Last Friday, the long and short-term issuer default ratings (IDR) of BOK Financial Corporation (BOKF) and its lead bank subsidiary, Bank of Oklahoma, were affirmed by Fitch Ratings at “A-/F1″. The outlook of the rating is “stable”.
The rating agency acknowledged that BOK Financial’s adequate capital levels have helped the company survive the economic downturn relatively well. Though it experienced deterioration in asset quality with significant increase in nonperforming assets, the company neither raised capital nor went for dividend cuts or bailout programs.
However, Fitch anticipates nonperforming asset levels to remain elevated at BOK Financial. This follows the company’s strategy of maximizing value including the retention of foreclosed assets till the recovery of the market. Additionally, the company’s portfolio exposure to private-label mortgage backed securities remains another concern as further impairments are possible stemming from their low ratings.
Nevertheless, BOK Financial’s steady operating earnings, diverse revenue stream and liquid balance sheet are expected to help the company navigate through these challenges. The company’s strategic expansions and local-leadership based business model have aided it to transform its operations into a leading financial service provider from a top-notch bank in Oklahoma. Therefore, its loan portfolio is well diversified geographically. Additionally, capital levels are strong.
BOK Financial is currently rated as Zacks #3 Rank (Hold), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. We currently have a long-term Neutral recommendation on the stock.
Read the full analyst report on “BOKF”
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