Commerce Bancshares Inc.
) fourth-quarter 2012 earnings of 72 cents per share were in line
with the Zacks Consensus Estimate as well as the prior quarter's
earnings. However, this compared favorably with the year-ago
quarter's earnings of 66 cents.
COMMERCE BANCSH (CBSH): Free Stock Analysis
HUNTINGTON BANC (HBAN): Free Stock Analysis
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For the full year 2012, Commerce Bancshares recorded earnings per
share of $2.90 compared with $2.69 in 2011. However, the earnings
marginally missed the Zacks Consensus Estimate of $2.92.
Results for the quarter were aided by augmented top line, partly
offset by higher expenses. Credit quality and capital ratios
showed mixed trends. However, sustained growth in loans and
deposits were the highlights for the quarter
Net income for the quarter was $66.8 million, up 1.2%
sequentially and 8.6% on a year-over-year basis. For 2012, net
income stood at $269.3 million, up 5.1% from $256.3 million in
Commerce Bancshares' total revenue was $273.5 million, up 3.6%
from $264.1 million in the prior quarter and 2.3% from $267.3
million in the year-ago quarter. Total revenue was 3.6% ahead of
the Zacks Consensus Estimate of $264.0 million.
For 2012, total revenue came in at $1.07 billion, dipping 1.2%
from $1.09 billion in 2011. However, total revenue surpassed the
Zacks Consensus Estimate of 1.05 million by 2.8%.
Taxable equivalent net interest income was $168.4 million, rising
5.3% sequentially. The increase was largely attributable to
higher inflation interest on the company's inflation-protected
Non-interest income grew 2.4% from the previous quarter to $103.3
million. The sequential improvement was mainly due to higher
bankcard transaction fees, trust fees deposit account charges and
other fees, consumer brokerage services as well as other income,
partly offset by lower capital market fees.
Non-interest expense hiked 3.2% from the prior quarter to $158.3
million. The increase was mainly attributable to higher salaries
and employee benefits, supplies and communication expenses,
equipment costs, other expenditure, deposit insurance expenses,
partly mitigated by lower marketing costs, net occupancy costs as
well as data processing expenses.
Efficiency ratio decreased to 59.62% from 59.99% in the prior
quarter. The decline implies a hike in profitability.
Commerce Bancshares reported a mixed credit quality during the
quarter. Total nonperforming assets came in at $64.9 million,
down 11.7% sequentially and 30.9% from prior-year quarter.
Further, allowance for loan losses as a percentage of total loans
was 1.75%, down from 1.82% in the prior quarter and 2.01% in the
However, net charge-offs escalated 18.7% sequentially, but
deteriorated 30.8% year over year to $10.8 million. Likewise,
provision for loan losses stood at $8.3 million in the quarter,
up 49.2% from the previous quarter, but down 31.4% from the
Average loans (excluding loans held for sale) inched up 1.8% from
the previous quarter and 5.7% from the comparable quarter last
year to $9.6 billion. Further, total deposits improved 8.9%
sequentially and 9.2% year over year to $18.3 billion, reflecting
growth in non-interest bearing deposits and savings, interest
checking and money market deposits.
Capital and Profitability Ratios
Commerce Bancshares' capital ratios deteriorated in the quarter.
Tier I leverage ratio came in at 9.14%, down from 10.00% in the
prior quarter and 9.55% in the prior-year quarter. Tangible
common equity to assets ratio as of Dec 31, 2012 was 9.25%, down
from 10.47% as of Sep 30, 2012 and 9.91% as of Dec 31, 2011.
The company's return on average assets was 1.25% compared with
1.28% as of Sep 30, 2012 and 1.19% as of Dec 31, 2011.
Additionally, the company's return on average equity increased to
11.62% from 11.57% as of Sep 30, 2012 and 11.39% as of Dec 31,
However, book value, based on total equity as of Dec 31, 2012,
was $23.76 per share, down from $25.08 as of Sep 30, 2012 and
$23.24 as of Dec 31, 2011.
During the quarter, Commerce Bancshares repurchased 774,000
shares at an average price of $37.93 per share.
Strong capital base and an excellent liquidity enable Commerce
Bancshares to position itself comfortably for expansion via
acquisitions. Moreover, the company's direct retail and
commercial banking franchise are expected to perform steadily.
Its focus on developing in the high-growth areas and efforts to
reorganize expenses would also prove accretive to overall growth
in the future.
However, prevailing low interest rates, diminishing loan demands
and muted economic growth are expected to hurt Commerce
Bancshares' overall performance. Also, the recently proposed
financial rules and the stringent regulatory landscape are
matters of concern.
One of Commerce Bancshares peers,
Huntington Bancshares Incorporated
), which holds a Zacks Rank #2 (Buy), is expected to announce its
fourth quarter 2012 results on Jan 17.
Commerce Bancshares currently retains a Zacks Rank #3 (Hold).
Also, considering the fundamentals, we maintain a long-term
Neutral recommendation on the shares.