Texas Capital Bancshares(TCBI) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income to common of $64.3 million for the quarter, up$ 34.5 million year-over-year, with earnings per share increasing by $0.74, marking the highest level in two years adjusted for divestiture [58] - Quarterly PPNR grew 43% year-over-year to$ 96.4 million, the highest since the transformation began in Q1 2021 [58] - Total revenue increased by $46.2 million or 20% compared to Q2 2022, benefiting from a 76% increase in noninterest income [85] Business Line Data and Key Metrics Changes - Investment banking and trading income reached a record$ 27.5 million, up $8.7 million or 47% quarter-over-quarter, marking the third consecutive record quarter since launching the investment banking business [53][84] - Wealth management income increased 8% quarter-over-quarter, with assets under management growing 6% [42] - Gross payment revenues increased by 12% year-over-year, indicating a successful multiyear focus on proprietary applications [36] Market Data and Key Metrics Changes - Deposit balances increased by 5% or$ 1.1 billion in the quarter, with the loan-to-deposit ratio remaining flat at 91% [44] - Noninterest-bearing deposits decreased by 19%, reflecting a shift to interest-bearing deposits [64] - The company experienced a 10% increase in criticized loans, primarily due to special mention real estate loans [95] Company Strategy and Development Direction - The company is focused on a multi-quarter business model transformation aimed at reducing dependence on rate-driven earnings and enhancing revenue stability [13] - Continued investment in the investment banking platform is expected to contribute at least 10% of total revenue by 2025 [53] - The firm aims to maintain a strong liquidity position, targeting a CET1 ratio of at least 12% by year-end [99] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transformation and the ability to meet long-term targets despite changing market conditions [74] - The company anticipates manageable real estate migration and believes its client selection and underwriting guidelines provide adequate protection against realized loss [68] - Management noted that while loan growth was lower this quarter, new client acquisition increased by over 30% compared to the prior quarter [139] Other Important Information - The company has made significant investments over the last two years, resulting in expected operating and financial efficiencies [71] - The firm has successfully launched the Texas Capital Texas Equity ETF, marking a significant expansion of its asset management capabilities [131] - The company reported a tangible book value per share of $57.93, a near all-time high, reflecting a 7% year-over-year increase [55] Q&A Session Summary Question: What is the outlook for investment banking and trading? - Management indicated that the investment banking pipeline is broad and diverse, with expectations for continued solid performance in the third and fourth quarters [119] Question: Can you provide an update on staffing expectations? - Management noted a 6% decline in noninterest expenses quarter-over-quarter, with high-quality staffing now in place and stability achieved [103][104] Question: What are the expectations for loan growth? - Management clarified that loan growth is not the primary focus, emphasizing the importance of recycling capital and meeting client needs through various solutions [138]