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Investment banking drives strong Q2 for Texas Capital
Investment banking drives strong Q2 for Texas Capital

Yahoo

time17-07-2025

  • Business
  • Yahoo

Investment banking drives strong Q2 for Texas Capital

Texas Capital Bancshares exceeded expectations for its second-quarter earnings, with executives championing the results as evidence that the bank's multi-year turnaround strategy is coming to fruition. The Dallas-based bank reported $1.58 in diluted earnings per share, a 97.5% increase from $0.80 a year earlier, beating analysts' consensus estimate of $1.29 per share, according to S&P Capital IQ. Texas Capital also reported net income of $77.3 million for the quarter, an 85.6% increase from $41.7 million a year earlier. The bank primarily attributed the income bump to more income from trading and from fees in its investment banking and advisory businesses. "Our strong quarterly performance is the result of continued execution on our multi-year roadmap, which is delivering structurally higher and more sustainable earnings across a broad set of products and services with an operating model that is only beginning to deliver on its potential for future scale," Texas Capital CEO Rob Holmes said during the company's earnings call on Thursday. To support the bank's growth goals, Texas Capital is building out its corporate and investment banking platform in an effort to generate a more reliable stream of fee income. The bank's broker-dealer arm, known as Texas Capital Securities, is planning to open offices in Los Angeles and Chicago by the end of this year, with multiple new investment bankers hired last quarter. "Despite the fact that capital markets were essentially closed in April and through the first part of May, investment banking and trading income did come in above the guide," Texas Capital Chief Financial Officer Matt Scurlock said during the earnings call. "This was supported by strong capital markets syndication fees and then continued growth in sales and trading." Read more about banks' second-quarter earnings here: Back in 2021, the bank set what Holmes called a "turnaround" goal of a 1.1% return on assets by 2025. At the end of 2020, the bank had reported a 0.18% return on assets. In the second quarter quarter of 2025, that metric came in at 0.99%, which brought the return on assets for 2025 year-to-date to 0.80%. Texas Capital executives didn't change their "low double-digit percentage growth" revenue outlook for the year or their goal of hitting the bank's ROA target in 2025. But they did tweak the bank's expense outlook for the year, revising their previous projection of high single-digit percentage growth down to "medium to high" single-digit percentage growth. "This outlook suggests continued earnings momentum and achievement of a quarterly 1.1% ROA in the second half of the year," Scurlock said on the earnings call. "Our aspiration is not to achieve 1.1 and stop," Holmes said. "That was a guide post along the way of the transformation. We have a long way to go, and what we're certain of is that the strategy works. The client acceptance of this strategy and our bankers is actually surprising even to me. We've reallocated a lot of capital to get the right clients onto the platform." Citigroup analysts wrote in a report Thursday that shares in Texas Capital "are likely to trade higher today" in light of the bank's second-quarter performance and the new guidance calling for more modest expense growth. However, the Citi analysts noted that the bank's stock had outperformed its target price leading into the earnings announcement, so "total net upside today could be modest." Investor response to the bank's earnings was positive, with shares in Texas Capital rising 3% in midday trading.

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