On Aug 28, 2015, we issued an updated research report on BOK Financial Corporation BOKF. Shares of this Oklahoma-based company recorded a year-to-date return of 6%. We believe this growth story comes on the heels of the company’s organic growth, improving credit quality and strong capital position.
Period end loans grew at a Compound Annual Growth Rate (CAGR) of 7.5% in the last five years (2010-2014) with the trend continuing thereafter. Further, management expects low double-digit loan growth for 2015. Apart from rising loan balances, BOK Financial is strengthening its balance sheet with improving credit quality. Nonperforming assets and allowance for credit losses have been declining consistently over the past few years.
The company currently remains focused on its two major strategic objectives: balance sheet repositioning for a probable rising rate environment in 2015 and building operational infrastructure to boost risk management, compliance and information technology.
Notably, net interest income is likely to exhibit a slight rise in 2015, owing to earning asset composition and stable to improving NIM. Also, income from fees and commissions are anticipated to exhibit mid single-digit growth. Management expects growth in the mortgage business in the second-half 2015, though at a slower pace owing to seasonality.
However, the company faces operational risk from escalating costs. Operating expenses increased at a CAGR of 3% over the last five years (2010-2014) and the increasing trend continued in first-half 2015 as well. Further, expenses are expected in the range of $225 million to $230 million each for the remaining quarters of 2015. For full year, expenses are expected to exhibit mid-single-digit growth.
Also, we remain concerned owing to a persistent low interest rate environment and the prevailing stringent regulatory landscape.
Over the past 7 days, the Zacks Consensus Estimate remained stable at $4.47 per share and $4.83 per share for 2015 and 2016, respectively.
BOK Financial currently carries a Zacks Rank #3 (Hold).
Some-better ranked stocks in the finance sector include BancFirst Corporation BANF, First Financial Bankshares Inc. FFIN and The Bank of New York Mellon Corporation BK. All three stocks sport a Zacks Rank #2 (Buy).
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