The U.S. shale oil collapse has now gotten so bad that it is beginning to impact other areas of the economy. In fact, for shareholders of BOK Financial Corporation (BOKF), Cullen/Frost Bankers, Inc. (CFR) and Texas Capital BancShares Inc (TCBI), the energy slump is already making a meaningful impact on the regional banking business.
As U.S. oil companies struggle to remain solvent, regional banks with high exposure to energy assets have found themselves in a tricky situation.
BOK Financial Corporation (BOKF)
BOKF shares are already down 4.3% year-to-date, and WTI’s push to new 13-year lows drove the bank to increase loan loss provisions for Q4 2015 to $22.5 million. Prior to the January adjustment, BOK had guided for Q4 loan loss provisions as low as $3.5 million.
“It’s going to get worse before it gets better,” Raymond James analystMichael Rose said of the environment for energy-exposed regional banks like BOKF. However, the firm sees potential buying opportunities opening up in the space. Rose notes that many of the energy loans are some of the most conservatively-underwritten loans on the books.
“I think we’re setting up for a tremendous buying opportunity in a lot of these names because these banks are not going to lose money,” Rose said in January.
Unfortunately, Standard & Poors and Moody’s aren’t as optimistic when it comes to BOKF. In early February, S&P lowered its long-term issuer credit rating for BOKF and reiterated a negative outlook. Moody’s recently placed BOK Financial on review for a credit downgrade as well.
Currently, BOKF has the second-highest energy loan composition among all U.S. regional banks at 19.4%.
Cullen/Frost Bankers, Inc. (CFR)
CFR is…
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