Frost CEO ‘true to the culture’
SAN ANTONIO — In his first earnings call as chairman and CEO of Cullen/Frost Bankers, Phil Green told securities analysts Wednesday he has no plans to shake up the San Antonio bank holding company.
“First of all, what we’re going to do is we’re going to stay true to the culture that we’ve had for 150 years,” said Green, successor to Dick Evans, who retired last month after more than 18 years at the helm and 45 years overall at the bank.
Green takes over leadership at a time when the major Texas bank is dealing with ongoing weakness in the oil industry, which accounts for 14.4 percent of its lending portfolio and contributed to a 4.8 percent
drop in profits in the quarter ended March 31. Nonperforming loans more than doubled over those three months, and the company continued building its reserves against souring energy loans.
“I frankly don’t wake up in the morning thinking the first thing about the business being energy,” said Green, who was Frost’s chief financial officer for 20 years before becoming president at the beginning of last year.
“We spend a lot of time talking about energy and dealing with energy. I don’t think it really ought to define us because of what we’re doing and the success we’re having in other areas and (in) just growing the business,” Green added.
Cullen/Frost earned $66.8 million, or $1.07 a share, in the quarter, down from $70.1 million, or $1.10 a share, in the same period a year ago. Still, the company managed to exceed analysts’ estimates by 3 cents a share, according to the average estimate of nine analysts polled by Thomson Financial Network.
Cullen/Frost Bankers Inc., the parent company for Frost Bank, had $28.4 billion in assets as of March 31.
The bank set aside $28.5 million in provisions toward future loan losses. That follows a fourthquarter provision of $34 million, the highest for the bank in more than 20 years.
“Every Texas bank this quarter has ended up putting bigger provision than people expected,” said Brett Rabatin, a senior research analyst at Piper Jaffray.
But, he added, “I don’t think we will have to worry about provisioning being as high … going forward.”
Green cited “continued energy sector stress” for a sharp increase in nonperforming assets, which were $180 million at the end of the first quarter, or more than double the $85.7 million at the end of last year and triple the amount from a year ago. The last time the company had as much in nonperforming assets was the fourth quarter of 2009 in the aftermath of the global financial crisis.
Green said in an interview that the problems today are “localized in a specific industry.”
In fact, the increase in nonperforming loans is the result of just a few energy loans, he added. Energy-related problem loans totaled $594 million, or 36 percent of the bank’s energy portfolio at the end of the first quarter. Those loans account for almost 62 percent of all of its problem loans.
Crude oil prices have recovered to around $45 a barrel after plunging as low as $26 a barrel in the first quarter. Prices have tumbled from a recent high of $107 a barrel in June 2014.
Though Cullen/Frost’s shares this year got off to their worst start in at least three decades, the stock has rebounded strongly. The shares had fallen 29 percent to $42.55 by Jan. 25. But since then, the shares are up 4 percent for the year based on Wednesday’s closing price of $62.44.