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Cullen/Frost Bankers Inc CFR

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Morningstar’s Analysis

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Cullen/Frost Keeps Expenses Low in 2020 as Revenue Feels Pressure

Eric Compton, CFA Senior Equity Analyst

Analyst Note

| Eric Compton, CFA |

Narrow-moat-rated Cullen/Frost reported decent fourth-quarter earnings, with EPS of $1.38 compared with Factset consensus of $1.28. This equated to a return on equity of 8.6% during the quarter. Revenue remained under some pressure, with net interest income on a reported basis down 3.5% year over year and roughly 0.5% quarter over quarter, while fees were down 4% year over year. Expenses were up 1% year over year, leading to a decline in preprovision net revenue of 12%. Provisioning dropped to its lowest level for the year. After peaking at $175 million in the first quarter, provisioning has now dropped to just under $14 million. 2021 will be another difficult year to predict as a second round of Paycheck Protection Program loans flows through the balance sheet, yields likely remain under some pressure, and provisioning potentially swings around again. Based on these results, we will likely raise our fair value modestly, likely by a mid-single-digit percentage.

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Company Profile

Business Description

Cullen/Frost Bankers is a financial holding company, headquartered in San Antonio. One of the 50 largest U.S. banks, Frost provides a wide range of banking, investments, and insurance services to businesses and individuals across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Permian Basin, Rio Grande Valley, and San Antonio regions.

Contact
111 W. Houston Street
San Antonio, TX, 78205
T +1 210 220-4011
Sector Financial Services
Industry Banks - Regional
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 4,685

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