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BOK Financial's (BOKF) Shares Decline on Q4 Earnings Miss

Zacks Equity Research

Following BOK Financial’s BOKF fourth-quarter 2019 earnings release, the stock has depreciated 2.84%. The company reported a negative earnings surprise of 15.7% for the quarter. Earnings per share of $1.56 lagged the Zacks Consensus Estimate of $1.85. Further, the bottom line compares unfavorably with the prior-year quarter’s $1.65.

Expenses and provisions escalated in the quarter. Moreover, loans declined and pressure on margin was visible. Yet, top-line strength on fee income growth and rise in deposits were driving factors.

Net income came in at $110.4 million compared with the $108.5 million recorded in the year-ago quarter.

For 2019, net income was $500.8 million or $7.03 per share compared with the $445.6 million or $6.63 reported in 2018.

Revenues Climb, Costs Up, Loans Down

For 2019, revenues were $1.8 billion, up 12.5% year over year. The revenue figure comes in line with the Zacks Consensus Estimate.

Revenues in the fourth quarter came in at $449.6 million, up around 1% year over year. The revenue figure, however, missed the Zacks Consensus Estimate of $454.8 million.   

Net interest revenues totaled $270.2 million, down 5.4% year over year. Further, net interest margin (NIM) shrunk 60 basis points year over year to 2.88%.

BOK Financial’s fees and commissions revenues amounted to $179.4 million, up 12.1% on a year-over-year basis. Higher fiduciary and asset management revenues, brokerage and trading revenues, transaction card revenues, along with elevated mortgage banking revenues, primarily led to this upswing. This was partly offset by lower deposit service charges and fees, along with reduced other revenues.

Total other operating expenses were $288.8 million, up 1.5% year over year. This uptick mainly stemmed from higher personnel expenses and mortgage banking costs.

Efficiency ratio increased to 63.65% from the prior years’ 63.25%. Generally, a higher ratio indicates decline in profitability.

Total loans as of Dec 31, 2019, were $21.8 billion, down 2.2% sequentially. As of the same date, total deposits amounted to $27.6 billion, up 5.7% sequentially.

Credit Quality: A Mixed Bag

During the December-end quarter, provisions for credit losses of $19 million more than doubled from the prior-year quarter. The combined allowance for credit losses was 0.97% of outstanding loans as of Dec 31, 2018, up from 0.96% in the year-ago period.

Additionally, non-performing assets totaled $293.8 million or 1.35% of outstanding loans and repossessed assets as of Dec 31, 2019, up from $267.2 million or 1.23% in the prior-year period. Net charge-offs were $12.5 million, up 1.6% year over year.

Capital Position

Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. As of Dec 31, 2019, the common equity Tier 1 capital ratio was 11.39% as compared with 10.92% as of Dec 31, 2018.

Tier 1 and total capital ratios on Dec 31, 2019, were 11.39% and 12.94%, respectively, compared with 10.92% and 12.50% as of Dec 31, 2018. Leverage ratio was 8.40% compared with 8.96% as of Dec 31, 2018.

Share Repurchase Update

During the October-December period, the company repurchased 280,000 million common shares at an average price of $81.59 per share.

Our Viewpoint

BOK Financial’s continued fee income growth keeps us optimistic about the stock. Furthermore, growth in deposit balances indicates an efficient organic-growth strategy. The company’s diverse revenue mix and favorable geographic footprint are likely to keep supporting its performance in the upcoming quarters. Nevertheless, escalating expenses and provisions are concerns.

BOK Financial Corporation Price, Consensus and EPS Surprise

BOK Financial Corporation Price, Consensus and EPS Surprise

BOK Financial Corporation price-consensus-eps-surprise-chart | BOK Financial Corporation Quote

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

Riding on high revenues, PNC Financial PNC reported a positive earnings surprise of 1.7% in the fourth quarter. Earnings per share of $2.97 surpassed the Zacks Consensus Estimate of $2.92. Further, the bottom line reflects an 8% jump from the prior-year quarter’s reported figure.

Comerica CMA delivered a positive earnings surprise of 6.3% in the fourth quarter on high non-interest income. Earnings per share of $1.85 outpaced the Zacks Consensus Estimate of $1.74. Earnings, however, came in lower than the prior-year quarter figure of $1.95.

Wells Fargo’s WFC fourth-quarter 2019 adjusted earnings of 93 cents per share lagged the Zacks Consensus Estimate of $1.12 on lower net interest income and rise in expenses. Results exclude litigation accruals. Including litigation accruals (not tax-deductible) worth 33 cents per share related to certain matters, earnings came in at 60 cents per share compared with the prior-year quarter’s $1.21.

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