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East West Bancorp (EWBC) Dips on Q3 Earnings Miss, Cost Hike
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Shares of East West Bancorp (EWBC - Free Report) lost 9.3% following the release of its third-quarter 2022 results. Earnings per share of $2.08 missed the Zacks Consensus Estimate by a penny. However, the bottom line increased 32% from the prior-year quarter.
Results were hurt by a rise in expenses and higher provisions. However, an improvement in revenues was a tailwind. Also, supported by the rise in interest rates, the net interest margin (NIM) recorded year-over-year growth.
Net income was $295.3 million, up 31% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $627.4 million, jumping 34% year over year. The top line beat the Zacks Consensus Estimate of $619 million.
Net interest income was $551.8 million, growing 39.4% year over year. NIM expanded 98 basis points (bps) to 3.68%.
Non-interest income increased 3.3% to $75.6 million. This was largely driven by higher deposit account fees, lending fees, interest rate contracts and other derivative income, wealth management fees, and other income.
Non-interest expenses rose 5.2% year over year to $216 million. The rise was mainly due to an increase in deposit account expenses, data processing costs, other operating expenses, compensation and employee benefits costs, and deposit insurance premiums and regulatory assessments charges.
The efficiency ratio was 34.43%, down from 43.81% in the prior-year quarter. A fall in the efficiency ratio indicates a rise in profitability.
As of Sep 30, 2022, net loans were $46.9 billion, up 2% sequentially. Total deposits were $53.9 billion, down marginally from the previous-quarter end.
Credit Quality: A Mixed Bag
As of Sep 30, 2022, non-performing assets were $97 million, plunging 43.8% year over year.
However, the provision for credit losses was $27 million against $10 million as a provision benefit in the prior-year quarter. Annualized quarterly net charge-offs were 0.06% of average loans held for investment compared with 0.13% in the year-ago quarter.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Sep 30, 2022, common equity Tier 1 capital ratio was 12.3%, down from 12.8% as of Sep 30, 2021. Total risk-based capital ratio was 13.6%, down from 14.2%.
At the end of the third quarter, the return on average assets was 1.86%, up from 1.46% as of Sep 30, 2021. Return on average tangible equity was 22.16%, up from 17.25%.
Share Repurchases
In the third quarter, EWBC did not repurchase any shares.
As of Sep 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
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2022 earnings of $1.55 per share were in line with the Zacks Consensus Estimate. The bottom line rose 6.9% from the prior-year quarter’s adjusted earnings of $1.45.
Results benefited from higher net interest income, a rise in loan balance and increasing rates. However, lower non-interest income mainly due to rising mortgage rates was the undermining factor. Higher adjusted expenses and a rise in provisions were the other headwinds for HWC.
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) earnings of $1.07 per share handily surpassed the Zacks Consensus Estimate of 91 cents. The figure reflects a year-over-year jump of 48.6%.
Results were primarily aided by higher rates, robust deposits and improving loan balances, which drove net interest income. However, an increase in expenses, a fall in total other income and higher provisions were the headwinds for WAFD.
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East West Bancorp (EWBC) Dips on Q3 Earnings Miss, Cost Hike
Shares of East West Bancorp (EWBC - Free Report) lost 9.3% following the release of its third-quarter 2022 results. Earnings per share of $2.08 missed the Zacks Consensus Estimate by a penny. However, the bottom line increased 32% from the prior-year quarter.
Results were hurt by a rise in expenses and higher provisions. However, an improvement in revenues was a tailwind. Also, supported by the rise in interest rates, the net interest margin (NIM) recorded year-over-year growth.
Net income was $295.3 million, up 31% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $627.4 million, jumping 34% year over year. The top line beat the Zacks Consensus Estimate of $619 million.
Net interest income was $551.8 million, growing 39.4% year over year. NIM expanded 98 basis points (bps) to 3.68%.
Non-interest income increased 3.3% to $75.6 million. This was largely driven by higher deposit account fees, lending fees, interest rate contracts and other derivative income, wealth management fees, and other income.
Non-interest expenses rose 5.2% year over year to $216 million. The rise was mainly due to an increase in deposit account expenses, data processing costs, other operating expenses, compensation and employee benefits costs, and deposit insurance premiums and regulatory assessments charges.
The efficiency ratio was 34.43%, down from 43.81% in the prior-year quarter. A fall in the efficiency ratio indicates a rise in profitability.
As of Sep 30, 2022, net loans were $46.9 billion, up 2% sequentially. Total deposits were $53.9 billion, down marginally from the previous-quarter end.
Credit Quality: A Mixed Bag
As of Sep 30, 2022, non-performing assets were $97 million, plunging 43.8% year over year.
However, the provision for credit losses was $27 million against $10 million as a provision benefit in the prior-year quarter. Annualized quarterly net charge-offs were 0.06% of average loans held for investment compared with 0.13% in the year-ago quarter.
Capital Ratios Deteriorate, Profitability Ratios Improve
As of Sep 30, 2022, common equity Tier 1 capital ratio was 12.3%, down from 12.8% as of Sep 30, 2021. Total risk-based capital ratio was 13.6%, down from 14.2%.
At the end of the third quarter, the return on average assets was 1.86%, up from 1.46% as of Sep 30, 2021. Return on average tangible equity was 22.16%, up from 17.25%.
Share Repurchases
In the third quarter, EWBC did not repurchase any shares.
As of Sep 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
Hancock Whitney Corporation’s (HWC - Free Report) third-quarter 2022 earnings of $1.55 per share were in line with the Zacks Consensus Estimate. The bottom line rose 6.9% from the prior-year quarter’s adjusted earnings of $1.45.
Results benefited from higher net interest income, a rise in loan balance and increasing rates. However, lower non-interest income mainly due to rising mortgage rates was the undermining factor. Higher adjusted expenses and a rise in provisions were the other headwinds for HWC.
Washington Federal’s (WAFD - Free Report) fourth-quarter fiscal 2022 (ended Sep 30) earnings of $1.07 per share handily surpassed the Zacks Consensus Estimate of 91 cents. The figure reflects a year-over-year jump of 48.6%.
Results were primarily aided by higher rates, robust deposits and improving loan balances, which drove net interest income. However, an increase in expenses, a fall in total other income and higher provisions were the headwinds for WAFD.