BOK Financial (BOKF) Q4 Earnings Lag, Expenses Flare Up

BOK Financial CorporationBOKF reported negative earnings surprise of 18.3% in fourth-quarter 2016. Earnings per share of 76 cents lagged the Zacks Consensus Estimate of 93 cents. Moreover, the bottom line declined around 14.6% from the prior-year quarter. Reported results included certain one-time items.

Lower-than-expected results were driven by higher expenses. However, rise in loans and deposits balances aided revenue growth. Notably, nil provisions in the quarter were a favorable factor.

Net income attributable to common shareholders was $50.0 million, down 16.1% from $59.6 million in the year-ago quarter.

For full-year 2016, net income attributable to shareholders was $232.7 million or $3.53 per share, down from $288.6 million or $4.21 per share in the prior year. Results also lagged the Zacks Consensus Estimate of $3.69.

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Revenues & Expenses Rise

For full-year 2016, BOK Financial's revenues totaled $1.50 billion, up 4.9% year over year. Further, the revenue figure surpassed the Zacks Consensus Estimate of $1.45 billion.

Revenues came in at $359.5 million, up 1% year over year. However, the figure lagged the Zacks Consensus Estimate of $365 million.

Net interest revenue came in at $194.2 million, up 7.1% year over year. Net interest margin (NIM) also contracted 1 basis point (bp) year over year to 2.63%.

BOK Financial's fees and commissions revenues amounted to $162 million, up 5.4% on a year-over-year basis. The quarter witnessed growth in several income categories, partially offset by lower brokerage and trading revenues and other revenues.

Total other operating expenses were $265.5 million, up nearly 15.2% year over year. The rise was driven by increase in almost all components of expenses.

Total loans at BOK Financial as of Dec 31, 2016 were $17.0 billion, up 6.9% year over year. As of the same date, total deposits amounted to $22.7 billion, up 7.6% from the year-ago period.

Credit Quality: A Mixed Bag

BOK Financial's asset quality deteriorated during the quarter. The company recorded nil provisions in the fourth quarter. Net recovery was $1.2 million compared with charge offs of $3.0 million in the prior-year period.

Further, the combined allowance for credit losses was 1.52% of outstanding loans as of Dec 31, 2016, up from the year-ago period of 1.43%.

Additionally, non-performing assets totaled $356.6 million or 2.09% of outstanding loans and repossessed assets as of Dec 31, 2016, up from the prior-year period of $251.9 million or 1.58%.

Steady Capital Position

Armed with healthy capital ratios, BOK Financial and its subsidiary banks exceeded the regulatory well-capitalized level. The company became subject to new regulatory rules on Jan 1, 2015. As of Dec 31, 2016, the common equity Tier 1 capital ratio was 11.27%.

Tier 1 and total capital ratios were 11.27% and 12.87%, compared with 12.13% and 13.30%, respectively, as of Dec 31, 2015. Leverage ratio was 8.72% as against 9.25% as of Dec 31, 2015.

Our Viewpoint

BOK Financial's consistent revenue growth keeps us optimistic about the stock. Moreover, continued growth in loan balances support the company's organic growth strategy. In addition, its diverse revenue mix and favorable geographic footprint should support growth in the upcoming quarters.

However, several issues, including the stringent regulatory landscape and rising expenses, remain key concerns.

BOK Financial Corporation Price, Consensus and EPS Surprise

BOK Financial Corporation Price, Consensus and EPS Surprise | BOK Financial Corporation Quote

Currently, BOK Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Performance of other Banks

Bank of America Corporation BAC reported fourth-quarter 2016 earnings. Rise in trading revenue as well as mortgage banking fees led to earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Further, the figure was 48% higher than the year-ago quarter number.

Driven by interest income, Wells Fargo & Company's WFC fourth-quarter 2016 earnings recorded a positive surprise of about 3%. Adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, it compared favorably with the prior-year quarter's earnings of $1.00 per share. Including net hedge ineffectiveness accounting impact of 7 cents, earnings came in at 96 cents per share.

Comerica Inc. CMA delivered a positive earnings surprise of 4.2% in fourth-quarter 2016. Adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. The adjusted figure excludes a restructuring charge of 7 cents per share. Also, earnings increased 43.8% year over year.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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