Cullen/Frost Bankers(US:CFR)2019-10-31 18:07Financial Data and Key Metrics Changes - In Q3 2019, Cullen/Frost earned $109.8 million or $1.73 per diluted common share, compared to $115.8 million or $1.78 per share in the same quarter last year [7] - Return on average assets was 1.35% for the quarter, down from 1.49% in Q3 2018 [7] - Average deposits increased to $26.4 billion from $26.2 billion year-over-year [7] - Average loans rose to $14.5 billion, a 5.8% increase from the previous year [7] - Provision for loan losses was $8 million, up from $6.4 million in Q2 2019 and $2.7 million in Q3 2018 [7] Business Line Data and Key Metrics Changes - Commercial loans focused on consistent growth, with new relationships increasing by 5% year-over-year [10] - Consumer banking saw a 48% increase in net new customer growth compared to the previous year [12] - Consumer loan portfolio averaged $1.7 billion, a 1.9% increase year-over-year [13] - The booking ratio for commercial real estate (CRE) decreased to 24% from 32% year-over-year [11] Market Data and Key Metrics Changes - Texas unemployment remained low at 3.4% for five consecutive months [17] - Job growth in Texas decelerated to 0.9% in September, down from 3% in July [17] - Houston's unemployment rate fell to 3.6% in September, with employment growth at 2.2% for Q3 [19] - Austin's unemployment rate stood at 2.7%, with the information sector showing 23% job growth year-to-date [20] Company Strategy and Development Direction - The company plans to open 25 new financial centers in Houston over the next two years, with several already opened [12] - Focus on maintaining quality standards while pursuing balanced growth in commercial loans [10] - The company aims to enhance its technology and service offerings to attract more customers [66] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for loan growth in Q4, particularly in commercial and industrial (C&I) segments [27] - The interest rate environment poses challenges, but the company remains focused on fundamentals [13] - Management anticipates continued pressure on net interest margin (NIM) due to competitive pressures [31] Other Important Information - Total non-interest expenses increased by approximately 7.8% year-over-year, with specific costs related to Houston expansion and headquarters relocation [24] - The company expects a full-year earnings estimate of $6.81, which is considered reasonable [24] Q&A Session All Questions and Answers Question: Loan growth and competition - The company noted that losing deals to structure is due to competition from small banks, large banks, and private equity [26] Question: Optimism for loan growth in Q4 - Management indicated that a stronger pipeline in C&I is driving optimism for loan growth in Q4 [27] Question: Net interest margin guidance - The company maintains a full-year NIM guidance of 375 basis points, factoring in recent rate cuts [28] Question: Deposit growth and seasonality - The company reported strong deposit growth, with no unusual seasonal factors affecting this quarter [32] Question: Distressed energy loan exposure - The company has approximately $87 million in energy loans classified as problems, primarily from two non-performing loans [33] Question: Expense growth expectations for 2020 - Management anticipates higher expense growth in 2020 due to full-year impacts from new headquarters and branch openings [39]