BOK Financial (BOKF) Down 2.1% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for BOK Financial Corporation BOKF. Shares have lost about 2.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

BOK Financial Beats Q1 Earnings and Revenue Estimates

Driven by higher revenues, BOK Financial reported a positive earnings surprise of 29.8% in first-quarter 2017. Earnings per share of $1.35 surpassed the Zacks Consensus Estimate of $1.04. Moreover, the bottom line jumped 110.9% from the prior-year quarter.

Better-than-expected results were primarily driven by higher net interest income. Rise in loan balances aided revenue growth. Notably, the absence of provisions in the quarter acted as a tailwind. However, the results were partially offset by an increase in expenses.

Net income attributable to common shareholders came in at $88.4 million, up 107.5% from $42.6 million in the year-ago quarter.

Revenue Growth More than Offsets Higher Expenses

Revenues came in at $365.5 million, up 17.6% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $359 million.

Net interest revenue came in at $201.2 million, up 36.3% year over year. Net interest margin (NIM) also expanded 16 basis point year over year to 2.81%.

BOK Financial’s fees and commissions revenues amounted to $164.4 million, up slightly on a year-over-year basis. The quarter witnessed growth in several income categories, partially offset by lower mortgage banking and other revenues.

Total other operating expenses were $244.7 million, up nearly 1% year over year. The increase was caused by almost all components of expenses, except insurance and other costs.

Total loans at BOK Financial as of Mar 31, 2017 were $17.0 billion, almost stable compared with the prior quarter. As of the same date, total deposits amounted to $22.6 billion, down nearly 1% from the prior quarter.

Credit Quality: A Mixed Bag

The company did not record any provisions during the quarter. Also, net recovery was $0.7 million as against charge offs of $22.5 million in the prior-year period.

Further, non-performing assets totaled $333.9 million or 1.96% of outstanding loans and repossessed assets as of Mar 31, 2017, down from of $349.3 million or 2.18% in the prior-year period.

However, the combined allowance for credit losses was 1.52% of outstanding loans as of Mar 31, 2017, up from 1.50% in the year-ago period.

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 Mar 31, 2017, the common equity Tier 1 capital ratio was 11.60%.

Tier 1 and total capital ratios were 11.60% and 13.26%, respectively, compared with 12.00% and 13.21% as of Mar 31, 2016. Leverage ratio was 8.89% compared with 9.12% as of Mar 31, 2016.

Outlook

For full-year 2017, management expects mid single-digit loan growth reflected by growth in C&I personal loans and mortgage loans. Low-single digit revenue growth from fee-generating businesses is expected on a trailing 12-month basis.

Continued gradual decline in the securities portfolio is expected with an overall reduction of about $700 million for 2017.

Regarding net interest income (NII), low single digit growth is expected. NIM is expected to increase or remain stable.

Management expects expenses to be almost stable or slightly down year over year for 2017.

Loan loss provision for 2017 is expected in the range of $15–$20 million.

The company anticipates continued capital deployment through acquisitions, organic growth, share buybacks and dividends.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been seven upward revisions in the last two months.

BOK Financial Corporation Price and Consensus

 

BOK Financial Corporation Price and Consensus | BOK Financial Corporation Quote

VGM Scores

At this time, the stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'C'. Following the exact same course, the stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is solely suitable for momentum investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock sports a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.

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