Quick Take on 2Q26 Earnings Result: Operating Leverage Improving, But Competition & High Bar Drove Underperformance

Research evidence excerpt

Quick Take on 2Q26 Earnings Result: Operating Leverage Improving, But Competition & High Bar Drove Underperformance

Update

July 30, 2026 11:43 PM GMT

Morgan Stanley & Co. LLCMCullen/Frost Bankers | North America Manan Gosalia

Equity Analyst

Quick Take on 2Q26 Earnings Manan.Gosalia@morganstanley.comAlexander L Ward +1 212 761-4092

Research Associate

Alex.Ward@morganstanley.com +1 212 296-3096

Result: Operating Leverage

Cullen/Frost Bankers (CFR.N, CFR US)

Midcap Banks | United States of AmericaImproving, But Competition &

Stock Rating Underweight

Industry View Attractive

Price target $141.00High Bar Drove Shr price, close (Jul 30, 2026) $163.49

Mkt cap, curr (mm) $10,161

52-Week Range $169.09-119.16Underperformance

AlphaSignals Earnings Reaction

Weakens our thesis Modest upside Modest revision higher

Impact to our thesis Financial results versus consensus Direction of next 12-month

consensus EPS

Source: Company data, Morgan Stanley Research

On the Quarter: Operating EPS of $2.70 beat consensus estimates by 14c (+6%)

on lower expenses and provision

Fees and Expenses were positive

• CFR increased their fee guide from 'up 4-5% y/y' to 'up 7.5-8.5% y/y' as they

continue to grow relationships with commercial and consumer clients.

• Despite better fees, CFR decreased their expense guide from 'up 5-6% y/y' to

up '4.5-5% y/y'. CFR is starting to scale in their more mature branch network,

and continues to focus on expense discipline. We view these changes to the

guide as a positive surprise, particularly given the increasingly competitive

operating environment in Texas.

• For 2026 we are increasing our fee estimates from up 5% to up 7%, and

decreasing our expenses estimates from up 6.5% to up 5%

NII Guidance In Line; Today's Stock Weakness Likely Reflects Competitive