Why is BOK Financial (BOKF) up 7% since its last earnings report?

It has been about a month since BOK Financial’s (BOKF) last earnings report. The stock rose about 7% in that time, outperforming the S&P 500.

Will the recent positive trend continue until its next earnings release, or is BOK Financial headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

BOK Financial lags Q1 earnings estimates, shares rise

BOK Financial reported net earnings per share of 88 cents that missed the Zacks Consensus Estimate of $1.29 for the first quarter of 2020. Moreover, the financial results compared unfavorably to the prior-year quarter’s earnings per share of 1. $54.

The decreasing margins and deteriorating loan quality were worrying. However, the driving factors behind the revenue growth were revenue growth, lower costs and deposit growth.

Net income was $62.1 million compared to $110.6 million reported in the same quarter last year.

Revenues are rising, costs and loans are falling

First-quarter adjusted revenues were $441.7 million, up 3.7% year-over-year. However, the revenue numbers missed the Zacks Consensus Estimate of $448.2 million.

Net interest income was $261.4 million, down 6% year over year. Moreover, NIM contracted 50 basis points year-over-year to 2.80%.

BOK Financial’s fee and commission revenues amounted to USD 192.7 million, an increase of 20% year-on-year. The recovery was primarily driven by higher revenues from custody and asset management activities, revenues from brokerage and trading activities, revenues from transaction cards and increased revenues from mortgage banking. This was partially offset by lower fees and deposit service charges and lower other revenues.

Total other operating expenses were $268.6 million, down 6.5% year-over-year. This was mainly due to lower personnel costs.

The efficiency rate improved to 58.62% from 64.80% in the previous year. Generally, a lower ratio means improved profitability.

Total lending as of March 31, 2020 was $22.5 billion, an increase of 3.2%. On the same day, total deposits were $29.2 billion, an increase of 15.4%.

Credit quality is deteriorating

In the quarter ending March, loan loss provisions were $93.8 million, compared to $8 million in the prior-year quarter. The total allowance for credit losses was 1.40% of outstanding loans as of March 31, 2019, compared to 0.94% in the year-ago period.

Additionally, non-performing assets amounted to $292 million, or 1.30%, of outstanding loans and foreclosed assets as of March 31, 2020, compared to $261.5 million, or 1.20%, in the prior-year period. Net write-offs were $17.2 million, up 7.1% year-over-year.

Capital position

Armed with healthy capital ratios, BOK Financial and its subsidiary banks have exceeded the regulatory level of good recapitalization. As of March 31, 2020, the Common Equity Tier 1 capital ratio was 10.98% compared to 10.71% as of March 31, 2019.

Tier 1 capital ratios and total capital ratios as of March 31, 2020 were 10.98% and 12.58%, respectively, compared to 10.71% and 12.24% as of March 31, 2019. The leverage ratio was 8.16 % compared to 8.76% on March 31, 2019.

Share an update on the buyback

During the January-March period, the company repurchased 442,000 million shares of common stock at an average price of $75.52 per share.

How have estimates changed since then?

It turns out that the estimate review has been trending downward over the past month. Due to these changes, the consensus estimate moved -5.79%.

VGM results

At this point, BOK Financial has a weak Growth Score of F, however its Momentum Score is performing slightly better at D. Following the exact same trajectory, the stock is rated D on the value side, placing it in the bottom 40% for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. No wonder BOK Financial is sporting a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

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