UPDATE 2-Cullen/Frost Q4 profit beats analysts' view, shares up

* Q4 profit of $0.89/shr Vs Estimates of $0.87/shr

* Benefits from resilient Texas economy

* Sequential decline in provision for bad loans

* Shares rise 13 percent in early trade (Adds details, analysts comments, share movement)

By Sweta Singh

BANGALORE, Jan 28 (Reuters) - Financial holding company Cullen/Frost Bankers Inc (CFR.N) reported quarterly profit above analysts' estimates helped by a significant sequential decline in provision for bad loans and a relatively resilient Texas economy.

Shares of the company rose as much as 16 percent in morning trade, while the broader KBW Bank Index .BKX was up 11 percent.

"While we have been very fortunate in Texas to escape the worst of the current recession, observers expect some weakening in job growth and the rest of the Texas economy in 2009," Chief Executive Dick Evans said in a statement.

Cullen/Frost has been relatively immune to the turmoil in financial markets as its operations are concentrated in Texas, whose economy has held up relatively well thanks to its dependence on the oil business.

Texas economy could begin to feel more of an impact from the broader U.S. recession, which implies to that the company's provision expenses and reserve build in the quarters to come could be high, Morgan Stanley analyst Ken Zerbe wrote in a note to clients.

The bank has also avoided most of the problem securities that have battered other regional lenders.

The San Antonio, Texas-based company reported fourth-quarter net income of $53.0 million, or 89 cents per share, compared with $54.7 million, or 93 cents a share.

Analysts expected the company to earn 87 cents a share, excluding items, according to Reuters Estimates.

Provision for possible loan losses more than doubled to $8.6 million. However, sequentially, provisions fell 54 percent.

Net interest income rose about $7 million to $138.1 million. Non-performing assets were $78.0 million at year-end, compared to $55.2 million the previous quarter.

Weaker fee income trends and net interest margin compression did occur in the fourth quarter, but was largely offset by strong balance sheet growth and manageable credit costs, Oppenheimer & Co analyst Terry McEvoy told Reuters.

McEvoy expects the company to build reserves and see higher charge-offs in 2009.

Cullen/Frost, part of the 24-member KBW Bank Index .BKX, competes with Prosperity Bancshares (PRSP.O), Texas Capital (TCBI.O) and Sterling Financial (STSA.O) in Texas.

Shares of the company were trading up $5.41 $46.88 in morning trade on the New York Stock Exchange. The stock has lost 23 percent of its value in the last 12 months. (Reporting by Sweta Singh in Bangalore, Editing by Dinesh Nair)