Solid Q2 for Cullen/Frost; Higher Net Interest Income Driving Higher EPS Outlook

Narrow-moat-rated Cullen/Frost reported decent second-quarter earnings per share of $1.81, roughly in line with the FactSet consensus of $1.77, while revenue came in at $409 million, slightly ahead of consensus of $391 million. Last quarter, management highlighted that some additional expense pressure was starting to materialize, and we saw that this quarter as expenses were up 3% sequentially and 14% year over year. This was in line with our expectations, and we were already forecasting for double-digit year-over-year growth for the rest of the year. Trust and investment fees started to show a bit of weakness sequentially, a common pattern throughout the industry; however, most other fee line items were holding up well in the quarter. As a reminder, there will be some slightly additional pressure from the elimination of OD/NSF fees in the second half of the year.