Being an energy lender is seen as a negative right now, but some banks in oil country are benefiting in the short run from the sector's downturn.

Executives at Cullen/Frost Bankers — while being quizzed by analysts Wednesday about the San Antonio bank's credit exposures to firms hurt by falling oil prices — talked up the opportunity to finance their stronger clients' efforts to buy weakened rivals.

"The strong players know that they can acquire, or believe they'll have opportunities to acquire, properties and buy [proven production lines] cheaper than they can drill," said Dick Evans, chairman and chief executive of the $28 billion-asset Cullen/Frost. "There are two sides to this thing."

Energy-related credits actually drove loan growth at Cullen/Frost and BOK Financial in Tulsa, Okla., which both reported fourth-quarter results Wednesday.

Cullen/Frost increased loans 2.8% from the previous quarter, to $10.9 billion, thanks heavily to energy-related business. That increase reflected higher credit line utilization as companies moved to finish production already underway, versus loans to new borrowers, Evans said during a conference call with analysts.

The $29 billion-asset BOK reported that energy loans increased 7.5% from the third quarter as lower oil prices caused a surge in energy balances. BOK projects "low double-digit" loan growth in 2015.

Part of the increased demand comes from clients who are seeking more help from banks because the capital markets are pricing energy-related risk much higher than before.

Oil's slide has created a classic dilemma for lenders, who are tempted to maintain or even increase credit lines to customers reeling in asset deployment, but who must also consider repayment consequences should oil prices fall lower and remain there longer.

The current drop in oil prices is less steep and less severe compared with other recent downturns, but a prolonged dip in oil prices could make things dicier, BOK executives told analysts, repeating the industry's mantra this earnings season.

Cullen/Frost's Evans talked about how the company has recently met with 90% of its energy-related customers to assess its potential exposure to problems.

"The result is no energy additions were made to our problem loans since the third quarter," Evans said. "Customers were preparing for decreased revenue and margins and have developed formal operating plans to deal with these declines."

Analysts say Evans' comments on a potential silver lining from increased M&A and other business might just be a short-lived phenomenon, given the uncertainty of oil prices. The fourth-quarter spurt at Cullen/Frost may be offset by weaker energy loan growth later this year.

"They are seeing some growth potential in the near term, but are still pretty cautious about the longer term," said Jon Arfstrom, an analyst with RBC Capital Markets.

Investors are more interested in longer-term consequences, analysts said.

"You could see them finding some opportunities for a quarter or two, but I would hazard to guess that loan portfolios will be lower year over year," said Brett Rabatin, an analyst at Sterne Agee. "Investors want loan growth and they think that commercial-and-industrial lending is great, but it would be tough to tell investors they were growing meaningfully in energy. That would be a tough pill to swallow."

That all could mean high-flying Texas banks are going to start looking more like banks in the rest of the country, said Emlen Harmon, an analyst at Jefferies. "Without the tailwind from energy and its impacts on broader loan growth, growth rates won't compare as favorably," Harmon said.

In a follow-up interview, Evans said the energy industry needs fixing. High oil prices hid the fact that many energy companies were using outdated equipment, borrowed too much and lacked experienced management, he said.

"The business was running too hot and there were too many companies chasing too few deals," he said, noting that the stronger players are waiting to pounce. "It will be cleaned up."

Cullen/Frost and the Texas economy are not wholly dependent on energy for loan growth, Evans argued. "Everyone talks about 16% of our portfolio being in energy, but that means 84% is in other loans," he said.

When asked if the opportunity to play off the energy downturn is enough to offset the industry's slowing demand for credit, Evans said he didn't know.

"I will answer that when you tell me how many people will go broke," he said.

For more on distress in the oil and gas sector, see Investors Flow Into Oil & Gas and Distressed Debt Investment Opportunities are Expected to Rise.

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