On Sep 25, 2014, we issued an updated research report on Cullen/Frost Bankers, Inc. (CFR). Shares of this commercial and consumer banking services provider have recorded a year-to-date return of around 7%. Further, Cullen/Frost recorded an average positive earnings surprise of 0.67% in the last four quarters.
We believe this growth story has been aided by the company’s continued focus on organic growth among several other positives including a strong capital position, steady capital deployment activities and strategic acquisitions.
Organic growth remains a key strength at Cullen/Frost, as reflected in its revenues. Revenues grew at a CAGR of 2.7% over the last five years (2009–2013). Moreover, net revenues increased 6.6% year over year in first-half 2014. We believe the company is well positioned to maintain this trend going forward.
As of Jun 30, 2014, deposits grew 8.7% over the last six months, while loans were up 12.6%. Moreover, first-half 2014 recorded the highest volume of new loan commitments since 2008. Therefore, the growing deposit base would help the company generate more loans and meet other general business purposes.
Cullen/Frost continues to expand through acquisitions. In May 2014, in an attempt to increase its footprint in Texas, the company completed the merger with WNB Bancshares, Inc. This marks the first bank acquisition for Cullen/Frost since 2006 when it bought Fort Worth-based Summit Bancshares Inc. The merger enabled Cullen/Frost to reinforce its Texas franchise and enter the profitable Midland and Odessa markets.
Moreover, with a sound balance sheet and capital position, Cullen/Frost has a competitive advantage over other banks. Additionally, backed by its strong liquidity position, Cullen/Frost has been consistently paying dividends.
Analysts’ bullish stance on the stock was reflected in the estimate revisions over the past 60 days. For 2014, the Zacks Consensus Estimate advanced 1.5% to $4.19 per share. It moved up 1.8% to $4.45 per share for 2015.
Stocks That Warrant a Look
Other Southwest banks worth considering include BOK Financial Corporation (BOKF), Texas Capital BancShares Inc. (TCBI) and Opus Bank (OPB).
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