Flush With Capital, Commerce Bancshares Has Some Decisions To Make

Core pre-provision earnings growth is going to remain challenging for banks in 2021, as loan demand remains soft, rates remain low, and most banks have already made their major moves on structural costs. Commerce Bancshares (CBSH) is in a better situation with respect to credit than most, and that’s not a trivial driver looking at core growth below the pre-provision line, and the bank is also flush with capital, giving management a better set of options when it comes to deploying capital towards growth and/or returning capital to shareholders.

I was concerned at the time of my last write-up that, for all of Commerce’s positive attributes, the shares were nevertheless at risk for lagging the broader bank sector. That has proved the case as the “risk-on” trade has continued with Commerce’s double-digit move lagging its peers by more than 10%. Valuation remains a valid concern here, but I do think the optionality on capital is an invaluable positive attribute going into this year.

 

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Flush With Capital, Commerce Bancshares Has Some Decisions To Make