Cullen/frost Bankers ((CFR)) has held its Q1 earnings call. Read on for the main highlights of the call.
Cullen/Frost Bankers’ recent earnings call presented a balanced sentiment, highlighting strong financial performance alongside some operational challenges. The company reported increased earnings, robust consumer loan growth, and successful expansion efforts. However, it also faced challenges such as a decline in non-interest bearing deposits and higher net charge-offs. Overall, the sentiment was a mix of positive growth and some hurdles to overcome.
Strong Earnings Growth
Cullen/Frost Bankers reported impressive earnings growth, with the company earning $149.3 million, or $2.30 per share, in the first quarter of 2025. This marks an increase from $134 million, or $2.06 per share, in the same quarter last year, showcasing the bank’s ability to enhance its profitability.
Record Consumer Loan Growth
The bank achieved record consumer loan growth, with balances increasing by 20.5% year-over-year. This marks the 11th consecutive quarter of 20% growth, primarily driven by consumer real estate lending, indicating strong demand and effective lending strategies.
Expansion Success
Cullen/Frost’s expansion efforts have been fruitful, generating $2.64 billion in deposits, $1.9 billion in loans, and 64,000 new households. Notably, loans and households exceeded goals by 40% and 27%, respectively, underscoring the success of their strategic initiatives.
Improved Net Interest Margin
The bank’s net interest margin improved by seven basis points, reaching 3.6% from 3.53% reported last quarter. This improvement reflects effective management of interest-earning assets and liabilities.
JD Power Recognition
For the 16th year in a row, JD Power recognized Frost as number one in Texas for consumer banking satisfaction, highlighting the bank’s commitment to customer service excellence.
Strong Commercial Loan Pipeline
The commercial real estate (CRE) loan pipeline remains robust, with opportunities over $10 million showing the highest growth. New loan commitments totaled $1.28 billion in Q1 2025, a 1.5% increase from the previous year, indicating strong demand in the commercial sector.
Decline in Non-Interest Bearing Deposits
Despite overall growth, the bank experienced a decline in non-interest bearing deposits, with average total deposits down $228 million from the previous quarter. This decline was primarily driven by lower non-interest bearing accounts.
Higher Net Charge-Offs
Net charge-offs increased to $9.7 million in the first quarter, up from $7.3 million a year ago. This rise in charge-offs indicates some challenges in credit quality management.
CRE Payoffs Impacting Loan Growth
CRE payoffs totaled over $430 million in Q1 2025, compared to just over $150 million in Q1 2024. These payoffs have created headwinds for loan growth, posing a challenge for the bank’s lending strategies.
Forward-Looking Guidance
Looking ahead, Cullen/Frost Bankers anticipates interest income growth between 5% and 7% for 2025, despite expecting four 25 basis point federal rate cuts. The bank also projects net interest margin improvement by 12 to 15 basis points over 2024’s 3.53%. Additionally, they expect mid to high single-digit loan growth and 2% to 3% deposit growth for the year, alongside non-interest income growth in the 2% to 3% range and non-interest expense growth in the high single digits.
In summary, Cullen/Frost Bankers’ earnings call reflected a balanced sentiment, with strong financial performance and growth in key areas such as consumer loans and expansion efforts. However, challenges like declining non-interest bearing deposits and higher net charge-offs remain. The bank’s forward-looking guidance suggests continued growth, with expectations for improved interest income and net interest margins, despite anticipated federal rate cuts.