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Texas Capital (TCBI) Displays Organic Growth: Time to Hold?

A favorable operating backdrop with the anticipation of another interest rate hike by the Fed has driven investors’ optimism for banking stocks. Therefore, we can add some of them to our portfolio based on the banks’ strong fundamentals and solid long-term prospects.

Texas Capital Bancshares, Inc. TCBI is one such stock. Top-line strength, easing margin pressure and a strong capital position are major driving factors. However, escalating expenses remain a concern.

Continued loan and deposit growth, along with a diversified fee income base, aided the company to rally 6.3% over the past six months compared with 5.2% growth recorded by the industry.



Further, the company’s earnings estimates inched up 1.3% for the current year, in the last 30 days. It currently carries a Zacks Rank #3 (Hold).

Organic growth remained a key strength at Texas Capital, as reflected by its revenue growth story, primarily due to increased net interest income, driven by rise in average earning assets. Moreover, the company’s latest MCA business is anticipated to bolster earnings in 2017 and beyond. Furthermore, a diversified fee income base will likely support revenue growth in the near term.
 
After years of facing a declining trend, the company reported a stabilized net interest margin (NIM) in 2016. Moreover, as a result of the recent rate hikes since December 2016, the company reported an expanding NIM in the first nine months of 2017. Also, it has been benefiting from better fee pricing and improved loan yields.

Growth remains the key story at Texas Capital and the company continues to perform well on a variety of metrics. It continues to experience growth in loans and deposits. Nonetheless, we believe this growth has stemmed from a gain in market share from the company’s economizing competitors which struggled against Texas Capital’s relationship-based model.

However, the company continues to witness an elevation in expenses. Though its efforts to hire experienced bankers and expand the company’s presence are encouraging, the resultant expenses, which continue to rise at a rate higher than the revenues, negate the incremental effects of business expansion.

Stocks to Consider

Enterprise Financial Services Corporation EFSC has been witnessing upward estimate revisions for the last month. Additionally, the stock jumped more than 21% over the past year. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

First Financial Bancorp FFBC has been witnessing upward estimate revisions for the past month. Also, the company’s shares have risen nearly 18.9% in a year’s time. It holds a Zacks Rank of 2, at present.

Chemical Financial Corporation CHFC has been witnessing upward estimate revisions for the past 60 days. In six months’ time, the company’s share price has been up more than 5%. It also carries a Zacks Rank of 2.

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Chemical Financial Corporation (CHFC): Free Stock Analysis Report
 
First Financial Bancorp. (FFBC): Free Stock Analysis Report
 
Enterprise Financial Services Corporation (EFSC): Free Stock Analysis Report
 
Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report
 
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