Comparing First Horizon National (FHN) and Cullen/Frost Bankers (CFR): Which is the Better Option for Undervalued Stocks in the Banks – Southwest Sector?
For investors seeking undervalued stocks from the Banks – Southwest sector, two companies that have likely piqued their interest are First Horizon National Corporation (FHN) and Cullen/Frost Bankers, Inc. (CFR). Both banks have a strong presence in the region and have shown promising growth potential. However, determining which stock is the better investment requires a closer look at their financial performances, business models, and growth prospects.
Financial Performances
- First Horizon National Corporation (FHN):
- Net income for Q3 2021: $141.4 million
- Total assets: $50.1 billion
- Return on assets (ROA): 1.12%
- Price-to-earnings (P/E) ratio: 12.3
- Cullen/Frost Bankers, Inc. (CFR):
- Net income for Q3 2021: $111.1 million
- Total assets: $32.2 billion
- Return on assets (ROA): 1.52%
- Price-to-earnings (P/E) ratio: 11.1
Based on these figures, Cullen/Frost Bankers (CFR) has a higher return on assets (ROA) and a lower P/E ratio compared to First Horizon National (FHN). A lower P/E ratio suggests that the stock is undervalued relative to its earnings.
Business Models
- First Horizon National Corporation (FHN):
- Diversified financial services company with operations in banking, wealth management, and mortgage services.
- Strong presence in the Southeastern United States.
- Focus on expanding its footprint through acquisitions and organic growth.
- Cullen/Frost Bankers, Inc. (CFR):
- Community bank focused on commercial and consumer banking, wealth management, and trust services.
- Strong presence in Texas, with a significant portion of its assets and loans originating in San Antonio.
- Conservative growth strategy, focusing on maintaining a strong balance sheet and stable earnings.
While both banks have a strong presence in the Southwest and offer a range of financial services, First Horizon National (FHN) has a more diversified business model, which may provide more opportunities for growth. However, Cullen/Frost Bankers (CFR) has a more conservative growth strategy, which could result in steadier earnings and a more stable stock price.
Growth Prospects
- First Horizon National Corporation (FHN):
- Recently announced plans to acquire IBERIABANK Corporation, which will expand its footprint into new markets and increase its total assets to over $70 billion.
- Continues to invest in digital banking technologies to enhance the customer experience and drive growth.
- Cullen/Frost Bankers, Inc. (CFR):
- Has a strong track record of consistent earnings growth, with net income increasing by over 15% in the past year.
- Focuses on organic growth through expanding its loan portfolio and increasing its deposit base.
Both banks have strong growth prospects, but First Horizon National (FHN) is poised for more significant expansion through its acquisition of IBERIABANK Corporation. This growth could lead to increased earnings and a higher stock price.
Impact on Individuals and the World
Impact on Individuals:
For individual investors, the decision between First Horizon National (FHN) and Cullen/Frost Bankers (CFR) depends on their investment goals and risk tolerance. Those seeking a more diversified investment with higher growth potential may prefer First Horizon National. However, investors looking for a more stable, conservative investment with consistent earnings growth may prefer Cullen/Frost Bankers.
Impact on the World:
The performance of these two banks, as well as the overall banking sector, can have a significant impact on the economy. A strong banking sector can lead to increased consumer and business confidence, which can drive economic growth. Conversely, a weak banking sector can lead to decreased confidence and a slowing economy.
Conclusion
When comparing First Horizon National (FHN) and Cullen/Frost Bankers (CFR) for undervalued stocks in the Banks – Southwest sector, it’s essential to consider their financial performances, business models, and growth prospects. Both banks have strong presences in the region and have shown promising growth potential. However, Cullen/Frost Bankers has a higher return on assets and a lower P/E ratio, making it a more attractive option for those seeking a stable, undervalued investment. First Horizon National, on the other hand, has a more diversified business model and significant growth prospects through its acquisition of IBERIABANK Corporation. Ultimately, the decision between these two stocks depends on an investor’s risk tolerance and investment goals.
The performance of these banks and the overall banking sector can have a significant impact on individuals and the world. A strong banking sector can lead to increased confidence and economic growth, while a weak sector can lead to decreased confidence and a slowing economy. As such, it’s essential to stay informed about the financial performance and growth prospects of these banks and the sector as a whole.
