Texas Capital Bancshares TCBI continues to grow organically, primarily due to rise in net interest income, along with steady loan and deposit growth, which indicates its upside potential. However, lack of loan diversification andescalating expenses remain key concerns.
Nevertheless, the company has been able to gain analysts’ confidence over the past 30 days. The Zacks Consensus Estimate for current-year earnings has been revised slightly upward to $6.46 in the same period. The stock currently carries a Zacks Rank #3 (Hold).
Shares of Texas Capital have gained 2.7% over the past six months compared with 2,2% growth of the industry.
Diversified fee income base and rising interest rates have supported Texas Capital’s top-line growth over the past few years. Revenues witnessed a compound annual growth rate (CAGR) of 17.6% over the last five years (2014-2018). Notably, management expects net revenues to grow in high single-digit percent.
Further, Texas Capital benefits from robust balance sheet growth. The company continued to experience growth in total loans held for investment (CAGR of around 12.4%) and deposits (CAGR of 12.9%) over the last five years (2014-2018). We believe this growth has stemmed from gain in market share from the company’s economizing competitors that struggled against Texas Capital’s relationship-based model.
However, Texas Capital’s soaring expenses remain a major concern. Costs witnessed a CAGR of 16.5% over the last five years (ended 2018). The company’s efforts to improve technology platform and rising salaries and benefits expenses are major contributors to expense growth.
Also, nearly 61% of Texas Capital’s loan portfolio comprises commercial and real estate lending. Such high exposure depicts lack of diversification, which can be risky for the company amid challenging economy and competitive markets.
Stocks to Consider
Some better-ranked stocks in the same space are OP Bancorp OPBK, First Internet Bancorp INBK and The Bancorp, Inc. TBBK. All these stocks flaunt a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OP Bancorp’s current-year earnings has been revised 22.4% upward over the past 30 days. Also, its share price has seen a 14.5% rise in the past three months.
First Internet’s earnings estimates have been revised 12.3% upward for the ongoing year over the past 30 days. Also, in the past three months, its share price has increased 3%.
Earnings estimates for The Bancorp have moved up 9.1% for 2019 over the past 30 days. Also, its share price has seen a 5.7% rise in the past three months.
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