We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
East West Bancorp (EWBC) Benefits From Decent Loan Growth
Read MoreHide Full Article
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. However, continued margin pressure due to relatively lower rates, deteriorating asset quality and mounting expenses are near-term concerns.
East West Bancorp’s net interest income (NII), which is the primary source of its revenues, witnessed a compound annual growth rate (CAGR) of 5.8% over the last five years (2017-2021). A rise in demand for loans and an improving economy are expected to keep supporting NII in the upcoming quarters. Management projects adjusted NII (excluding PPP income) to increase 17-19% this year.
East West Bancorp has a solid balance sheet. As of Dec 31, 2021, the company had total debt worth $701.3 million, while cash and cash equivalents were $3.91 billion. Investment-grade credit ratings from Standard & Poor’s and Fitch Ratings render the company favorable access to the debt markets.
Further, the company’s capital deployment activities seem impressive. This January, EWBC hiked its quarterly dividend by 21%. 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 Dec 31, 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.
Moreover, analysts seem to be optimistic regarding the company’s prospects. Thus, the Zacks Consensus Estimate for 2022 earnings has been revised 1.4% upward over the past seven days. For 2023, it has moved 2.3% north over the same period.
This Zacks Rank #2 (Buy) stock has gained 4.7% over the past year, outperforming the industry’s rally of 3.8%.
Image Source: Zacks Investment Research
However, while East West Bancorp’s net interest margin (NIM) registered a rise in 2017 and 2018, the same declined in the last three years due to near-zero interest rates. Despite a decent rise in the demand for loans and the expected interest rate hikes this year, pressure on NIM is likely to persist in the near term due to relatively lower rates.
East West Bancorp’s asset quality has been deteriorating over the past few years. Provision for credit losses witnessed a CAGR of 65.7% over the four years ended 2020. While the company recorded negative provisions in 2021, a substantial jump in provisions was recorded in 2020 as the company continued to build reserves to combat the coronavirus-related economic slowdown. For 2022, EWBC expects provision for credit losses to be below $50 million.
Other Banks Worth a Look
Bank of Hawaii’s (BOH - Free Report) current-year earnings estimates have moved marginally upward over the past 30 days. Over the past year, shares of the company have lost 9.3%.
BOH, at present, carries a Zacks Rank of 2.
Northrim BanCorp, Inc.’s (NRIM - Free Report) 2022 earnings estimates have been unchanged over the past 30 days. The company’s shares have declined almost 1% in the past year.
Image: Shutterstock
East West Bancorp (EWBC) Benefits From Decent Loan Growth
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. However, continued margin pressure due to relatively lower rates, deteriorating asset quality and mounting expenses are near-term concerns.
East West Bancorp’s net interest income (NII), which is the primary source of its revenues, witnessed a compound annual growth rate (CAGR) of 5.8% over the last five years (2017-2021). A rise in demand for loans and an improving economy are expected to keep supporting NII in the upcoming quarters. Management projects adjusted NII (excluding PPP income) to increase 17-19% this year.
East West Bancorp has a solid balance sheet. As of Dec 31, 2021, the company had total debt worth $701.3 million, while cash and cash equivalents were $3.91 billion. Investment-grade credit ratings from Standard & Poor’s and Fitch Ratings render the company favorable access to the debt markets.
Further, the company’s capital deployment activities seem impressive. This January, EWBC hiked its quarterly dividend by 21%. 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 Dec 31, 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.
Moreover, analysts seem to be optimistic regarding the company’s prospects. Thus, the Zacks Consensus Estimate for 2022 earnings has been revised 1.4% upward over the past seven days. For 2023, it has moved 2.3% north over the same period.
This Zacks Rank #2 (Buy) stock has gained 4.7% over the past year, outperforming the industry’s rally of 3.8%.
Image Source: Zacks Investment Research
However, while East West Bancorp’s net interest margin (NIM) registered a rise in 2017 and 2018, the same declined in the last three years due to near-zero interest rates. Despite a decent rise in the demand for loans and the expected interest rate hikes this year, pressure on NIM is likely to persist in the near term due to relatively lower rates.
East West Bancorp’s asset quality has been deteriorating over the past few years. Provision for credit losses witnessed a CAGR of 65.7% over the four years ended 2020. While the company recorded negative provisions in 2021, a substantial jump in provisions was recorded in 2020 as the company continued to build reserves to combat the coronavirus-related economic slowdown. For 2022, EWBC expects provision for credit losses to be below $50 million.
Other Banks Worth a Look
Bank of Hawaii’s (BOH - Free Report) current-year earnings estimates have moved marginally upward over the past 30 days. Over the past year, shares of the company have lost 9.3%.
BOH, at present, carries a Zacks Rank of 2.
Northrim BanCorp, Inc.’s (NRIM - Free Report) 2022 earnings estimates have been unchanged over the past 30 days. The company’s shares have declined almost 1% in the past year.
NRIM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.