Analyst Note| Eric Compton, CFA |
Narrow-moat Cullen/Frost reported solid second-quarter earnings, with EPS of $1.80 compared with FactSet consensus of $1.56. This equated to a return on equity of 11.2%. Accelerated Paycheck Protection Program forgiveness helped drive net interest income up on a reported basis, increasing roughly $16 million sequentially, or roughly 7%. Excluding PPP-related effects shows NII roughly bottoming out during the quarter, so it appears that core NII may be stabilizing. Meanwhile, management continues to wait for the yield environment to improve before deploying excess liquidity into securities, which would help boost yields and NII once deployed.