BOK Financial is bucking industrywide trends on two hot topics — loan growth and expenses.
The Tulsa, Oklahoma, company reported an 8% year-over-year increase in total loans and reaffirmed its forecast of loan growth in the upper single-digit percentages over the next 15 months. The anticipated uptick is based on favorable economic conditions in BOK's markets, businesses moving into those markets and a chance to make more loans as other banks pull back, executives said.
"This is a really unique opportunity we have that maybe you get once every 15 years or so — to definitely take market share and grow when others are less able to do that," BOK Chairman and CEO Stacy Kymes told analysts Wednesday during the company's third-quarter earnings call.
Kymes said that while some banks are "having to manage their liquidity and capital constraints, we're not."
BOK, the parent company of Bank of Oklahoma, is also going against the grain on expenses.
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Looking ahead, BOK is forecasting a "modest" uptick in expenses as it invests in technology and strategic initiatives. The company is expanding its commercial and wealth management services into the San Antonio market, and it plans to open a fixed income sales and trading office in Memphis, Tennessee.
Currently, the bank's efficiency ratio is 64%, which means that it's less efficient than competitors that have lower ratios. But Kymes said that figure is not a problem.
"Having a low-60s efficiency ratio doesn't bother us at all because we've got 40% to 50% of our revenues from fee-based businesses that carry a higher efficiency ratio," Kymes said on the call. "And so we're going to be prudent about expenses … but we're going to grow the company, and we're going to think about things from a long-term perspective, not a short-term perspective."
While BOK is defying certain industrywide trends, it is more aligned in other areas. Like many of its peers, the $48.9 billion-asset company is facing ongoing margin pressure as a result of rising funding costs. An increase in trading sales activity also cut into its margin last quarter, according to the company.
For the third quarter, BOK's net interest margin was 2.69%, down from 3% in the second quarter of this year and from 3.24% in the third quarter of 2022. The company is predicting a low double-digit basis point decline in the fourth quarter and another smaller decline in the first quarter before its net interest margin begins to recover.
Wedbush Securities analyst David Chiaverini said Wednesday that BOK's net interest margin in the third quarter was "worse than our forecast," and its net interest income was "well below" the forecast. Net interest income fell by 7% from the prior quarter to $300.9 million.
Still, Chiaverini argued that BOK Financial's greater-than-average reliance on fee income — about 33% of its revenue comes from fees, versus 22% at peer companies — is a positive. "We believe BOK's diversification of its business model warrants a premium valuation, which is appropriately reflected in its current trading price," Chiaverini wrote in a research note.
BOK's net income in the third quarter was $134.5 million, down from $156.6 million during the same quarter in 2022. Earnings per share were $2.04, or five cents lower than the average estimate of $2.09 from analysts surveyed by FactSet Research Systems.
Net interest income fell to $300.9 million from $316.3 million in the year-ago period. Fee income rose to $197.9 million from $192.6 million a year ago.
BOK's stock price was down about 10% late Wednesday afternoon. It has fallen about 38% year to date.
