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."

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