Texas Capital Bancshares, Inc. TCBI stock looks like an attractive investment option now. With ongoing progress in its strategic business plan, the company is well-poised to capitalize on growth opportunities while continuing to enhance its financial stability and operational capabilities. A strong capital position is an added positive.
Analysts seem optimistic regarding TCBI’s earnings growth potential. The Zacks Consensus Estimate for the company’s 2024 earnings has been revised 5.7% upward over the past 30 days. Thus, TCBI currently sports a Zacks Rank #1 (Strong Buy).
TCBI’s Estimate Revision Trend
Image Source: Zacks Investment Research
In the past six months, shares of TCBI have gained 20.1% compared with the industry’s growth of 8.3%.
Image Source: Zacks Investment Research
Let’s Discuss some of the factors that make TCBI a solid pick right now.
Strategic Business Plan: Texas Capital is progressing well with its strategic plan announced in 2021 to improve operating efficiency. Pursuant to this, Texas Capital agreed to purchase a portfolio of about $400 million in committed exposure to healthcare companies.
Further, the company continues to progress with investment banking offerings every quarter and building a base of consistent and repeatable revenues that will be a differentiator in the marketplace and a meaningful contributor to future earnings.
The company is also implementing technology-enabled process innovations that improve customer experiences, reduce risk and deliver structural efficiencies. Further, it is broadening its offerings with the establishment of Texas Capital Securities Energy Equity Research and the debut of Texas Capital Direct Lending.
These efforts are expected to increase the company's NII and reduce non-interest expenses by 2025.
Key revenue growth strategies include expanding Treasury Solutions, targeting these services to generate 5% of total revenues by 2025 and increasing investment banking and trading income to 10%, driven by corporate advisory, underwriting and sales & trading.
TCBI aims to elevate non-interest income from 11% in 2020 to 15-20% of total revenues by 2025, strengthening its treasury, investment banking and private wealth divisions. The proposal includes aggressive hiring plans to more than double the number of client-facing professionals across Texas by 2025.
Revenue Strength: TCBI’s top-line growth is impressive. An elevated level of investment banking, trading income and higher NII drove revenues to witness a compound annual growth rate (CAGR) of almost 2% over the last five years (2018-2023).
Although revenues declined in the first half of 2024, the company’s progress on its strategic plan (announced in September 2021), efforts to expand banking capabilities and expansion of customer portfolio are expected to support revenue growth in the quarters ahead.
TCBI’s Sales Estimates
Image Source: Zacks Investment Research
Strong Balance Sheet Position: As of June 30, 2024, Texas Capital had a total debt (comprising long-term debt and short-term borrowings) of $2.33 billion. The company’s liquid assets (including its cash and due from banks and interest-bearing cash and cash equivalents) as of the same date were $2.91 billion. Given the decent liquidity position, its debt seems manageable.
Strong Capital Position: Texas Capital is well-capitalized as its capital ratios remain exceptionally strong compared with its peer group. These ratios have enhanced with the additional capital raised since 2008. As of June 30, 2024, the bank's total capital ratio was 15.7%, while its Common Equity Tier 1 ratio was 11.6%. Both figures are well above regulatory requirements, underscoring the bank’s solid capital position.
Other Finance Stocks Worth a Look
Some other top-ranked stocks from the banking space are Hilltop Holdings Inc. HTH and First Reliance Bancshares, Inc. FSRL, each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for HTH for the current year have been revised 1.5% upward over the past 60 days. The company’s shares have gained 1.4% in the past six months.
Estimates for FSRL’s current-year earnings have been revised 11.25% upward in the past 60 days. The company’s shares have surged 23.8% in the past six months.
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Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report
Hilltop Holdings Inc. (HTH): Free Stock Analysis Report
First Reliance Bancshares Inc. (FSRL): Free Stock Analysis Report
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