Cullen/Frost Bankers is confident that its clients can handle whatever the Trump economy throws at them, but it’s also adding to its loss allowance just in case.
During an earnings call with analysts on Thursday, executives at the San Antonio-based parent company of Frost Bank discussed their decision to raise the company’s allowance for credit losses to $275.5 million in the first quarter of 2025, up from $250.3 million in the same period last year.
“We did build our allowance,” Chief Financial Officer Dan Geddes said. “We made some tweaks to really account for tariffs, risk of recession. And so we just felt like that was prudent to do.”
In recent months, President Donald Trump has
“What they’re really looking for in most cases is clarity, so they can make decisions,” Green said. “I think they’re looking forward to getting some trade deals done, so they know what the tariffs will be, and will know the impact on their cost structure and supply chain.”
At the same time, Green said, many business people are confident they can survive the costs of a trade war — by charging higher prices to consumers. After reading synopses of conversations between loan officers and their clients, the CEO said he found “no apoplexy about the tariff situation.”
“I would say the thing that I learned … was the fairly high level of confidence from a lot of people in their ability to pass the costs along,” Green said.
Green’s comments prompted an analyst to ask how well Cullen/Frost customers could handle such inflation. The CEO responded that, aside from some slowing “on the margin,” the company’s consumer banking customers were spending and borrowing at normal levels.
“I don’t think we’ve seen a big slowdown in the consumer at this point,” Green said. “As long as they have jobs, I think they’re going to continue to be reasonably stable.”
First-quarter earnings for the $52 billion-asset Cullen/Frost beat Wall Street’s expectations. The company’s net income reached $150.9 million, well above analysts’ average estimate of $140.2 million, according to S&P. Earnings per share came out to $2.30, surpassing the consensus estimate of $2.17, per S&P.
Analysts at RBC Capital Markets, Raymond James and Keefe Bruyette & Woods all called the results a “solid” performance.
“Overall, this was another clean and quality quarter for the company,” Jon Arfstrom of RBC Capital Markets wrote in a research note.
Cullen/Frost attributed its rising net income, which increased 11% year-over-year, partly to growth in its loan book. Average loans in the first quarter reached $20.8 billion, an 8.8% increase from the first three months of 2024.
Green also credited the bank’s strategy of
“The successes of the earlier expansion locations are now funding the current expansion effort, and we expect the overall effort will be accretive to earnings beginning in 2026,” Green said.
Looking toward whatever challenges 2025 may bring, Green took a longer view of his company’s history. Frost Bank was founded in 1868, he pointed out, and has gotten plenty of practice riding out crises since then.
“One of the advantages of being at a 157-year-old institution is that we have been through all kinds of things, whether it’s high or low interest rates, high or low unemployment, recessions, expansions, pandemics or changes in economic policy,” Green said. “Frost has grown and prospered through it all.”