Cullen/Frost Bankers, Inc. (NYSE:CFR) has a Return on Invested Capital (ROIC) of 0.83%, which is lower than its Weighted Average Cost of Capital (WACC) of 16.22%, indicating inefficiency in generating returns above its cost of capital.
Among its peers, Community Bank System, Inc. (CBU) showcases remarkable efficiency with an ROIC of 40.08% against a WACC of 8.55%, suggesting strong growth potential and efficient capital utilization.
Bank of Hawaii Corporation (BOH) and Prosperity Bancshares, Inc. (PB) also demonstrate efficient capital utilization, with their ROIC exceeding their WACC, indicating more promising financial performance compared to CFR and other peers.
Cullen/Frost Bankers, Inc. (NYSE:CFR) is a financial holding company based in Texas, primarily engaged in providing a wide range of banking services. It operates through its subsidiary, Frost Bank, offering commercial and consumer banking, investment, and insurance services. In the competitive banking sector, CFR’s performance is often compared with peers like Commerce Bancshares, Inc. (CBSH), BOK Financial Corporation (BOKF), Bank of Hawaii Corporation (BOH), Prosperity Bancshares, Inc. (PB), and Community Bank System, Inc. (CBU).
In evaluating CFR’s financial efficiency, the Return on Invested Capital (ROIC) is a crucial metric. CFR’s ROIC stands at 0.83%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 16.22%. This disparity results in a ROIC to WACC ratio of 0.0511, indicating that CFR is not generating returns that exceed its cost of capital. This suggests that CFR may need to reassess its capital allocation strategies to improve its financial performance.
When comparing CFR to its peers, Commerce Bancshares, Inc. (CBSH) has a negative ROIC of -0.61% against a WACC of 11.70%, resulting in a ROIC to WACC ratio of -0.0523. This indicates that CBSH is also struggling to generate returns above its cost of capital. On the other hand, BOK Financial Corporation (BOKF) has a slightly better ROIC of 1.24% but still falls short of its WACC of 17.78%, with a ROIC to WACC ratio of 0.0697.
In contrast, Bank of Hawaii Corporation (BOH) and Prosperity Bancshares, Inc. (PB) show more promising figures. BOH boasts a ROIC of 25.53% against a WACC of 14.57%, resulting in a ROIC to WACC ratio of 1.7525. Similarly, PB has a ROIC of 1.85% and a WACC of 9.19%, with a ROIC to WACC ratio of 0.2013. These figures suggest that both BOH and PB are generating returns that exceed their cost of capital, indicating more efficient capital utilization.
Community Bank System, Inc. (CBU) stands out with a remarkable ROIC of 40.08% and a WACC of 8.55%, leading to a ROIC to WACC ratio of 4.6888. This indicates that CBU is generating returns significantly above its cost of capital, suggesting efficient capital utilization and strong growth potential compared to its peers. CBU’s performance highlights the importance of effective capital management in achieving superior financial results.
