Are These Banks The Best Natural Gas Plays? – Cullen/Frost Bankers, Inc. (CFR), Texas Capital Bancshares Inc (TCBI), Hilltop Holdings Inc. (HTH)

Drilling Down

Another name is Cullen/Frost Bankers, Inc. (NYSE:CFR) which is the holding company for Frost Bank which operates primarily in two segments: Banking and Frost Wealth Advisors and almost solely in Texas. The stock is close to its 52 week high of $61.68. Cullen/Frost Bankers, Inc. (NYSE:CFR) has a P/E of 15.80 and a 3.10% yield with a payout ratio of 49%.

Founded in 1868 and based in San Antonio the company has 110 financial centers in Texas blanketing these shale areas. During a three year spree between 2005-2008 Cullen/Frost Bankers, Inc. (NYSE:CFR) acquired six Texas banks. The company has been in the news lately as it had an $150 million issuance of non-cumulative perpetual preferred shares to fund a common share buyback worth $144 million. Many investors saw this February 14 announcement as not only an insider vote of confidence but also advancing return on equity.

Their main competition in Texas is the big banks, Wells Fargo & Co (NYSE:WFC), Bank of America Corp (NYSE:BAC), andJPMorgan Chase & Co. (NYSE:JPM) As of 2009 Cullen/Frost Bankers, Inc. (NYSE:CFR) was the fifth largest bank in Texas after these three. Currently it has around $23 billion under management.

Two quick caveats on Cullen Frost- the short interest has been increasing and the PEG at 2.24 indicates it may be overvalued.

High on Hilltop

This last name is for the speculators among you because it has the most risk and possible reward. Hilltop Holdings Inc. (NYSE:HTH) was a frequent underperformer, most recently reporting a loss of -$0.18. But it acquired Plains Capital Corporation turning the former property and casualty insurer into a banker as of November 30 of last year. This purchase was seen as very favorable and led the stock to almost double from $7.75 to $14.49. Insiders have been buying in for the last few months as they are optimistic about Plains Capital, the holding company for PlainsCapital Bank. The Texas bank has $6.3 billion in assets and 34 branches in Texas.

In a March 5 interview for Wall Street Transcript, Sterne. Agee & Leach Managing Director Brett Rabatin mentioned Hilltop Holdings as an undiscovered gem and undercovered by analysts. He also likes the new bank acquisition. Like these other banks Plains Capital has a strong wealth management division and specializes in middle market commercial business and the aforementioned high net worth Texan.

The Bottom Line

Cullen/Frost Bankers, Inc. (NYSE:CFR) is the name to go to if you want a decent yield and the safety of size. Texas Capital Bancshares is a promising prospect with a lower P/E. Finally, for those with a wildcatter spirit, Hilltop Holdings may have more reward if you’re willing to take the risk.

The article Are These Banks The Best Natural Gas Plays? originally appeared on Fool.com and is written by AnnaLisa Kraft.

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