Independent Bank Group (IBTX +1.2%) and Prosperity Bancshares (PB -1.4%) are boosted to Buy from Hold, and Cullen/Frost (CFR -1.5%) to Hold from Sell. The reasoning isn't hard to gauge, given oil's doubling in price over the past four months.
CFR is higher by 38% since Feb. 1, with IBTX up 32% and PB ahead 25%.
Associated Banc-Corp (ASB +0.5%) after the close on Friday announced a Q4 increase of $13M in the loan loss allowance for its energy portfolio. The move brings the loss ratio up to 5.6% at year-end vs. 3.8% a quarter earlier, and will cut EPS by about $0.03. Full results are due on Jan. 21.
The warning is notable, says Evercore ISI's Stephen Moss, in that the bank's $752M energy portfolio (4% of total loans) consists entirely of 1st-lien E&P credits on oil and gas reserves. Previously, Evercore had seen the greatest near-term risk to earnings as coming from oilfield services loans, but the ASB move suggests rapidly growing stresses for E&P borrowers.
Lenders on watch include: Cullen/Frost (CFR -0.6%), where energy makes up 16% of total loans, Zions (ZION -0.8%) (8%), Comerica (CMA -0.1%) (7%), Texas Capital Bancshares (TCBI +0.1%) (7%), Independent Bank Group (IBTX +0.9%) (7%), and Prosperity Bancshares (PB -0.9%) (4%). Cullen/Frost and Prosperity are reiterated at Sell.
Texas-based Independent Bank Group (IBTX -0.7%) and LegacyTexas Financial Group (LTXB -5.6%), and Mississippi-based Hancock Holding Company (HBHC +0.8%) are downgraded to Equal Weight from Overweight at Stephens.
The three are lower by between 7% and 14% over the past month.