Commerce Bancshares, Inc. (CBSH): Boston Consulting Group Matrix [10-2024 Updated]
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Commerce Bancshares, Inc. (CBSH) Bundle
As we dive into the performance of Commerce Bancshares, Inc. (CBSH) in 2024, we can categorize its business operations using the Boston Consulting Group Matrix. This analysis highlights the company's strengths and weaknesses, revealing its Stars, Cash Cows, Dogs, and Question Marks. Discover how CBSH's impressive net income growth and solid capital ratios position it as a leader, while also examining the challenges it faces in specific segments and emerging opportunities for growth.
Background of Commerce Bancshares, Inc. (CBSH)
Commerce Bancshares, Inc. (CBSH) is a publicly traded bank holding company based in Kansas City, Missouri. Founded in 1865, the company operates through its primary subsidiary, Commerce Bank, which offers a comprehensive range of financial services. These services include consumer and commercial lending, investment management, and treasury management, among others.
As of June 30, 2024, Commerce Bancshares had total assets amounting to approximately $30.57 billion, a decrease from $32.83 billion at the end of 2023. The company's total equity was reported at $3.16 billion, with a tangible common equity to tangible assets ratio of 9.82%.
The bank operates through three main segments: Consumer, Commercial, and Wealth. The Consumer segment offers various loan and deposit products through approximately 140 retail locations, while the Commercial segment provides corporate lending and cash management services. The Wealth segment focuses on trust and estate planning, investment management, and private banking services.
In recent financial performance, for the second quarter of 2024, CBSH reported a net income of $139.6 million, marking a 9.2% increase from the previous year. The company achieved a return on average assets of 1.86% and a return on average equity of 18.52%. Notably, net interest income reached $262.2 million, driven by higher loan interest income, despite an increase in deposit interest expense.
Commerce Bancshares has a strong commitment to maintaining a robust capital position, demonstrated by its Tier 1 risk-based capital ratio of 16.19% as of June 30, 2024. The company also emphasizes strong liquidity management, with liquid assets totaling approximately $11.22 billion.
The bank's strategic focus on customer relationships and service quality has historically positioned it favorably in the competitive banking landscape. This dedication is reflected in the stability of its core customer deposits, which constitute a significant portion of its funding base.
Commerce Bancshares, Inc. (CBSH) - BCG Matrix: Stars
Strong Net Income Growth
Net income for Commerce Bancshares, Inc. reached $256.9 million in the first half of 2024, representing a 2.0% increase from the previous year.
Increased Interest Income on Loans
Interest income on loans increased by 14.5%, totaling $67.7 million for the first six months of 2024.
Growth in Non-Interest Income
Non-interest income rose by 5.6%, driven by higher deposit account charges and trust fees, totaling $301.1 million for the first half of 2024.
High Return on Total Assets
The return on total assets was recorded at 1.86%, indicating effective asset utilization.
Solid Capital Ratios
Commerce Bancshares maintained solid capital ratios, including a Tier I leverage ratio of 12.13%.
| Financial Metric | 2024 (First Half) | 2023 (First Half) | % Change |
|---|---|---|---|
| Net Income | $256.9 million | $252.2 million | +2.0% |
| Interest Income on Loans | $67.7 million | $59.1 million | +14.5% |
| Non-Interest Income | $301.1 million | $285.2 million | +5.6% |
| Return on Total Assets | 1.86% | 1.82% | +0.04% |
| Tier I Leverage Ratio | 12.13% | 11.95% | +0.18% |
Commerce Bancshares, Inc. (CBSH) - BCG Matrix: Cash Cows
Established consumer banking segment with consistent revenue generation
Commerce Bancshares, Inc. (CBSH) has established a strong position in the consumer banking sector, generating consistent revenue through its various financial products. The bank reported total net interest income of $262.2 million for the second quarter of 2024, a 5.1% increase compared to $249.5 million for the same period in 2023.
Total deposits at $24.3 billion, despite a recent decline, indicating customer loyalty
As of June 30, 2024, CBSH reported total deposits amounting to $24.3 billion, reflecting a decrease of $1.1 billion since December 31, 2023. This decline was primarily due to a reduction in demand deposits, particularly in business demand deposits, which fell by $660.2 million.
Strong loan portfolio quality with low historical loss levels on consumer loans
The bank's loan portfolio remains robust, with total loans reported at $17.2 billion as of June 30, 2024. The provision for credit losses was $5.5 million for the quarter, a 15.5% decrease from $6.5 million in the same period last year, indicating strong credit quality.
Consistent cash dividends paid on common stock, reinforcing shareholder value
CBSH has maintained a strong commitment to shareholder returns, paying cash dividends of $0.270 per share in the second quarter of 2024, totaling $34.96 million. Over the past year, the company's dividend payments have shown a steady increase, enhancing shareholder value amid fluctuating market conditions.
Effective management of non-interest expenses, increasing only marginally at 2.0%
In managing its operational efficiency, CBSH reported a marginal increase in non-interest expenses of 2.0%, totaling $232.2 million for the second quarter of 2024 compared to $227.6 million in the same quarter of 2023. This controlled growth in expenses has contributed to the overall profitability of the bank.
| Financial Metrics | Q2 2024 | Q2 2023 | Change (%) |
|---|---|---|---|
| Total Deposits | $24.3 billion | $25.4 billion | -4.3% |
| Net Interest Income | $262.2 million | $249.5 million | +5.1% |
| Provision for Credit Losses | $5.5 million | $6.5 million | -15.5% |
| Cash Dividends Paid | $34.96 million | $33.74 million | +3.6% |
| Non-Interest Expenses | $232.2 million | $227.6 million | +2.0% |
Commerce Bancshares, Inc. (CBSH) - BCG Matrix: Dogs
Decrease in Business Segment Profitability
The profitability of Commerce Bancshares' business segments has decreased, with a 7.8% year-over-year decline in income before income taxes for the commercial segment. Specifically, for the six months ended June 30, 2024, income before income taxes for the Consumer segment decreased by $37.8 million, or 23.3%, compared to the same period in 2023.
