It seems wise to buy BOK Financial Corporation BOKF stock now, given its strong fundamentals and efforts to diversify the loan portfolio. The favorable higher interest rate environment will act as a tailwind. The company’s steady capital-deployment activities are backed by a solid balance-sheet position.
The company has been witnessing upward earnings estimate revisions lately, reflecting analysts’ optimism regarding its earnings growth potential. In the past 30 days, the Zacks Consensus Estimate for earnings has moved 5.2% and 11.7% north for 2022 and 2023, respectively. The stock currently sports a Zacks Rank #1 (Strong Buy).
Its price performance also seems decent. The stock has gained 13.2% in the past three months against the industry’s fall of 0.4%.
Image Source: Zacks Investment Research
What Makes BOK Financial Attractive?
Impressive Organic Growth: BOK Financial’s loan and deposits’ growth sets the stage for a strong balance sheet. The company witnessed loan increase at a compound annual growth rate (CAGR) of 4.2% in the last five years (2017-2021). Deposits also escalated, recording a five-year CAGR of 16.9% in 2021. Given a diverse business model and an increase in loans to individuals, the company is well-poised for organic growth.
Higher Net Interest Revenues: With the Federal Reserve raising rates numerous times already so far this year, along with expectations of more such hikes in the upcoming period, BOK Financial’s net interest revenues and the yield on interest-earning assets are expected to witness robust growth. After slashing rates thrice in 2019, the central bank cut interest rates to near zero in March 2020 (to cushion the U.S. economy from the coronavirus-induced mayhem), which hurt the company’s net interest revenues and margins. Given the aggressive rate hike expectations and solid loan demand, the company is projecting the net interest margin (NIM) to increase to 3.5% by the first half of 2023.
Robust Liquidity Profile: BOK Financial had $1.6 billion of cash and due from banks and interest-bearing cash and cash equivalents as of the third-quarter end. This is sufficient to fund $1.4 billion of borrowings as of Sep 30, 2022. With $9.8 billion of secured wholesale borrowing capacity, the company has ample financial flexibility. Given its strong liquidity profile, the company might be able to continue meeting debt and interest obligations in the near term even if the economic situation worsens. This will also help the company in its capital-deployment activities.
Earnings Growth: BOK Financial’s recorded earnings growth of 7.2% in the past three to five years. While earnings for 2022 are projected to decline 16.7%, the same is likely to rebound in 2023, rising 17.8%.
The stock has a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Strong Leverage: BOK Financial’s debt/equity ratio is 0.08, lower than the industry average of 0.22. The relatively strong financial health of the company is likely to help it perform better than its peers in a dynamic business environment.
Stocks Worth a Look
A couple of other stocks from the finance space worth considering are Capital Southwest CSWC and AssetMark Financial AMK.
The Zacks Consensus Estimate for Capital Southwest’s current fiscal-year earnings has moved 4.7% higher in the past 30 days. In the past month, its shares have rallied 1.1%. Currently, Capital Southwest carries a Zacks Rank #2 (Buy).
AssetMark Financial currently carries a Zacks Rank #2. Its earnings estimates for the current year have been revised 5.4% upward over the past 30 days. In the past month, its shares have rallied 27.6%.
Zacks Names “Single Best Pick to Double”
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.