On Wednesday, Truist Securities increased its price target on shares of BOK Financial (NASDAQ:BOKF) to $112 from the previous target of $94, while keeping a hold rating on the stock. The adjustment came after the firm reviewed BOK Financial's second-quarter results and revised its core earnings per share (EPS) estimates for 2024 and 2025.
The revised estimates for the core EPS are now $7.85 for 2024, up from $7.38, and $7.93 for 2025, a slight increase from $7.92. Truist Securities attributed these changes primarily to reduced expenses and a marginal increase in fee income, which are expected to balance out the projected lower net interest income (NII) in 2025 due to slower balance sheet growth.
A key highlight of BOK Financial's performance was the growth in non-interest bearing (NIB) deposits, which saw a 5% quarter-over-quarter increase. This growth supports the firm's confidence in the bank's ability to maintain its deposit mix in the low 20% range.
Despite fees and commissions falling 5% below expectations, there is an anticipation of improvement in these areas, especially if mortgage banking and trading volumes increase as a result of potential rate cuts.
The expense guidance provided by BOK Financial indicates a mid-single-digit increase, which is based on an adjusted 2023 expense base that excludes a $43.8 million FDIC special assessment and $3.4 million in BOKF Insurance sales expenses. Consequently, Truist Securities has lowered its expense forecast to $1,351 million for 2024 and $1,404 million for 2025.
In summary, Truist Securities maintains a neutral stance on BOK Financial's stock, suggesting it is nearing fair value at 13.2 times the firm's projected 2025 EPS. With the updated price target, the firm values the stock at 14.1 times the estimated 2025 earnings per share.
In other recent news, BOK Financial Corporation has reported a strong performance in the second quarter of 2024, with a net income of $163.7 million, or $2.54 per diluted share. After adjustments for notable items, earnings stood at $131.1 million, with an EPS of $2.02.
The company has attributed its robust performance to its diversified loan portfolio, disciplined credit quality, and industry-leading fee income. Notably, BOK Financial has witnessed growth in its commercial loan segment and received positive feedback from clients on their recently launched wealth management platform.
Looking ahead, the company expects net interest income growth to continue into 2024, with provision expenses expected to be similar to or lower than the levels seen in 2023. The company's executives anticipate a stable net interest margin, influenced by loan growth and interest rates. However, they also anticipate mid-single-digit expense growth, along with a deposit beta in the mid-50s in a downward rate scenario.
BOK Financial also highlighted its openness to mergers and acquisitions, awaiting the right opportunities. Despite experiencing paydowns in their CRE portfolio as borrowers refinance, the company remains optimistic about future growth, particularly in the C&I loan segment.
InvestingPro Insights
In light of Truist Securities' revised price target for BOK Financial, a closer look at the recent InvestingPro data and tips can provide additional context for investors. BOK Financial's market capitalization stands at $6.84 billion, and it currently has a P/E ratio of 14.96, reflecting investor sentiment and the company's earnings over the past year. The stock is trading near its 52-week high, at 98.17% of this peak, signaling strong recent performance with a price total return of 28.92% over the last six months.
InvestingPro Tips indicate that BOK Financial has a track record of consistent dividend payments, having raised its dividend for 10 consecutive years and maintained payments for 20 consecutive years. In terms of profitability, analysts predict the company will remain profitable this year, which aligns with the company's positive performance over the last twelve months.
Still, there are concerns as analysts have revised their earnings downwards for the upcoming period, and the company has been flagged for weak gross profit margins and a valuation that implies a poor free cash flow yield.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available that delve deeper into BOK Financial's financial health and future prospects. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to these exclusive insights.
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