BOK Financial (BOKF) Q4 Earnings Lag Estimates, Expenses Up

BOK Financial’s BOKF delivered a negative earnings surprise of 2.9% in fourth-quarter 2018. Adjusted earnings per share of $1.65 lagged the Zacks Consensus Estimate of $1.70. Yet, the bottom line compared favorably with $1.11 in the prior-year quarter.

Though expenses and provisions escalated in the quarter, investors’ optimism was visible on top-line strength, aided by rising loans and deposits balance. Therefore, shares of BOK Financial rallied 2.4% following the earnings release.

Including certain one-time items, net income came in at $108.5 million or $1.50 per share compared with $72.5 million or $1.11 per share in the year-ago quarter.

For 2018, net income was $445.6 million or $6.63 per share compared with $334.6 million or $5.11 reported in 2017.

Revenues, Costs, Loan & Deposits Rise

For 2018, revenues were $1.6 billion, up 6.7% year over year. The revenue figure was in line with the Zacks Consensus Estimate.

Revenues in the fourth quarter came in at $422.2 million, up 12.8% year over year. Yet, the figure lagged the Zacks Consensus Estimate of $432.3 million.

Net interest revenues totaled $285.7 million, up 31.7% year over year. Net interest margin (NIM) expanded 43 basis points year over year to 3.40%.

BOK Financial’s fees and commissions revenues amounted to $160.1 million, up 1.4% on a year-over-year basis. Higher fiduciary and asset management revenues along with other revenues primarily led to the rise. This was partly offset by lower brokerage and trading revenues along with reduced mortgage banking revenues.

Total other operating expenses were $284.6 million, up 11.8% year over year. The rise mainly stemmed from rise in almost all components of expenses.

Efficiency ratio improved to 63.24% from 66.07% a year ago. Generally, a lower ratio indicates improved profitability.

Net loans as of Dec 31, 2018, were $21.4 billion, up 18.2% sequentially. As of the same date, total deposits amounted to $25.3 billion, up 17.1% sequentially.

Credit Quality: A Mixed Bag

During the fourth quarter, provisions for credit losses of $9 million were seen as against credit provision of $7 million in the prior-year quarter. Yet, the combined allowance for credit losses was 0.97% of outstanding loans as of Dec 31, 2018, down from 1.37% in the year-ago period.

Additionally, non-performing assets totaled $267.2 million or 1.23% of outstanding loans and repossessed assets as of Dec 31, 2018, down from $290.3 million or 1.69% in the prior-year period.

Capital Position

Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. The company was subject to new regulatory rules on Jan 1, 2015. As of Dec 31, 2018, the common equity Tier 1 capital ratio was 10.92% as compared with 12.05% as of Dec 31, 2017.

Tier 1 and total capital ratios on Dec 31, 2018, were 10.92% and 12.50%, respectively, compared with 12.05% and 13.54% as of Dec 31, 2017. Leverage ratio was 8.96% compared with 9.31% as of Dec 31, 2017.

Share Repurchase Update

During the October-December quarter, the company repurchased 525,000 million common shares at an average price of $85.82 per share.

Our Viewpoint

BOK Financial’s consistent revenue growth keeps us optimistic about the stock. Furthermore, continued growth in loan balances indicates an efficient organic growth strategy. The company’s diverse revenue mix and favorable geographic footprint are likely to keep supporting growth in the upcoming quarters. Nevertheless, escalating expenses and provisions remain a concern.

BOK Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Citizens Financial Group CFG delivered a positive earnings surprise of 4.3% in fourth-quarter 2018 on higher revenues. Adjusted earnings per share of 98 cents topped the Zacks Consensus Estimate of 94 cents. Also, the bottom line improved 38% from the prior-year quarter.

Signature Bank’s SBNY fourth-quarter 2018 earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.79. Further, the bottom line compared favorably with $2.11 earned in the prior-year quarter.

People's United Financial Inc. PBCT reported fourth-quarter 2018 operating earnings of 36 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, the figure improved 16% year over year.

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