Cullen/Frost Bankers, Inc.
) have recorded a return of 37.5% in 2013. Impressive organic
growth, capital adequacy and expansion through recent
acquisitions acted as the positives behind this growth story, but
we are not so optimistic about these positives translating to
further price appreciation down the road as there will be
significant pressure due to its rising level of non-interest
After analyzing its fundamentals following the third-quarter 2013
earnings release, we would suggest to stay invested in it but not
to further add it to your portfolio.
Why this Stance?
With the growing level of deposits, Cullen/Frost has expanded
organically. The level of deposits increased 2.6% in the first
nine months of 2013. The growing deposit base should help the
company generate loans and meet other general business purposes.
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.
During third-quarter 2013, 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 markets.
However, with the growing level of non-interest expenses, the
company is exposed to operational risks. Non-interest expenses
surged 6.6% year over year in the first nine months of 2013.
Continuation of this trend will remain a hindrance for
For Cullen/Frost, over the last 60 days, the Zacks Consensus
Estimate for 2013 and 2014 remained stable at $3.78 and $4.08 per
share, respectively. Currently, Cullen/Frost carries a Zacks Rank
Other Stocks to Consider
Some better-ranked Southwest banks include
ViewPoint Financial Group, Inc.
) with a Zacks Rank #1 (Strong Buy), while
Southside Bancshares Inc.
Texas Capital BancShares Inc.
) carry a Zacks Rank #2 (Buy).
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VIEWPOINT FINL (VPFG): Free Stock Analysis
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