Conservative Loss Provisions make BOK Financial a buy in recovering economy

Bock Corporate Finance is a financial holding company with subsidiaries in several countries, including Oklahoma, Texas, New Mexico, Colorado, Arizona. This group is about $ 24 billion of assets and net worth of about $ 2.4 billion. Exchange for shares of BOKF move closely in recent months, S & P 500. If the closing price of $ 52.04 on 2/23/20111, retailers multiplier 14,25 PE, and some PB 1.36. Current price is trading near the top of the range high 52 week low ($ 42 - $ 56) better profitability in the industry. BOKF outperformed the industry in terms of profitability: return on assets 0.77% of the first three quarters of 2010, while return on equity of 7.5% compared to an average rate of 0.36% and 3.98% for the distribution of industry losses. Conservative: But this hides the total number of important aspects of their profits: the profit of banks amounted to many losses in the future. Although the company banks on average hold the position in 19% of the revenue asset, BOKF be significantly higher supply about 27% write NPAs.Higher fall from the average: In addition, it has been accepted to register 25% of non-performing loans compared to only 15 % for the average bank in the country. This suggests that many of the losses were considered to be educated and BOKF go forward, we expect that this strong profit. We base our recommendations on the quality of the hidden forces of balance sheet profit of the company, which will be discussed next.Better asset quality: non-executable BOKF assets (ie loans overdue) 1:48% of total assets at September 30, 2010, compared to an average of 3.76% at the national level. Light turmoil in the mortgage market is worth more to see how far the bank's mortgage portfolio of problem loans. Approximately 3.3% of all mortgage banks default, compared to the national average of 4.96%. Based on these two measures, asset quality seems better than the national average, and we believe that this will be a big force in the campaign when the economy does not start the economy recover.Improving lower capital base is less dangerous: a key factor for the level of risk The bank's capital with his eldest daughter, namely Bank NA of Oklahoma, Oklahoma. Subsidiary banks, the liquidity position and the benefits (as reflected in the total profit of the company), but now it is below a satisfactory level of equity capital. We believe that this is a direct result of more than normal level of costs and the provision of loss that the bank made.Recommendation: The market has surpassed: For example, shares to buy a good economy begins to recover. In such a situation, capital position is expected to attract the attention of the second order is likely to return to push the shares higher. In light of our positive outlook on the economy, we give more weight to force the NAP is a relatively low income quality, and issued a positive recommendation in the medium term.