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Loan Growth to Aid East West Bancorp (EWBC) Amid Low Rates
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East West Bancorp, Inc.’s (EWBC - Free Report) organic growth strategy remains impressive. The company’s capital deployment activities reflect a strong balance sheet and liquidity position, through which it will likely continue to enhance shareholder value.
Moreover, analysts seem to be optimistic regarding the company’s earnings growth prospects. Thus, the Zacks Consensus Estimate for its current-year earnings has been witnessing an upward trend over the past 30 days.
However, continued margin pressure amid lower interest rates and elevated expenses remain major near-term concerns for the company.
Looking at fundamentals, East West Bancorp’s net interest income (NII), which is the primary source of its revenues, witnessed a compound annual growth rate (CAGR) of 5.1% over the last four years (2017-2020), with the momentum continuing in the first nine months of 2021. Improvement in loans and deposits are expected to further support NII in the upcoming quarters.
Over the last three years (2018-2020), total loans witnessed a CAGR of 8.5% and deposits saw a CAGR of 12.5%. Both loans and deposits increased in the first nine months of this year as well.
Further, the company’s capital deployment activities seem impressive. In January 2021, it hiked its quarterly dividend by 20%, following hikes in April 2019, July 2018 and January 2015. Also, the company has a share repurchase plan in place, under which it has authorized the repurchase of up to $500 million worth of shares. As of Sep 30, 2021, $354.1 million worth of shares were left to be repurchased. Given a solid capital position and earnings strength, the company’s capital deployment plan looks sustainable.
However, while East West Bancorp’s net interest margin (NIM) registered a rise in 2017 and 2018, the same declined in 2019, 2020 and the first nine months of 2021 due to near-zero interest rates. Despite the decent rise in the demand for loans, pressure on NIM is likely to persist in the near term due to the low interest-rate environment.
Also, expenses increased, witnessing a CAGR of 2.7%, over the last four years (2017-2020) mainly due to a rise in compensation and employee benefit costs. The uptrend continued in the first nine months of 2021. Overall costs are expected to remain elevated due to an increase in headcount and investments in technology for improving non-interest income.
A few stocks from the finance space worth a look are mentioned below.
The Charles Schwab Corporation’s (SCHW - Free Report) current-year earnings estimates have moved upward over the past 30 days. The stock has appreciated more than 90% in the past year.
Affiliated Managers Group, Inc.’s (AMG - Free Report) current-year earnings estimates have moved up over the past 30 days. The company’s shares have gained more than 120% in the past year.
Ares Management Corporation’s (ARES - Free Report) current-year earnings estimates have moved up marginally over the past 30 days. The company’s shares have gained more than 90% in a year.
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Loan Growth to Aid East West Bancorp (EWBC) Amid Low Rates
East West Bancorp, Inc.’s (EWBC - Free Report) organic growth strategy remains impressive. The company’s capital deployment activities reflect a strong balance sheet and liquidity position, through which it will likely continue to enhance shareholder value.
Moreover, analysts seem to be optimistic regarding the company’s earnings growth prospects. Thus, the Zacks Consensus Estimate for its current-year earnings has been witnessing an upward trend over the past 30 days.
However, continued margin pressure amid lower interest rates and elevated expenses remain major near-term concerns for the company.
Looking at fundamentals, East West Bancorp’s net interest income (NII), which is the primary source of its revenues, witnessed a compound annual growth rate (CAGR) of 5.1% over the last four years (2017-2020), with the momentum continuing in the first nine months of 2021. Improvement in loans and deposits are expected to further support NII in the upcoming quarters.
Over the last three years (2018-2020), total loans witnessed a CAGR of 8.5% and deposits saw a CAGR of 12.5%. Both loans and deposits increased in the first nine months of this year as well.
Further, the company’s capital deployment activities seem impressive. In January 2021, it hiked its quarterly dividend by 20%, following hikes in April 2019, July 2018 and January 2015. Also, the company has a share repurchase plan in place, under which it has authorized the repurchase of up to $500 million worth of shares. As of Sep 30, 2021, $354.1 million worth of shares were left to be repurchased. Given a solid capital position and earnings strength, the company’s capital deployment plan looks sustainable.
However, while East West Bancorp’s net interest margin (NIM) registered a rise in 2017 and 2018, the same declined in 2019, 2020 and the first nine months of 2021 due to near-zero interest rates. Despite the decent rise in the demand for loans, pressure on NIM is likely to persist in the near term due to the low interest-rate environment.
Also, expenses increased, witnessing a CAGR of 2.7%, over the last four years (2017-2020) mainly due to a rise in compensation and employee benefit costs. The uptrend continued in the first nine months of 2021. Overall costs are expected to remain elevated due to an increase in headcount and investments in technology for improving non-interest income.
A few stocks from the finance space worth a look are mentioned below.
The Charles Schwab Corporation’s (SCHW - Free Report) current-year earnings estimates have moved upward over the past 30 days. The stock has appreciated more than 90% in the past year.
Affiliated Managers Group, Inc.’s (AMG - Free Report) current-year earnings estimates have moved up over the past 30 days. The company’s shares have gained more than 120% in the past year.
Ares Management Corporation’s (ARES - Free Report) current-year earnings estimates have moved up marginally over the past 30 days. The company’s shares have gained more than 90% in a year.