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Texas Banks' Earnings Are In The Books: Here's How To Play It

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Texas Banks' Earnings Are In The Books: Here's How To Play It
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The collapse in oil prices has been a good thing for many parts of the U.S. economy, lowering fuel and material costs and providing additional disposable income to consumers. However, the weak oil environment has also had a negative impact on parts of the economy outside of the energy sector.

In a new report, Piper Jaffray analyst Brett Rabatin discusses the outlook for Texas banks, which have been suffering right along with many of their local oil industry customers. Here’s a breakdown of what Rabatin had to say about the group following Q2 earnings.

Criticized Loans

All the Texas banks discussed in the report had “fairly sizable” increases in criticized and classified energy loans in Q2. Rabatin sees growing concern in the market about the risks involved with these types of loans and points out that the Texas banks trade at a multiple discount to national peers.

Uncertain Outlook

Rabatin said that the overall outlook for Texas in coming quarters is murky. However, he sees “a lot of bright spots” in the state, including the Dallas region.

Stock Picks

Rabatin is cautious on Comerica Incorporated (NYSE: CMA) and fails to see potential catalysts for the stock outside of rising interest rates.

However, he has a more positive outlook for Texas Capital BancShares Inc (NASDAQ: TCBI).

“We still believe TCBI has a strong growth catalyst and potential profitability improvement… but we are a little more cautious on credit quality,” he explained.

Piper Jaffray has Overweight ratings on Texas Capital, BOK Financial Corporation (NASDAQ: BOKF), Legacy Texas Financial Group Inc (NASDAQ: LTXB) and Hilltop Holdings Inc. (NYSE: HTH).

Latest Ratings for CMA

DateFirmActionFromTo
Jan 2017CitigroupDowngradesNeutralSell
Jan 2017JP MorganUpgradesNeutralOverweight
Dec 2016Bank of AmericaUpgradesUnderperformNeutral

View More Analyst Ratings for CMA
View the Latest Analyst Ratings

Posted-In: Brett Rabatin Piper JaffrayAnalyst Color Long Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

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