8. Cullen/Frost Bankers

Shares of Cullen/Frost Bankers ( CFR) of San Antonio closed at $58.19 Monday, returning 5% over the previous year. Based on a quarterly payout of 46 cents, the shares have a dividend yield of 3.16%. The dividend was increased by a penny on April 28.

First-quarter net income was $51.9 million, or 85 cents a share, increasing from $47.8 million, or 79 cents a share, during the first quarter of 2010. The provision for possible loan losses declined to $9.5 million during the first quarter from $13.6 million a year earlier. Net interest income increased 3% year-over-year to $141.8 million in the first quarter.

The net interest margin was 4.03% for the first quarter, increasing from.93% in the fourth quarter, but declining from 4.19% in the first quarter of 2010. The first-quarter ROA was 1.17%.

During the company's earnings conference call on April 27 following the earnings announcement, CEO Richard Evans warned that some lenders were returning to shoddy underwriting practices that led to the credit crisis, saying "It appears that some banks are at it again. In a period of historically low interest rates and very high liquidity, they're compromising sound lending practices in search of a higher return."

Following the earnings release, Michael Diana of Cantor Fitzgerald reiterated his buy rating on the shares with a $73 price target, saying that as the economy improves, his firm expects Cullen/Frost to report "a surge in net interest income," from "powerful loan growth, driven by Cullen/Frost's market share gains during the downturn," and a much higher net interest margin, "driven by asset sensitivity" in a rising rate environment.

The shares trade for 15 times the consensus 2012 earnings estimate of $3.84 a share, which is the highest valuation by this measure among the 10 banks listed here.

Diana is the only one out of 15 analysts covering Cullen/Frost to rate the shares a buy. Among the remaining analysts, 13 have neutral ratings and one analyst recommends selling the shares.

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