On Oct 8, 2013, we initiated our coverage on commercial and
consumer banking services provider,
Cullen/Frost Bankers, Inc.
) at Neutral based on its positive approach to market conditions
and capital deployment efforts. Moreover, a healthy capital
position is indicative of the company's robust standing. However,
the regulatory reforms, surging expenses and an unsettled global
economy might act as deterrents for this Zacks Rank #2 (Buy)
Cullen/Frost's organic growth through its huge deposits base,
capital adequacy and expansion through recent acquisitions
prompted us to initiate with this stance.
With the growing level of deposits, the company has expanded
organically. Though the level of deposits declined slightly in
the first six months of 2013, it grew at a CAGR of 11.1% over the
last five years (2008-2012). The growing deposit base should help
the company generate loans and meet other general business
Cullen/Frost looks attractive for income-seeking investors due to
its steady capital deployment activities. In Apr 2013, the
company announced a 4% hike in its quarterly cash dividend on
common stock. Moreover, the company has increased dividend every
year since the financial crisis in 2008.
Recently, in an attempt to expand its footprint in Texas,
Cullen/Frost signed a definitive merger agreement with WNB
Bancshares, Inc. The merger will enable Cullen/Frost to reinforce
its Texas franchise and enter the profitable Midland and Odessa
However, with the growing level of non-interest expenses, the
company is exposed to operational risks. Non-interest expenses
surged 7.4% year over year in first-half 2013. Moreover, the
recent regulatory norms have increased compliance costs.
Continuation of this trend will remain a hindrance for
For Cullen/Frost, over the last 60 days, the Zacks Consensus
Estimate for 2013 increased 0.3% to $3.78 per share, while it
moved north by 2.5% to $4.07 per share for 2014.
Other Stocks to Consider
Besides Cullen/Frost, other stocks in the same sector that are
currently performing well include
Banc of California, Inc.
) with a Zacks Rank #1 (Strong Buy), while
Prosperity Bancshares Inc.
Community Trust Bancorp Inc.
) carry a Zacks Rank #2.
BANC OF CA INC (BANC): Free Stock Analysis
CULLEN FROST BK (CFR): Free Stock Analysis
COMMUN TRUST BC (CTBI): Free Stock Analysis
PROSPERITY BCSH (PB): Free Stock Analysis
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