Banking

Why Frost Bank isn’t avoiding raising deposit rates

Unlike a few of its rivals, Cullen/Frost Bankers is raising deposit rates in reaction to current interest-rate walkings by the Federal Reserve.

The method might be harming the San Antonio-based bank’s margins, however it’s supporting deposit volumes, and it’s part of what CEO Phil Green calls the “square deal” the bank provides its customers.

The moms and dad business of Frost Bank reported overall deposits of $44.7 billion in the 2nd quarter, up 17% from the very same duration in 2015.

Cullen/Frost reported a 13.2% boost in typical loans throughout the 2nd quarter, led by a 37% boost in industrial realty loans.

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“If you look at some of the competition, they haven’t moved at all,” Green stated throughout an interview after the bank’s profits discussion. “We don’t think that’s a credible position to not respond to increases we’ve seen in the market.”

Frost Bank’s 0.17% interest rate for service cost savings accounts is greater than the nationwide average of 0.10%, according to the most current information from DepositsAccounts.com. Its 1 year rate for certificates of deposit is 1.8% — significantly greater than the nationwide average of 0.56%.

Despite its increasing deposit expenses, Cullen/Frost reported a 12% boost in net interest earnings to $288.2 million. Its net interest margin increased by 23 basis indicate 2.56%.

The $51.8 billion-asset bank reported quarterly earnings of $117.4 million, which was flat from the 2nd quarter of in 2015. Its profits per share of $1.81 beat the $1.77 typical price quote of experts surveyed by FactSet Research Systems.

Cullen/Frost reported typical loans of $16.5 billion, leaving out Paycheck Protection Program loans, a 13.2% boost from the very same duration a year previously. The development was led by a 37% boost in industrial realty loans. Consumer loans grew 31%, while the industrial and commercial portfolio was up 25%.

Green stated Frost is “taking advantage of natural growth” in metropolitan Texas markets consisting of Dallas and Houston. The bank’s growth efforts in both cities went beyond expectations, he stated.

“There’s so much business activity and backlog in these markets,” Green stated. “I see that slowing as interest rates go up, but I don’t see it tipping over into a meaningful recession.”

“The economy is very strong here, and I do not expect an imminent recession in this state,” Green stated.

Frost reported a $239.6 million allowance for credit losses, down 6% from the very same duration in 2015. Second-quarter net charge-offs amounted to $2.8 million, a 75% boost from $1.6 million throughout the very same duration in 2021.

In a research study note Friday, Compass Point Research & Trading expert David Rochester explained the bank’s quarterly lead to beneficial terms, however indicated a 14% boost in noninterest costs as a relative weak point.

Salaries and wage costs increased 20% to $116.8 million from the very same duration in 2015. The boost was partially connected to the application of a $20 per hour base pay in December.

Gabriel

A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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