BOK Financial (BOKF) Beats On Q3 Earnings, Revenues Up Y/Y

BOK Financial (NASDAQ:BOKF) delivered a positive earnings surprise of 4.7% in third-quarter 2019. Earnings per share of $2 outpaced the Zacks Consensus Estimate of $1.91. Also, the bottom line comes in 11.7% higher than the year-ago quarter’s reported figure.

Higher revenues, and improved loan and deposit balances were the driving factors. However, mounting expenses and provisions, along with lower margin, were the major headwinds.

Net income attributable to shareholders came in at $142.2 million compared with the prior-year quarter’s $117.3 million

Revenues Up, Costs Rise, Deposits Improve

Revenues in the third quarter were $465.6 million, up 13.9% year over year. Further, the figure surpassed the Zacks Consensus Estimate of $461.9 million.

Net interest revenues totaled $279.1 million, up 15.9% year over year. However, net interest margin (NIM) contracted 20 basis points to 3.01%.

BOK Financial’s fees and commissions revenues amounted to $186.1 million, up 12% on a year-over-year basis. This upswing mainly resulted from rise in all components except fiduciary and asset management revenues.

Total other operating expenses came in at $279.3 million, flaring up 10.6% year over year. This upside mainly resulted from rise in personnel, business promotion, net occupancy and other expenses.

Efficiency ratio improved to 53.51% from the year-earlier period’s 61.60%. A lower ratio indicates improved profitability.

Net loans as of Sep 30, 2019, were $22.3 billion, slightly up from the prior quarter. As of the same date, total deposits amounted to $26.2 billion, rising 3.4% sequentially.

Credit Quality Deteriorates

During the September-end quarter, provisions for credit losses were $12 million compared with $4 million provision recorded in the prior-year quarter. Additionally, non-performing assets totaled $286.2 million or 1.28% of outstanding loans and repossessed assets compared with $260.9 million or 1.42% at the end of the prior-year quarter. Net charge offs were $10.6 million as of Sep 30, 2019, up 18.5% from Sep 30, 2018.

However, combined allowance for credit losses was 0.92% of outstanding loans as of Sep 30, 2019, down from the prior year’s 1.16%.

Capital Ratios Decline

As of Sep 30, 2019, the common equity Tier 1 capital ratio was 11.06% compared with 12.07% as of Sep 30, 2018.

Tier 1 and total capital ratios on Sep 30, 2019 were 11.06% and 12.56%, respectively, compared with 12.07% and 13.37% as of Sep 30, 2018. Leverage ratio was 8.41% compared with 9.90% a year ago.

Share Repurchase Update

During the third quarter, the company repurchased 0.3 million common shares at an average price of $77.03 per share.

Our Viewpoint

BOK Financial’s efforts to expand through acquisitions are likely to further improve its revenues. Further, growth in loan and deposit balances act favorably for the company. The company’s diverse revenue mix and favorable geographic footprint are likely to boost its growth in the upcoming quarters. Nevertheless, escalating expenses and provisions along with falling NIM act as major headwinds.

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 & Earnings Release Dates of Other Companies

Northern Trust Corporation’s (NASDAQ:NTRS) third-quarter 2019 earnings per share of $1.69 outpaced the Zacks Consensus Estimate of $1.64. Also, the earnings figure compared favorably with the year-ago quarter’s $1.58.

Fifth Third Bancorp (NASDAQ:FITB) delivered third-quarter positive earnings surprise of 2.7%. Adjusted earnings per share of 75 cents surpassed the Zacks Consensus Estimate of 73 cents. However, excluding certain one-time items, the bottom line came in at 71 cents, down 16.4% year over year.

Bank of Hawaii Corporation (NYSE:BOH) is slated to report results on Oct 28.

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