Cullen/Frost Bankers, Inc. (NYSE:CFR) is a financial holding company based in Texas, offering a broad spectrum of banking services, including commercial and consumer banking, investment, and insurance services. CFR operates primarily through its subsidiary, Frost Bank, and faces competition from other regional banks such as Commerce Bancshares, Inc. (CBSH) and BOK Financial Corporation (BOKF).
In evaluating CFR's financial performance, the Return on Invested Capital (ROIC) is a crucial metric. CFR's ROIC is 0.83%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 8.93%. This discrepancy indicates that CFR is not generating sufficient returns to cover its cost of capital, raising concerns for investors.
When comparing CFR to its peers, Commerce Bancshares, Inc. (CBSH) has a negative ROIC of -0.98% and a WACC of 11.24%, resulting in a ROIC to WACC ratio of -0.09. This suggests that CBSH, similar to CFR, struggles to generate returns above its cost of capital.
Conversely, Community Bank System, Inc. (CBU) demonstrates strong financial performance with a ROIC of 40.08% and a WACC of 8.54%. The ROIC to WACC ratio of 4.69 indicates that CBU is effectively utilizing its capital to generate returns well above its cost, setting a benchmark for its peers.
Prosperity Bancshares, Inc. (PB) also outperforms CFR, with a ROIC of 1.85% and a WACC of 9.22%, resulting in a ROIC to WACC ratio of 0.20. While PB's returns exceed its cost of capital, it still lags behind CBU in terms of capital efficiency.
