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East West Bancorp (EWBC) Down Despite Q2 Earnings Beat
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East West Bancorp’s (EWBC - Free Report) second-quarter 2018 adjusted earnings per share of $1.18 surpassed the Zacks Consensus Estimate of $1.09. Also, the figure compares favorably with the prior-year quarter’s adjusted earnings of 81 cents per share.
Results primarily benefited from improvement in both net interest income and non-interest income. Also, loans and deposit balances improved, which supported results to some extent. However, elevated expenses and higher provision for credit losses were the undermining factors. Perhaps these were the reasons that the company’s shares declined 2.1% following the earnings release.
Net income for the reported quarter was $172.3 million or $1.18 per share, up from $118.3 million or $0.81 per share in the prior-year quarter.
Revenues Improve, Costs Escalate
Net revenues for the April-June quarter came in at $390 million, increasing 15.6% year over year. Also, the reported figure surpassed the Zacks Consensus Estimate of $383 million.
Net interest income was $341.7 million, increasing 17.8% year over year. Further, net interest margin expanded 34 basis points (bps) year over year to 3.83%.
Non-interest income amounted to $48.3 million, up 2.2% from the year-ago quarter. The rise was primarily driven by increase in letters of credit fees and foreign exchange income, wealth management fees, and derivative fees.However, other fees and operating incomewitnessed a decline.
Non-interest expenses flared up 5% from the year-ago quarter to $177.4 million.
The efficiency ratio was 45.5%, down from 50.1% a year ago. Notably, a fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Jun 30, 2018, net loans were $29.9 billion, up 2.2% sequentially. Total deposits increased slightly from the end of the previous quarter to $32.8 billion.
Credit Quality: A Mixed Bag
Annualized net charge-offs were 0.15% of average loans held for investment, up from 0.04% in the prior-year quarter end. Also, in the reported quarter, the company registered provision for credit losses of $15.5 million, up from $10.7 million recorded in the prior-year quarter.
However, as of Jun 30, 2018, total non-performing assets were $103.5 million, down 22.2% year over year.
Strong Capital & Profitability Ratios
Under the Basel III rules, common equity Tier 1 capital ratio was 12.2%, as of Jun 30, 2018, up from 11.3% at the end of the prior-year quarter. Total risk-based capital ratio was 13.7%, up from 12.8% witnessed in the year-ago quarter.
At the end of the reported quarter, return on average assets was 1.84%, increasing from 1.36% as of Jun 30, 2017. However, as of Jun 30, 2018, return on average tangible equity was 19.50%, up from 15.30% a year ago.
2018 Outlook
Management projects loans to be up 10% year over year.
NIM (excluding the impact of the discount accretion) is expected to be 3.75%.
Management expects non-interest expenses (excluding tax credit amortization & deposit premium amortization) to increase at a high single-digit rate.
Provision for credit losses is expected to be $70-$80 million.
The company estimates effective tax rate to be 13% in 2018.
Conclusion
East West Bancorp remains well positioned for organic growth, backed by the continued improvement in loans and deposit balances. Also, it retained the uptrend in revenues during the second quarter of 2018. Nonetheless, persistently rising expenses and provisions might dent bottom-line growth in the quarters ahead.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
Among other stocks in the same industry, Bank of Hawaii Corporation (BOH - Free Report) is set to release its earnings numbers on Jul 23, while RBB Bancorp (RBB - Free Report) and First Hawaiian, Inc. (FHB - Free Report) are slated to report their figures on Jul 24 and Jul 26.
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East West Bancorp (EWBC) Down Despite Q2 Earnings Beat
East West Bancorp’s (EWBC - Free Report) second-quarter 2018 adjusted earnings per share of $1.18 surpassed the Zacks Consensus Estimate of $1.09. Also, the figure compares favorably with the prior-year quarter’s adjusted earnings of 81 cents per share.
Results primarily benefited from improvement in both net interest income and non-interest income. Also, loans and deposit balances improved, which supported results to some extent. However, elevated expenses and higher provision for credit losses were the undermining factors. Perhaps these were the reasons that the company’s shares declined 2.1% following the earnings release.
Net income for the reported quarter was $172.3 million or $1.18 per share, up from $118.3 million or $0.81 per share in the prior-year quarter.
Revenues Improve, Costs Escalate
Net revenues for the April-June quarter came in at $390 million, increasing 15.6% year over year. Also, the reported figure surpassed the Zacks Consensus Estimate of $383 million.
Net interest income was $341.7 million, increasing 17.8% year over year. Further, net interest margin expanded 34 basis points (bps) year over year to 3.83%.
Non-interest income amounted to $48.3 million, up 2.2% from the year-ago quarter. The rise was primarily driven by increase in letters of credit fees and foreign exchange income, wealth management fees, and derivative fees.However, other fees and operating incomewitnessed a decline.
Non-interest expenses flared up 5% from the year-ago quarter to $177.4 million.
The efficiency ratio was 45.5%, down from 50.1% a year ago. Notably, a fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Jun 30, 2018, net loans were $29.9 billion, up 2.2% sequentially. Total deposits increased slightly from the end of the previous quarter to $32.8 billion.
Credit Quality: A Mixed Bag
Annualized net charge-offs were 0.15% of average loans held for investment, up from 0.04% in the prior-year quarter end. Also, in the reported quarter, the company registered provision for credit losses of $15.5 million, up from $10.7 million recorded in the prior-year quarter.
However, as of Jun 30, 2018, total non-performing assets were $103.5 million, down 22.2% year over year.
Strong Capital & Profitability Ratios
Under the Basel III rules, common equity Tier 1 capital ratio was 12.2%, as of Jun 30, 2018, up from 11.3% at the end of the prior-year quarter. Total risk-based capital ratio was 13.7%, up from 12.8% witnessed in the year-ago quarter.
At the end of the reported quarter, return on average assets was 1.84%, increasing from 1.36% as of Jun 30, 2017. However, as of Jun 30, 2018, return on average tangible equity was 19.50%, up from 15.30% a year ago.
2018 Outlook
Management projects loans to be up 10% year over year.
NIM (excluding the impact of the discount accretion) is expected to be 3.75%.
Management expects non-interest expenses (excluding tax credit amortization & deposit premium amortization) to increase at a high single-digit rate.
Provision for credit losses is expected to be $70-$80 million.
The company estimates effective tax rate to be 13% in 2018.
Conclusion
East West Bancorp remains well positioned for organic growth, backed by the continued improvement in loans and deposit balances. Also, it retained the uptrend in revenues during the second quarter of 2018. Nonetheless, persistently rising expenses and provisions might dent bottom-line growth in the quarters ahead.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
East West Bancorp, Inc. Price, Consensus and EPS Surprise | East West Bancorp, Inc. Quote
Currently, East West Bancorp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other stocks in the same industry, Bank of Hawaii Corporation (BOH - Free Report) is set to release its earnings numbers on Jul 23, while RBB Bancorp (RBB - Free Report) and First Hawaiian, Inc. (FHB - Free Report) are slated to report their figures on Jul 24 and Jul 26.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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