D A Davidson analyst Peter J. Winter upgraded BOK Financial Corporation (NASDAQ:BOKF) to Buy from Neutral and raised the price target to $124 (from $113).

The analyst writes that BOKF is well-positioned for lower rates, leading them to upgrade the EPS estimates for the second half of 2024 and 2025 to the top end of consensus.

Although BOKF lowered its revenue outlook in July, expecting only one rate cut in the second half of 2024 instead of two, the recent 50 basis point cut in September and signs of further rate cuts suggest a more positive revenue outlook ahead, adds the analyst.

Winter says that BOKF's deposit composition resulted in a high interest-bearing deposit beta, reaching approximately 69% in the second quarter, placing it at the top end among peers.

The down rate beta is also expected to be high, around the mid-50s, adds the analyst.

The analyst writes that its loan-to-deposit ratio is 68%, below peers, and management is comfortable allowing it to rise slightly to facilitate more aggressive deposit cost reductions.

BOKF's diverse fee income sources, comprising about 40% of revenues—compared to low 20s for small-bank peers—are key to its growth.

With only $16 million in provision expense for 1H24 and a positive credit outlook, the analyst expects the final provision to be below guidance.

The analyst expects EPS of $8.00 (vs. consensus of $7.82) in 2024 and $8.71 (vs. estimates of $8.47) in 2025.

Investors can gain exposure to the stock via Invesco KBW Regional Banking ETF (NASDAQ:KBWR).

Price Action: BOKF shares are up 2.84% at $112.43 at the last check Tuesday.

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