Shares of Cullen/Frost Bankers Inc. rose 3.3% Wednesday after the San Antonio-based company announced several measures to boost shareholder value.
In an announcement late Tuesday afternoon, Cullen/Frost declared a two- for-one stock split, and said it would repurchase 2% of its outstanding shares and increase the dividend 20%.
The stock rose $1.625 on Wednesday, to $50.875.
Analysts said Cullen/Frost's moves indicate the company is restored to good health after barely escaping intact from the banking woes that beset Texas in the 1980s and early 1990s. With $4.5 billion in assets, it is the largest independent bank left in the state.
"The bank had a lot of earnings problems given what happened to the Texas economy," said Livia Asher, a bank analyst with Merrill Lynch & Co., referring to the real estate and energy debacles that afflicted the state.
"But Cullen/Frost has come back pretty strongly, and the capital moves underscore their feeling they have recovered," she said.
In 1990, the company lost 85 cents per share. It earned only 2 cents per share the following year. In 1995, Cullen/Frost earned $4.08 per share, and this year analysts expect the bank to earn $4.63 per share, according to First Call Corp.
In the first quarter this year, the bank earned $1.15 per share, a 23% increase from the year-earlier period.
"Our strong earnings over the past year, along with our outlook for the remainder of 1996, allow the board to return the benefits of our progress to our shareholders," said chairman and chief executive Thomas C. Frost.
The company, because of its stormy experience a few years ago, has managed its balance sheet conservatively and allowed its capital ratios to reach high levels, Ms. Asher said.
Its leverage ratio of 8% is at the high end for banks, she said.
Last year, the dividend as a percentage of annual earnings was only 28%, compared to an industry average of roughly 35%, she added. With the dividend boost announced Tuesday, that ratio for Cullen/Frost will probably reach 36%, she said.
The bank plans to increase the quarterly payout to 42 cents a share from 35 cents a share.
Also, the company declared that on June 21 the stock will split. Companies commonly split their stock when the price rises high enough that retail investors could be dissuaded from buying the shares.
The company also said it would buy back 250,000 pre-split shares.
In other news, equity markets responded positively to a report from the National Association of Purchasing Management that costs in the manufacturing industry were not rising rapidly, despite higher than expected output.
For the first time in three days the 30-year Treasury bond did not decline, remaining unchanged at a yield of 6.90%. Recent economic news had caused fears of high inflation.
The Standard & Poor's 500 index rose 0.06% Wednesday. The S&P index of major banks fell 0.01%.
Bancorp Hawaii Inc. rose $1 to $37.25, a new 52-week high.
First Chicago/NBD Corp. fell 37.5 cents to $40.875. Deborah Beylus, a bank analyst at J.W. Charles Securities Inc., initiated coverage of the Chicago company with a "buy" rating, and predicted the stock would reach $53 per share in 12 months.
