Will Commerce Bancshares Growth Cushion Elevated Costs?

On Jun 8, 2016, we issued an updated research report on Commerce Bancshares, Inc. (NASDAQ:CBSH) . The company’s steady top-line growth and enhanced capital deployment activities remain impressive, while higher expenses and compressed margin remain as concerns.

Commerce Bancshares’ robust regional presence and diversified financial services contributed to its improved revenue generation. The uptrend continued in the first quarter of 2016 supported by consistent improvement in non-interest income. Moreover, sustained growth in the loan portfolio is expected to further augment top-line growth going forward.

Moving onto the bank’s capital deployment initiatives, Commerce Bancshares continues to shell out a quarterly dividend of 22.50 cents per share, which was last hiked in Jan 2014. Moreover, the company has a steady share repurchase program in place. Also, the bank’s efforts to streamline operations and expand footprints in new markets by undertaking various restructuring initiatives are likely to accelerate growth in the upcoming years.

On the flip side, escalating non-interest expenses continue to put pressure on financials. The constant rise in expenses, which continued in the first quarter of 2016, emphasizes the need for effective cost-control efforts. Also, stricter regulatory requirements are likely to further aggravate this situation going forward.

Though Commerce Bancshares’ riskier loan exposure and persistent margin compression continue to pose a threat to profitability, its healthy growth prospects driven by a sound capital base and strong liquidity level continue to keep the positive momentum alive as reflected in the 16% year-to-date rise in its share price.

With a projected EPS growth (F1/F0) of 6.6% and a projected sales growth (F1/F0) of 8.8%, Commerce Bancshares promises continuation of the upward revenue trend going forward.

Commerce Bancshares currently has a Zacks Rank #3 (Hold).

Other better-ranked mid-west banks include Enterprise Financial Services Corp. (NASDAQ:EFSC) , Wintrust Financial Corp. (NASDAQ:WTFC) and FirstMerit Corp. (NASDAQ:FMER) . While Enterprise Financial and Wintrust Financial sport a Zacks Rank #1 (Strong Buy), FirstMerit holds a Zacks Rank #2 (Buy).


COMMERCE BANCSH (CBSH): Free Stock Analysis Report

WINTRUST FINL (WTFC): Free Stock Analysis Report

FIRSTMERIT CORP (FMER): Free Stock Analysis Report

ENTERPRISE FINL (EFSC): Free Stock Analysis Report

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