On Apr 9, 2013, we downgraded our recommendation on Texas Capital BancShares Inc. (TCBI) to Neutral from Outperform. Our decision is based on the company’s inability to control costs in 2012.
Why the Downgrade?
Texas Capital is scheduled to announce its first-quarter 2013 results on Apr 24. Activities of this bank during the quarter were not enough to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter has moved down by 1.2% to 82 cents over the last 30 days.
A tendency for a downward estimate revision was more obvious for 2013 and 2014. The Zacks Consensus Estimate went down 3.8% to $3.33 per share for 2013 and 3.5% to $3.56 per share for 2014 over the same time frame. Hence, the company currently carries a Zacks Rank #4 (Sell).
Moreover, Texas Capital’s fourth-quarter 2012 earnings lagged the Zacks Consensus Estimate by 8.4%. The earnings miss primarily came on the back of higher expenses and decreased net interest margin.
While management expects continued growth in non-interest income, the future rate of growth could be affected by increased competition from nationwide and regional financial institutions as well as declining demand in mortgage warehouse lending volume. Moreover, though the economy is recovering, the pace is tepid. Hence, a robust improvement in the overall profitability might be limited in the near term.
Other Major Banks to Consider
Other major banks that are performing better than Texas Capital and are worth a look include BOK Financial Corporation (BOKF), First Financial Bankshares Inc. (FFIN) and Southside Bancshares Inc. (SBSI). All of these carry a Zacks Rank #2 (Buy).
BOK FINL CORP (BOKF): Free Stock Analysis Report
FIRST FIN BK-TX (FFIN): Free Stock Analysis Report
SOUTHSIDE BANCS (SBSI): Free Stock Analysis Report
TEXAS CAP BCSHS (TCBI): Free Stock Analysis Report
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