High Sensitivity to Interest Rate Changes
Commerce Bancshares has experienced a significant impact on net interest income due to rising interest rates. For the second quarter of 2024, net interest income decreased by $13.3 million, or 5.0%, primarily due to higher interest expenses on deposits which rose by $28.6 million. The overall average rate incurred on interest-bearing liabilities increased to 2.21% in the second quarter of 2024, compared to 1.87% in the same quarter of the previous year.
Declining Demand for Certain Credit Products
Demand for specific credit products has been declining, which has negatively affected growth prospects. The provision for credit losses on loans was $14.8 million for the first six months of 2024, down from $21.8 million in the same period last year, indicating a decrease in expected credit losses. This trend is compounded by an increase in net loan charge-offs, which amounted to $18.6 million, representing a $5.4 million increase from the first half of 2023.
Non-Interest Income from Bank Card Transaction Fees
Non-interest income derived from bank card transaction fees has decreased by 4.5% for the second quarter of 2024, with total fees amounting to $47.5 million compared to $49.7 million in the same quarter last year. This decline reflects a broader trend of reduced corporate card fees, which fell by 10.3%.
Underperformance in Specific Loan Categories
Particular loan categories are underperforming, notably in energy lending, which has decreased to $268.8 million. This segment has struggled to generate growth, reflecting the broader challenges faced by Commerce Bancshares in maintaining its market position amid shifting economic conditions.
| Performance Indicator | Current Value | Year-over-Year Change |
|---|---|---|
| Decrease in income before income taxes (Consumer Segment) | $37.8 million | -23.3% |
| Net interest income decrease | $13.3 million | -5.0% |
| Interest expense increase on deposits | $28.6 million | N/A |
| Bank card transaction fees | $47.5 million | -4.5% |
| Energy lending | $268.8 million | N/A |
| Net loan charge-offs | $18.6 million | +$5.4 million |
Commerce Bancshares, Inc. (CBSH) - BCG Matrix: Question Marks
Emerging wealth management segment showing potential for growth, but still developing.
The wealth management segment at Commerce Bancshares, Inc. is experiencing growth, with total assets under management reaching approximately $16.5 billion as of June 30, 2024, compared to $15.8 billion at the end of 2023. The segment has reported a year-over-year increase in trust fees of 11.7%, amounting to $103.4 million for the first six months of 2024, up from $92.6 million during the same period in 2023.
Investment securities portfolio shrinking, requiring strategic realignment.
Commerce Bancshares has seen a significant decline in its investment securities portfolio, which decreased by $1.3 billion to $8.5 billion by June 30, 2024, down from $9.8 billion at the end of 2023. This decline is attributed to reduced holdings in mortgage-backed and asset-backed securities, which fell by $812.5 million and $554.0 million, respectively.
Consumer credit card loans facing risk due to upcoming rate adjustments.
Consumer credit card loans at Commerce Bancshares amounted to $566.9 million as of June 30, 2024, with annualized net charge-offs increasing to 4.75%, compared to 3.27% the previous year. The average interest rate on these loans rose to 5.15%. This increase in rates poses a risk to the credit quality of these loans as consumers may struggle with higher repayment obligations.
Potential volatility in economic conditions impacting loan demand and credit quality.
The overall economic environment has shown signs of volatility, which could impact loan demand. Total loans at Commerce Bancshares decreased by $42.4 million, or 0.25%, from December 31, 2023, primarily due to declines in business real estate and consumer credit card loans. The provision for credit losses was $14.8 million for the first half of 2024, illustrating the company's cautious approach in response to potential economic downturns.
Need for innovation in digital banking services to attract younger demographics.
Commerce Bancshares is actively pursuing innovation in its digital banking services, recognizing that 37% of its current customer base is over the age of 55. The bank aims to develop enhanced mobile banking features and digital financial tools to attract younger customers, who are increasingly seeking digital solutions for banking. As of mid-2024, the bank has allocated $15 million towards technology upgrades to support these initiatives.
| Financial Metric | June 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Total Assets Under Management (Wealth Management) | $16.5 Billion | $15.8 Billion | +4.4% |
| Investment Securities Portfolio | $8.5 Billion | $9.8 Billion | -13.3% |
| Consumer Credit Card Loans | $566.9 Million | $589.9 Million | -3.5% |
| Annualized Net Charge-Offs on Credit Cards | 4.75% | 3.27% | +1.48% |
| Provision for Credit Losses | $14.8 Million | $21.8 Million | -32.6% |
| Investment in Digital Banking Innovation | $15 Million | N/A | N/A |
In summary, Commerce Bancshares, Inc. (CBSH) navigates a complex landscape characterized by its Stars, such as robust net income growth and effective asset utilization, alongside Cash Cows like its established consumer banking segment and loyal customer base. However, challenges persist in the Dogs category, marked by declining profitability in certain business segments and vulnerability to interest rate fluctuations. Meanwhile, the Question Marks present opportunities for growth, particularly in the emerging wealth management segment and the need for innovation in digital banking. Balancing these dynamics will be crucial for CBSH's strategic direction moving forward.