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Bank of Hawaii (BOH) Gains From Loan Growth, Costs Increase

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On Mar 24, we issued an updated research report on Bank of Hawaii (BOH - Free Report) . The company’s top line gets support from improving non-interest-bearing deposits and rising loan balance. Also, efforts to enhance shareholders’ value with capital deployment activities are impressive. However, mounting expenses and lack of diversification in fee income sources pose near-term headwinds.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised 1.1% upward in the past 60 days. It currently carries a Zacks Rank #3 (Hold).

Shares of Bank of Hawaii have gained 75.2% over the past six months compared with the industry’s growth of 82.5%.

The company’s organic growth efforts and increasing net interest income (NII) are supporting revenue growth. Further, NII and net interest margin are likely to gain from non-interest-bearing deposits, which are a low-cost funding source, accounting for 29% of total deposits.

Moreover, Bank of Hawaii’s loans and deposits are witnessing an increasing trend. Thus, strong deposit balances will help the company to generate higher loans and fund other business needs. Furthermore, backed by a strong capital position, the bank’s capital-deployment activities, which include regular dividend payouts and share buyback, seem sustainable.

However, its non-interest expenses are increasing continuously, primarily due to a rise in salaries expenses. This rising trend exposes the bank to operational risks and affects its bottom-line growth. Costs are likely to continue rising in the near term as the company is focusing on growing its franchise.

The lack of revenue diversification is another key concern for Bank of Hawaii. Though driven by rate cuts, the mortgage banking activities improved and resulted in higher fee income in the last two years, the same has been on a declining trend previously. Thus, the absence of diversifying efforts is likely to hurt Bank of Hawaii’s top-line growth.

Stocks to Consider

Fifth Third Bancorp (FITB - Free Report) has witnessed an upward earnings estimate revision of 2.1% for 2021 over the past 30 days. This Zacks Rank #2 (Buy) stock has jumped 70% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JPMorgan Chase & Co. (JPM - Free Report) current-year earnings estimates have risen slightly in 30 days’ time. Further, the company’s shares have appreciated 56.7% over the past six months. At present, it carries a Zacks Rank #2.

Morgan Stanley (MS - Free Report) has witnessed an upward earnings estimate revision of 1.5% for 2021 over the past 30 days. This Zacks Rank #2 stock has jumped 63.9% over the past six months.

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