Texas Capital Bancshares (NASDAQ: TCBI) reported strong third quarter 2024 results, marking three years since announcing its strategic plan in September 2021. The company achieved a record quarterly return of 1% on average assets and a 10% return on common equity.
Key points:
- Earnings per share reached €1.59
– Fee income increased 25% quarter-on-quarter and 32% year-on-year
– Investment banking and trading revenues reached a record €40.5 million
– Total deposits increased by €2 billion, or 9%
– The tangible equity ratio stood at 9.65%
Company Outlook
- Revision of revenue growth forecast to low single-digit percentage
– Reduction of forecast annual provision charges to 40 basis points of average loans held for investment purposes
– Target total non-interest income of €240 million for 2025
– Anticipation of high single digit or low double digit loan growth in 2025
– Targets an average return on assets of 1.1% in the second half of next year
Positive points
- Record quarterly return of 1% on average assets
– Net income before provisions of €115 million
– Commission income reached €64.8 million
– Acquisition of a €400 million health loan portfolio
– Total adjusted revenue increased by 14% to €305 million
– Adjusted net profit attributable to common shareholders increased by 97% compared to the previous quarter
Negative points
Highlights from the Q&A session
- Flexible capital deployment strategy focused on efficiency
– Slight decrease expected in investment banking fees in the fourth quarter
– Plans to maintain the CET1 ratio around 11%
– Continuous technological investments to improve operational efficiency
– Successful deployment of the Initio platform improving customer onboarding times
Texas Capital Bancshares reported strong financial performance in the third quarter of 2024, with record results in several key areas. The company’s CEO, Rob Holmes, highlighted the success of their strategic plan implemented three years ago, which led to significant improvements in customer acquisition and financial metrics.
The bank’s fee income saw a substantial increase, up 25% quarter-on-quarter and 32% year-on-year, reaching €64.8 million. Investment banking and trading revenues reached a record €40.5 million, contributing to the strong overall performance.
Texas Capital Bancshares’ balance sheet showed robust growth, with total deposits increasing by €2 billion, or 9%. The company has maintained a low loan-to-deposit ratio of 86%, indicating strong liquidity. The tangible equity ratio stood at a healthy level of 9.65%, reflecting the bank’s financial resilience.
Looking ahead, the company revised its revenue growth forecast to a low single-digit percentage and reduced its annual provision expense forecast. For 2025, Texas Capital Bancshares is targeting total non-interest income of €240 million and forecasts loan growth in the high single digits or low double digits.
Despite some challenges in the commercial real estate sector, with balances decreasing by 7%, the company remains optimistic about its future performance. The management team expressed confidence in its ability to capture market demand and continue to grow its customer base, which has increased 110% year-to-date compared to the previous year.
Texas Capital Bancshares plans to maintain its focus on operational efficiencies through continued technology investments, including the successful deployment of its Initio platform, which has significantly improved customer onboarding times.
Looking ahead, the company aims to achieve an average return on assets of 1.1% in the second half of next year, building on the strong foundation established by its strategic initiatives over the past three years .
Perspectives InvestingPro
Texas Capital Bancshares’ (NASDAQ: TCBI) strong third quarter 2024 results are reflected in several key InvestingPro metrics. The company’s market capitalization stands at €3.72 billion, indicating its significant presence in the banking sector.
One of the most notable InvestingPro tips is that TCBI has shown strong performance over the past three months, with the 3-month total price return reaching an impressive 21.96%. This aligns well with the company’s record quarterly return on average assets and substantial increase in fee income.
The bank’s profitability is further highlighted by fellow consultancy InvestingPro, which says analysts expect the company to be profitable this year. This corresponds to reported earnings per share of €1.59 and record revenue of €40.5 million from investment banking and trading.
InvestingPro data shows that TCBI’s revenue for the trailing twelve months to Q2 2024 was €972.13 million, with an operating margin of 25.2%. These figures support the company’s strong financial performance and its ability to generate substantial fee income.
It is worth noting that TCBI is trading near its 52-week high, with the price 97.92% off its 52-week high. This reflects investors’ confidence in the company’s strategic direction and financial results.
For investors looking for more comprehensive analysis, InvestingPro offers additional advice and insight. In fact, there are 5 other InvestingPro tips available for TCBI, which could provide valuable insight for those wanting to dig deeper into the company’s financial health and market position.
