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East West Bancorp (EWBC) Q2 Earnings Beat, Stock Down 1.8%
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East West Bancorp’s (EWBC - Free Report) second-quarter 2022 earnings per share of $1.81 handily surpassed the Zacks Consensus Estimate of $1.68. The bottom line also reflected a rise of 15.5% from the prior-year quarter.
Results were primarily aided by revenue growth and a rise in loan balances. Also, supported by the rise in interest rates, net interest margin (NIM) recorded year-over-year growth. However, an increase in provisions and rising operating expenses were headwinds. Probably because of these and a challenging macroeconomic backdrop, investors are bearish on the stock, which has lost 1.8% since the earnings release last week.
Net income was $258.3 million, up 14.9% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $551.396 million, jumping 24% year over year. The top line beat the Zacks Consensus Estimate of $522 million.
Net interest income was $473 million, growing 17.4% year over year. NIM expanded 48 basis points (bps) to 3.23%.
Non-interest income increased 14.6% to $78.4 million. This was largely driven by higher deposit account fees and interest rate contracts and other derivative income.
Non-interest expenses rose 3.9% to $196.9 million. The rise was mainly due to an increase in deposit account expenses, other operating expenses, compensation and employee benefits costs, and deposit insurance premiums and regulatory assessments charges.
The efficiency ratio was 35.7%, down from 42.6% in the prior-year quarter. A fall in the efficiency ratio indicates a rise in profitability.
As of Jun 30, 2022, net loans were $46 billion, up 7% sequentially. Total deposits were $54.3 billion, down 1.1%.
Credit Quality: A Mixed Bag
As of Jun 30, 2022, non-performing assets were $89.9 million, plunging 60.2% year over year.
However, the provision for credit losses was $13 million against $15 million as a provision benefit in the prior-year quarter. Annualized quarterly net recoveries were 0.06% of average loans held for investment against 0.13% of net charge-offs.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Jun 30, 2022, common equity Tier 1 capital ratio was 12%, down from 12.8% as of Jun 30, 2021. Total risk-based capital ratio was 13.2%, down from 14.3%.
At the end of the second quarter, the return on average assets was 1.66%, up from 1.56% as of Jun 30, 2021. Return on average tangible equity was 19.94%, up from 18.28%.
Share Repurchases
During the second quarter, EWBC repurchased 1.4 million shares for $100 million.
As of Jun 30, 2022, $254 million remained available under the buyback authorization, which was announced in March 2020.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan balances, rising interest rates and efforts to improve fee income. However, mounting expenses and a tough macroeconomic environment are likely to weigh on the company’s financials in the near term.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2022 (ended Jun 30) earnings of 91 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The figure reflects a year-over-year jump of 49.2%.
Results were primarily aided by higher revenues and improving loan balances. However, an increase in expenses and higher provisions were the undermining factors for WAFD.
Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2022 earnings of 96 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, plunged 27.3% from the prior-year quarter.
Results benefited from an improvement in net interest income, a rise in loan balance and a modest increase in non-interest income. However, an increase in non-interest expenses and higher provisions were the major headwinds for CBSH.
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East West Bancorp (EWBC) Q2 Earnings Beat, Stock Down 1.8%
East West Bancorp’s (EWBC - Free Report) second-quarter 2022 earnings per share of $1.81 handily surpassed the Zacks Consensus Estimate of $1.68. The bottom line also reflected a rise of 15.5% from the prior-year quarter.
Results were primarily aided by revenue growth and a rise in loan balances. Also, supported by the rise in interest rates, net interest margin (NIM) recorded year-over-year growth. However, an increase in provisions and rising operating expenses were headwinds. Probably because of these and a challenging macroeconomic backdrop, investors are bearish on the stock, which has lost 1.8% since the earnings release last week.
Net income was $258.3 million, up 14.9% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $551.396 million, jumping 24% year over year. The top line beat the Zacks Consensus Estimate of $522 million.
Net interest income was $473 million, growing 17.4% year over year. NIM expanded 48 basis points (bps) to 3.23%.
Non-interest income increased 14.6% to $78.4 million. This was largely driven by higher deposit account fees and interest rate contracts and other derivative income.
Non-interest expenses rose 3.9% to $196.9 million. The rise was mainly due to an increase in deposit account expenses, other operating expenses, compensation and employee benefits costs, and deposit insurance premiums and regulatory assessments charges.
The efficiency ratio was 35.7%, down from 42.6% in the prior-year quarter. A fall in the efficiency ratio indicates a rise in profitability.
As of Jun 30, 2022, net loans were $46 billion, up 7% sequentially. Total deposits were $54.3 billion, down 1.1%.
Credit Quality: A Mixed Bag
As of Jun 30, 2022, non-performing assets were $89.9 million, plunging 60.2% year over year.
However, the provision for credit losses was $13 million against $15 million as a provision benefit in the prior-year quarter. Annualized quarterly net recoveries were 0.06% of average loans held for investment against 0.13% of net charge-offs.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Jun 30, 2022, common equity Tier 1 capital ratio was 12%, down from 12.8% as of Jun 30, 2021. Total risk-based capital ratio was 13.2%, down from 14.3%.
At the end of the second quarter, the return on average assets was 1.66%, up from 1.56% as of Jun 30, 2021. Return on average tangible equity was 19.94%, up from 18.28%.
Share Repurchases
During the second quarter, EWBC repurchased 1.4 million shares for $100 million.
As of Jun 30, 2022, $254 million remained available under the buyback authorization, which was announced in March 2020.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan balances, rising interest rates and efforts to improve fee income. However, mounting expenses and a tough macroeconomic environment are likely to weigh on the company’s financials in the near term.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
East West Bancorp, Inc. price-consensus-eps-surprise-chart | East West Bancorp, Inc. Quote
Currently, EWBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2022 (ended Jun 30) earnings of 91 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The figure reflects a year-over-year jump of 49.2%.
Results were primarily aided by higher revenues and improving loan balances. However, an increase in expenses and higher provisions were the undermining factors for WAFD.
Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2022 earnings of 96 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, plunged 27.3% from the prior-year quarter.
Results benefited from an improvement in net interest income, a rise in loan balance and a modest increase in non-interest income. However, an increase in non-interest expenses and higher provisions were the major headwinds for CBSH.