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Why Is East West Bancorp (EWBC) Up 6.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for East West Bancorp (EWBC - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is East West Bancorp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
East West Bancorp Gains on Q4 Earnings & Revenue Beat
East West Bancorp’s fourth-quarter 2018 earnings per share of $1.18 surpassed the Zacks Consensus Estimate by a penny. Also, the figure compares favorably with adjusted earnings of 87 cents in the prior-year quarter (excluded the impact of tax act).
Results primarily benefited from improvement in net interest income and higher loans and deposits. However, increase in expenses, higher provisions for credit losses and decline in non-interest income were the undermining factors.
Net income in the reported quarter was $173 million, up substantially from $84.9 million in the prior-year quarter.
For 2018, adjusted earnings per share of $4.66 lagged the Zacks Consensus Estimate of $4.80. However, the figure compares favorably with earnings of $3.46 in 2017. Net income (GAAP basis) was $703.7 million, up 39.2%.
Revenues Improve, Costs Rise
Net revenues in the reported quarter were $411.1 million, increasing 12.7% year over year. Also, the reported figure beat the Zacks Consensus Estimate of $407.3 million.
Net revenues for 2018 were $1.60 billion, up 10.7%. Further, the reported figure beat the Zacks Consensus Estimate of $1.58 billion.
Net interest income was $369.4 million, increasing 15.6% year over year. NIM expanded 22 basis points (bps) to 3.79%.
Non-interest income amounted to $41.7 million, down 7.8% from the year-ago quarter.
Non-interest expenses increased 7.3% to $188.1 million.
The efficiency ratio was 45.75%, down from 48.03% a year ago. Notably, fall in efficiency ratio indicates higher profitability.
Loans & Deposits Increase
As of Dec 31, 2018, total loans were $32.4 billion, up 3.8% sequentially. Total deposits increased 5.4% from the end of the previous quarter to $35.4 billion.
Credit Quality: A Mixed Bag
Annualized net charge-offs were 0.20% of average loans held for investment, down from 0.22% at the end of the prior-year quarter. As of Dec 31, 2018, Non-PCI non-performing assets were $93 million, down 19.2%.
However, provision for credit losses of $18 million, up 16.1% from the prior-year quarter.
Strong Capital & Profitability Ratios
Common equity Tier 1 capital ratio was 12.2% as of Dec 31, 2018, up from 11.4% at the end of the prior-year quarter. Total risk-based capital ratio was 13.7%, up from 12.9% .
At the end of the reported quarter, return on average assets was 1.69%, increasing from 0.90% on Dec 31, 2017. Further, as of Dec 31, 2018, return on average tangible equity was 18.0%, up from 10.2% a year ago.
2019 Outlook
Management provided 2019 guidance on assumption of no rate hike this year.
Total loans are expected to be up 10% year over year.
NII (excluding the impact of discount accretion) is projected to increase at the low double digits rate. NIM (excluding impact of the discount accretion) is expected to be 3.75-3.80%.
Non-interest expenses (excluding tax credit amortization & core deposit intangibles) are expected to increase in the mid-single digit rate.
Provision for credit losses is expected to be $80-$90 million.
Effective tax rate is anticipated to be 15%, including the impact of tax credit investments.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, East West Bancorp has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, East West Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is East West Bancorp (EWBC) Up 6.6% Since Last Earnings Report?
A month has gone by since the last earnings report for East West Bancorp (EWBC - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is East West Bancorp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
East West Bancorp Gains on Q4 Earnings & Revenue Beat
East West Bancorp’s fourth-quarter 2018 earnings per share of $1.18 surpassed the Zacks Consensus Estimate by a penny. Also, the figure compares favorably with adjusted earnings of 87 cents in the prior-year quarter (excluded the impact of tax act).
Results primarily benefited from improvement in net interest income and higher loans and deposits. However, increase in expenses, higher provisions for credit losses and decline in non-interest income were the undermining factors.
Net income in the reported quarter was $173 million, up substantially from $84.9 million in the prior-year quarter.
For 2018, adjusted earnings per share of $4.66 lagged the Zacks Consensus Estimate of $4.80. However, the figure compares favorably with earnings of $3.46 in 2017. Net income (GAAP basis) was $703.7 million, up 39.2%.
Revenues Improve, Costs Rise
Net revenues in the reported quarter were $411.1 million, increasing 12.7% year over year. Also, the reported figure beat the Zacks Consensus Estimate of $407.3 million.
Net revenues for 2018 were $1.60 billion, up 10.7%. Further, the reported figure beat the Zacks Consensus Estimate of $1.58 billion.
Net interest income was $369.4 million, increasing 15.6% year over year. NIM expanded 22 basis points (bps) to 3.79%.
Non-interest income amounted to $41.7 million, down 7.8% from the year-ago quarter.
Non-interest expenses increased 7.3% to $188.1 million.
The efficiency ratio was 45.75%, down from 48.03% a year ago. Notably, fall in efficiency ratio indicates higher profitability.
Loans & Deposits Increase
As of Dec 31, 2018, total loans were $32.4 billion, up 3.8% sequentially. Total deposits increased 5.4% from the end of the previous quarter to $35.4 billion.
Credit Quality: A Mixed Bag
Annualized net charge-offs were 0.20% of average loans held for investment, down from 0.22% at the end of the prior-year quarter. As of Dec 31, 2018, Non-PCI non-performing assets were $93 million, down 19.2%.
However, provision for credit losses of $18 million, up 16.1% from the prior-year quarter.
Strong Capital & Profitability Ratios
Common equity Tier 1 capital ratio was 12.2% as of Dec 31, 2018, up from 11.4% at the end of the prior-year quarter. Total risk-based capital ratio was 13.7%, up from 12.9% .
At the end of the reported quarter, return on average assets was 1.69%, increasing from 0.90% on Dec 31, 2017. Further, as of Dec 31, 2018, return on average tangible equity was 18.0%, up from 10.2% a year ago.
2019 Outlook
Management provided 2019 guidance on assumption of no rate hike this year.
Total loans are expected to be up 10% year over year.
NII (excluding the impact of discount accretion) is projected to increase at the low double digits rate. NIM (excluding impact of the discount accretion) is expected to be 3.75-3.80%.
Non-interest expenses (excluding tax credit amortization & core deposit intangibles) are expected to increase in the mid-single digit rate.
Provision for credit losses is expected to be $80-$90 million.
Effective tax rate is anticipated to be 15%, including the impact of tax credit investments.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, East West Bancorp has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, East West Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.