J.P. Morgan Maintains Cullen/Frost Bankers Neutral Rating (CFR)

J.P. Morgan maintained its Cullen/Frost Bankers CFR Neutral rating and price target of $62 in a research report published today. In the report, J.P. Morgan states, "CFR's stock responded negatively to fourth quarter earnings, with more pressure following the conference call in which management discussed a mixed outlook for 2011, which the company characterized as a "transition year." While 4Q EPS of $0.87 was light tied to greater than expected provision expense, heading into 2011 there appears to be some headwinds driving management to guide to 2011 EPS "a little below" the range of consensus which at the time of the call was $4.10. On NIM, it appears that the company selling a derivative position should set up for the company to be more asset sensitive in the face of the repeal of Reg Q (which allows banks to pay interest on demand deposits), but at the cost of modest near-term pressure to NII and the NIM is only expected to be modestly higher in 2011. On the expense front, it appears marketing efforts will be stepped up in the new year. On the positive side, the company is cautiously optimistic that the turn towards positive loan growth will carry into the new year given a strong pipeline. Furthermore, management indicated that the company could provide below NCOs if current trends are sustained. Overall, with expectations recalibrated for 2011 we see the shares as a peer performer." Shares of Cullen/Frost Bankers were at $59.20 at the time of posting in pre-market trading, up 0.48% from Wednesday's market close.