BOK Financial's Outlook Positive - Analyst Blog
August 04 2011 - 1:13PM
Zacks
The long-term Issuer Default Ratings (IDR) of BOK
Financial Corp. (BOKF) and its lead bank subsidiary, BOKF,
NA was affirmed by Fitch Ratings at 'A-'. However, the rating
outlook has been revised to Positive from Stable.
The rating affirmation of BOK Financial can be attributed to
strong and consistent performance amidst a tough credit cycle as
opposed to dividend cuts or bailout relief. To the company’s
credit, its steady performance aided it in maintaining a solid
capital position.
BOK Financial has adhered to conservative underwriting standards
and this resulted in sturdy asset quality with very low charge-off
levels, which in turn bolstered its performance. Besides, its
diverse revenue mix as well as favorable geographic footprint has
backed its growth.
Offsetting the positives are an elevated level of nonperforming
assets (NPAs) and a $500 million exposure to sub investment grade
private-label mortgage-backed securities. Higher NPA levels reflect
the company’s slow asset disposition process rather than poor asset
quality. These raise the company’s future credit loss risk. The
company also possesses a highly liquid balance sheet that weighs on
its interest margin. Yet, the company saw a steady margin as it is
managed well.
The revision in outlook to positive stems form the rating
agency’s view that BOK Financial’s persistent and solid operating
performance coupled with a reduction in NPA levels as well as
private-label mortgage-backed securities without incurring
substantial credit impairments, could lead to BOK's IDR
upgrade.
BOK Financial’s growth strategy has involved comparatively
smaller footprint acquisitions and this has helped the company to
garner a larger share of the market. If prospects arise, this
strategy could continue in the near to intermediate term. However,
if the company alters its growth strategy, making larger
acquisition or moving out of its current footprint, its ratings may
come under pressure.
BOK Financial’s second quarter 2011 earnings came in at $69.0
million or $1.00 per share, which were above the Zacks Consensus
Estimate of 98 cents. The results also compare favorably with the
prior-quarter earnings of $64.8 million or 94 cents and prior-year
earnings of $63.5 million or 93 cents.
Results primarily reflect a decrease in loan loss provisions and
improved credit quality. Increases in fees and commissions revenue
also supported top-line growth.
Our Take
Strategic expansions and local-leadership based business model
of BOK Financial, which has peers such as Cullen/Frost
Bankers Inc. (CFR) and First Financial Bankshares
Inc. (FFIN), have aided its expansion into a leading
financial service provider from a small bank in Oklahoma.
A diverse revenue stream, sturdy capital position and expense
control initiatives augur well. A dividend hike is encouraging. Yet
a slow economic recovery and regulatory issues remain headwinds to
the company.
BOK Financial shares are maintaining a Zacks #3 Rank, which
translates into a short-term Hold recommendation.
BOK FINL CORP (BOKF): Free Stock Analysis Report
CULLEN FROST BK (CFR): Free Stock Analysis Report
FIRST FIN BK-TX (FFIN): Free Stock Analysis Report
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