We are downgrading our recommendation on
BOK Financial Corp.
) to Neutral from Outperform based on the persistent low interest
environment and regulatory pressures. Consequently, the company is
experiencing a declining trend in the net interest margin, which
fell to 3.34% in 2011 from 3.52% in 2010.
BOK FINL CORP (BOKF): Free Stock Analysis
CULLEN FROST BK (CFR): Free Stock Analysis
FIRST FIN BK-TX (FFIN): Free Stock Analysis
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Notably, in the last few quarters net interest margin descended to
3.19% in the first quarter of 2012 from 3.20% in the fourth quarter
of 2011 and 3.34% in the third quarter. With expectations of a
continual low interest rate environment in the upcoming quarters,
we expect the pressure on the margin to persist owing to an
increase in liquidity.
However, BOK Financial remains committed to boost shareholders'
wealth. With a solid capital position and consistent performance,
BOK Financial hiked its quarterly cash dividend by a nickel in the
first quarter of 2012, which currently stands at 38 cents per
share. This marked the seventh consecutive annual increase since
the company paid its first cash dividend in 2005.
In fact, strategic expansions and the local-leadership based
business model of BOK Financial, which has peers such as
Cullen/Frost Bankers Inc.
First Financial Bankshares Inc.
), aided it to expand into a leading financial service provider
from a bank in Oklahoma.
Owing to growth in net interest revenue as well as fees and
commissions revenue, BOK Financial's first-quarter 2012 earnings
came in at $1.22 per share, well above the Zacks Consensus Estimate
of $1.03. The company also reported growth in commercial loan
balances. Its diverse revenue mix and favorable geographic
footprint also backed its growth.
Additionally, its diverse revenue base and sturdy capital position,
as well as expense control initiatives augur well for investors.
Moreover, BOK Financial's capital deployment efforts will boost
investors' confidence in the stock.
While a low interest rate environment and regulatory issues are the
headwinds for BOK Financial, we believe that its diverse revenue
mix and favorable geographic footprint will back its growth.
Shares of BOK Financial currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating.