Texas Capital Remains at Outperform - Analyst Blog

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We have reaffirmed our Outperform rating on Texas Capital Bancshares Inc. ( TCBI ) based on its solid fundamentals and growth opportunities in the current economic environment.

Texas Capital reported first-quarter 2012 operating earnings of 70 cents per share, surpassing the Zacks Consensus Estimate of 62 cents. The results were significantly ahead of the prior-year quarter's earnings of 31 cents per share.

Quarterly results of Texas Capital benefited from an increase in the top line, aided by higher net interest income as well as non-interest income. However, it was partially offset by higher expenses. The improvements in the credit quality metrics were also quite impressive.

Net interest income of $88.2 million, was up 37% from the year-ago quarter driven by a 46% increase in total loans. Non-interest income increased 20% to $9.2 billion. Provision for credit losses plummeted 60% from the year-ago quarter to $3 billion. Yet non-interest expense grew 13% to $52.3 million.  

For Texas Capital, which has peers such as First Financial Bankshares Inc. ( FFIN ) and BancFirst Corporation ( BANF ), the business model remains a chief growth driver. The company has grown significantly since its inception, partly based on its ability to hire local lenders from its national competitors.

Texas Capital continues to perform well on a variety of metrics. Quite unlike its peers, the company continued to experience growth in loans and deposits over the past few years. In the midst of a slowing economy in Texas, we believe that this growth has stemmed from a gain in market share from its economizing competitors which struggled against Texas Capital's relationship-based model.

Moreover, the company's efforts to hire experienced bankers and expand its presence are encouraging. Though the resultant expenses that continue to grow remain a headwind, going forward we believe that with an eventual improvement in the Texan economy, the company would be further poised to experience an increase in earnings.

Encouraging Earnings Estimates Trends

Currently, for Texas Capital, the Zacks Consensus Estimate is $2.75 per share for 2012, reflecting a projected growth of around 38% year over year. For 2013, the Zacks Consensus Estimate is pegged at $2.85 per share.

Encouragingly, all the 13 estimates, for both 2012 and 2013, have moved north in the past 30 days. This moved up the Zacks Consensus Estimate by 15% for 2012 and 11% for 2013.

Texas Capital retains a Zacks #1 Rank, which translates into a short-term Strong Buy recommendation.

BANCFIRST OKLA (BANF): Free Stock Analysis Report
FIRST FIN BK-TX (FFIN): Free Stock Analysis Report
TEXAS CAP BCSHS (TCBI): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: BANF , FFIN , TCBI

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