This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

KBW Downgrades Cullen/Frost (Update 2)

Stocks in this article: CFR USB BOH

Updated with market close information.

NEW YORK ( TheStreet) -- KBW analyst Brady Gailey late on Tuesday lowered his rating for Cullen/Frost Bankers to "Underperform," despite calling the San Antonio "one of our highest quality names under coverage."

Cullen Frost's pulled back 1% to close at $51.97, after rising 12% over the previous month. The shares were still down 11% year-to-date, comparing favorably in a generally difficult year for bank stocks, to a 27% decline for the KBW Bank Index (I:BKX).

Based on a 46-cent quarterly payout, the shares have a dividend yield of 3.50%.

Gailey lowered his 12-month price target for Cullen/Frost to $45 from $46 and predicted the shares would slide another 10%, while also predicting a 25% increase for the KBW Bank Index.

The analyst said that "near-term headwinds, such as NIM pressure, minimal loan growth, no near-term earnings upside from consolidation, etc., will weigh on its premium valuation in 2012."

Cullen Frost had $17.7 billion in total assets as of Sept. 30, operating 132 branches in Texas. The company trades at a premium to most other large U.S. banks, at 1.9 times tangible book value, according to SNL Financial, and 14.5 times the consensus 2012 earnings estimate of $3.63, among analysts polled by FactSet.

You get what you pay for, and in the case of Cullen Frost, investors have seen strong earnings performance, with no surprises. The company was included among TheStreet's 10 Bank Stocks Bringing Home the Bacon since Cullen Frost ranks near the top of actively traded U.S. banks for earnings performance, over the past five years.

Gailey lowered his 2012 EPS estimate for Cullen/Frost to $3.28 from $3.40, and sees the company's net interest margin -- essentially the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- falling "from 3.74% currently to approximately 3.5% by year-end 2012, causing spread income to remain under pressure." The analyst's "down margin forecast is driven by repricing in its loan book (currently yielding 5.0%) and its bond book (currently yielding 4.6% with an approximately 4 year duration), without a material amount of loan growth or cash liquidity deployment."

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs