JPMorgan Endorses Cullen/Frost, Sees 32% Stock Rise

Key Takeaway

• JPMorgan endorses Cullen/Frost Bankers, projecting a 32% stock price increase with its strong loan growth outpacing peers.
• Warren Buffett names Greg Abel as his successor at Berkshire Hathaway, ensuring leadership continuity with full investment authority.
• Citi forecasts a 10%-15% rally for regional bank stocks by autumn, citing attractive valuations and potential share repurchases.

Cullen/Frost Bankers Spotlighted by JPMorgan

JPMorgan has highlighted Cullen/Frost Bankers as a standout investment, aligning with the late Charlie Munger's investment philosophy of buying excellent businesses at fair prices. The bank's recent performance, despite an earnings miss in the first quarter that led to a significant stock sell-off, has been noted for its strong organic growth story. Analyst Steven Alexopoulos from JPMorgan pointed out the bank's loan growth, which continued at an 11% annualized pace last quarter, outpacing most of its peers. JPMorgan maintains an overweight rating on Cullen/Frost with a 12-month price target of $140 per share, indicating a potential 32% upside from its current position.

Berkshire Hathaway's Succession Plan

At Berkshire Hathaway's annual general meeting, Warren Buffett outlined a more definitive succession plan, indicating Greg Abel as his successor with full authority over investments, including the conglomerate's stock portfolio and cash pile. This marks a significant shift, as many investors previously thought Ted Weschler and Todd Combs would play leading roles in managing Berkshire's investments. Buffett's decision to centralize power with Abel is seen as a move to ensure strong leadership continuity at Berkshire, which boasts over $1tn in assets.

Banking Sector Outlook and Strategies

Citi analyst Ben Gerlinger has initiated a "positive catalyst watch" on Hancock Whitney Corp, forecasting a summertime rally for regional bank stocks. Despite the historical playbook suggesting a reduction in bank exposure as credit costs rise, Gerlinger sees the current valuation of regional banks as an attractive entry point. He predicts a 10% to 15% rally in the sector until the autumn months, driven by factors such as excess capital and potential share repurchase authorizations. Gerlinger's outlook is supported by a broader analysis of first-quarter earnings across the banking industry, which showed credit results were mostly better than anticipated.

Street Views

• Steven Alexopoulos, JPMorgan (Bullish on Cullen/Frost Bankers):

  "When we think of the late, great Charlie Munger and his mantra to ‘buy wonderful businesses at fair prices,’ the bank that fits this bill in our view is Cullen Frost... We see underperformance in CFR as overblown and provides an even more attractive buying opportunity into a company that is poised to be a compounder of outsized growth in the key metrics that drive long-term performance of bank stocks."