NEW YORK ( TheStreet) -- Bank stocks have gotten so hot that some analysts are advising investors to stay away from even the strongest performing names. Sterne Agee analyst Brett Rabatin on Tuesday downgraded Cullen/Frost Bankers ( CFR) of San Antonio and First Financial Bancshares ( FFIN) of Abilene, Texas to "underperform" ratings from "neutral" ratings.
Cullen/Frost had $22.6 billion in total assets as of June 30 and is included among the 24 components of the KBW Bank Index ( I:BKX). Cullen Frost's shares returned 37% year-to-date through Monday's close at $73.18, following a return of 6% during 2012. The index returned 30% this year through Monday, following a return of 30% during 2012. The shares at Monday's close traded for 18.3 times the consensus 2014 earnings estimate of $4.00 a share, among analysts polled by Thomson Reuters. That is a particularly high valuation for a bank of this size in the current environment. Based on a quarterly payout of 50 cents, the shares have a dividend yield of 2.73%. Investors place a premium on Cullen/Frost because of the bank's strong and amazingly consistent long-term earnings track record. The bank's mean 10-year return on average assets (ROA) through 2012 was 1.37%, trailing only U.S. Bancorp ( USB) among components of the KBW Bank Index. Cullen/Frost's mean 10-year return on common equity (ROCE) through 2012 was 14.08%, trailing only USB, with a mean ROCE of 18.13% and Wells Fargo ( WFC), which had a mean 10-year ROCE of 15.45%. But over the 10-year period, Cullen/Frost's minimum annual ROA was a solid 1.12%, with Commerce Bancshares ( CBSH) of Kansas City, Mo., coming in second place among KBW Bank index components, with a minimum ROA of 0.95%. Cullen/Frost's minimum annual ROCE over the 10-year period was 9.76%, in 2009. Only U.S. Bancorp had a higher minimum annual ROCE, of 10.13%, also in 2009. Then again, at the end of 2009, Cullen/Frost had a tangible equity ratio of 8.56%, according to Thomson Reuters Bank Insight, compared to a much lower 5.91% for USB. In a note to clients on Tuesday, Rabatin called Cullen/Frost "qualitatively one of the best banks in the country," but added that "2Q13 results were generally disappointing due to underwhelming loan growth (particularly relative to TX peers) and flattish sequential revenue growth."