Outperform from Neutral
following a detailed analysis of its fundamentals in light of the
current economic environment.
Texas Capital reported second quarter 2011 operating earnings of
44 cents per share, which came in well ahead of the Zacks Consensus
Estimate of 36 cents. The results were also above the prior-year
quarter’s earnings of 22 cents per share.
Quarterly results benefited from an increase in net interest
income. However, lower non-interest income and higher expenses were
the dampeners.
For Texas Capital, which has peers such as First
Financial Bankshares Inc. (FFIN) and Cullen/Frost
Bankers Inc. (CFR), the business model remains a key
driver for growth. Following a community banking model, Texas
Capital strives to attract local business owners and individuals,
and thereby creates an above-average retention ratio. The company
has grown significantly since its inception, partly based on its
ability to hire local lenders from its national competitors. The
goal of this lift-out strategy is to hire talented professionals
(loan officers, trust managers, financial planners, and personal
bankers) who can bring clients to Texas Capital.
Additionally, the gain in market share from its competitors, a
solid capital position and organic growth augur well.
Going forward, we believe that with an eventual improvement in
the Texan economy, the company would be further poised to
experience an increase in earnings. Additionally, the company
remains asset-sensitive and is well positioned to benefit from an
eventual rise in interest rates.
Though expenses have increased following the company’s efforts
to hire experienced bankers, these have also led to an expansion of
its business, which is encouraging. Improving trends in credit
metrics also bode well.
Texas Capital shares retain a Zacks #1 Rank, which translates
into a short-term ‘Strong Buy’ recommendation.
CULLEN FROST BK (CFR): Free Stock Analysis Report
FIRST FIN BK-TX (FFIN): Free Stock Analysis Report
TEXAS CAP BCSHS (TCBI): Free Stock Analysis Report
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