You hear a lot about the shale gas boom in North Dakota and Pennsylvania, but interest has increased in Texas plays due to a positive mention of the natural gas industry in the President’s State of the Union address. The Chesapeake Energy website wrote of one Texas shale area, “The Haynesville Shale… has the potential to become the largest natural gas play in the U.S. by 2012, with technically recoverable resources estimated at 251 trillion cubic feet.”
In the early part of the twentieth century dynasties of Texas wealth were born and so is another generation in the twenty first. One thing all these new wealthy have in common- they need a bank to help invest their royalties – at the very least to cash the big checks. There are several Texas regional bank chains that fit the bill. Rather than play risky exploration and development oil and gas stocks these banks will benefit not just from royalty holders, but also from a general local economic boom. The Dallas Fed put out a report in mid-2012 that drilling in the Eagle Ford area (23 counties) has spurred strong employment and wage growth. Just extrapolate that to the other two shale areas.
Beneficiaries of Big Gas
One regional bank that is promising is Texas Capital Bancshares Inc (NASDAQ:TCBI), the holding company of Texas Capital Bank, with $10.5 billion under management and headquartered in Dallas for a total of 13 full service centers with branches in San Antonio, Houston, Ft. Worth, and Austin. This is a fairly new bank, only founded in 1996, but it was founded by Dr. Joseph M. (Jody) Grant, the American Community Bank Banker of the Year in 2001 and author of two books on Texas banking. His mission: to make Texas Capital “The Best Business Bank in Texas” and that’s still their slogan.
When researching community banks to profit on these shale booms it’s important for a bank to offer wealth management, private client services, and community banking to service the newly wealthy and the local beneficiaries of the shale wealth effect. Their Texas based wealth services offers no in-house investment products or funds, no revenue sharing, and no proprietary trading. It’s also in the process of expanding its services internationally.
On Jan.27, Texas Capital reported stellar earnings with net income up 59% year over year and diluted earnings per share increasing 51% to $3.01 from $1.99 in 2011. Despite that rise in EPS analysts were disappointed, expecting $3.08. Deposits were up (demand deposits up 45%, total deposits up 34%) as were investment loans while the level of non-performing assets decreased.
Currently the stock trades at a 14.05 P/E with a 1.27 PEG.