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East West Bancorp (EWBC) Stock Dips Despite Q4 Earnings Beat
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East West Bancorp’s (EWBC - Free Report) fourth-quarter 2023 adjusted earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.89. However, the bottom line declined 14.8% from the prior-year quarter.
Including FDIC special assessment-related expenses and gain on the sale of an available-for-sale debt security, earnings per share were $1.69.
Results were primarily aided by an increase in non-interest income. Also, loan balances increased sequentially in the quarter, which was a positive. However, lower net interest income (NII), and higher expenses and provisions were the undermining factors. Probably because of these negatives, shares of the company lost 2.4% in the after-market trading following the earnings release.
Net income (GAAP) was $239 million, declining 29% from the year-ago quarter. Our estimate for the metric was $260.7 million.
For 2023, adjusted earnings per share were $8.56, surpassing the Zacks Consensus Estimate of $8.38. Also, the bottom line increased 8.1% from the previous year. Net income (GAAP) was $1.16 billion, up 2.9% from 2022. Our estimate for the metric was $1.18 billion.
Revenues Decline, Expenses Rise
Quarterly net revenues were $654.7 million, down 2.3% year over year. However, the top line beat the Zacks Consensus Estimate of $642.6 million.
Full-year revenues were $2.61 billion, up 11.2% year over year. The top line marginally surpassed the Zacks Consensus Estimate of $2.60 billion.
Quarterly NII was $574.8 million, which declined 5.1% year over year. The net interest margin (NIM) contracted 50 basis points year over year to 3.48%. We expected NII and NIM to be $571.6 million and 3.47%, respectively.
Non-interest income was $79.9 million, up 23.1% from the year-ago quarter. The improvement was primarily driven by a significant increase in net gains on sales of loans. Also, the net gain on AFS debt security of $3.1 million, which was recorded in the fourth quarter of 2023, drove the increase in total fee income. We had estimated non-interest income to be $64.9 million.
Non-interest expenses were up 13% year over year to $290.5 million. The increase was mainly due to a significant rise in deposit insurance premiums and regulatory assessment costs. Our estimate for the same was $272 million.
The efficiency ratio was 44.37%, up from 38.35% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Dec 31, 2023, net loans were $51.5 billion, up 2.6% sequentially. Total deposits increased 1.8% sequentially to $56.1 billion. Our estimates for net loans and total deposits were $50.2 billion and $55.4 billion, respectively.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.15% of average loans held for investment, up 7 bps from the prior-year quarter. As of Dec 31, 2023, non-performing assets amounted to $114 million, rising 14.2% year over year.
The provision for credit losses was $37 million, which rose 48% from the prior-year quarter. Our estimate for the same was $39.3 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Dec 31, 2023, the common equity Tier 1 capital ratio was 13.31%, up from 12.68% as of Dec 31, 2022. The total risk-based capital ratio was 14.76%, up from 14.00% in the prior-year quarter.
At the end of the fourth quarter, return on average assets was 1.37%, down from 2.08% as of Dec 31, 2022. Return on average tangible equity was 15.26%, down from 24.96% as of Dec 31, 2022.
Share Repurchase Update
In the reported quarter, the company repurchased 1.5 million shares for $82 million.
Dividend Hike
The company’s board of directors announced a quarterly cash dividend of 55 cents per share, representing a hike of 15% from the prior payout. The dividend will be paid out on Feb 15, to shareholders of record as of Feb 2.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan balances, higher interest rates and efforts to improve fee income. However, a rise in expenses and a tough macroeconomic environment are likely to hurt the bottom line.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
The Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2023 adjusted earnings of $1.28 per share surpassed the Zacks Consensus Estimate of $1.12. However, the bottom line reflects a fall of 1.5% from the prior-year quarter.
Results were primarily aided by a rise in net interest revenues and fee revenues. The assets under management (AUM) balance witnessed a rise, which was another major positive for BK. However, higher expenses hurt the results to some extent. Also, the credit quality was weak in the reported quarter.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impacts of loss on available-for-sale debt securities and FDIC special assessment fees) of $1.46 surpassed the Zacks Consensus Estimate of $1.33. However, the bottom line declined 11.5% year over year.
Rising fee income was a positive for NTRS. Also, an increase in total assets under custody and AUM balances supported financials. Nonetheless, a fall in net interest income and a deterioration in the credit quality were headwinds.
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East West Bancorp (EWBC) Stock Dips Despite Q4 Earnings Beat
East West Bancorp’s (EWBC - Free Report) fourth-quarter 2023 adjusted earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.89. However, the bottom line declined 14.8% from the prior-year quarter.
Including FDIC special assessment-related expenses and gain on the sale of an available-for-sale debt security, earnings per share were $1.69.
Results were primarily aided by an increase in non-interest income. Also, loan balances increased sequentially in the quarter, which was a positive. However, lower net interest income (NII), and higher expenses and provisions were the undermining factors. Probably because of these negatives, shares of the company lost 2.4% in the after-market trading following the earnings release.
Net income (GAAP) was $239 million, declining 29% from the year-ago quarter. Our estimate for the metric was $260.7 million.
For 2023, adjusted earnings per share were $8.56, surpassing the Zacks Consensus Estimate of $8.38. Also, the bottom line increased 8.1% from the previous year. Net income (GAAP) was $1.16 billion, up 2.9% from 2022. Our estimate for the metric was $1.18 billion.
Revenues Decline, Expenses Rise
Quarterly net revenues were $654.7 million, down 2.3% year over year. However, the top line beat the Zacks Consensus Estimate of $642.6 million.
Full-year revenues were $2.61 billion, up 11.2% year over year. The top line marginally surpassed the Zacks Consensus Estimate of $2.60 billion.
Quarterly NII was $574.8 million, which declined 5.1% year over year. The net interest margin (NIM) contracted 50 basis points year over year to 3.48%. We expected NII and NIM to be $571.6 million and 3.47%, respectively.
Non-interest income was $79.9 million, up 23.1% from the year-ago quarter. The improvement was primarily driven by a significant increase in net gains on sales of loans. Also, the net gain on AFS debt security of $3.1 million, which was recorded in the fourth quarter of 2023, drove the increase in total fee income. We had estimated non-interest income to be $64.9 million.
Non-interest expenses were up 13% year over year to $290.5 million. The increase was mainly due to a significant rise in deposit insurance premiums and regulatory assessment costs. Our estimate for the same was $272 million.
The efficiency ratio was 44.37%, up from 38.35% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Dec 31, 2023, net loans were $51.5 billion, up 2.6% sequentially. Total deposits increased 1.8% sequentially to $56.1 billion. Our estimates for net loans and total deposits were $50.2 billion and $55.4 billion, respectively.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.15% of average loans held for investment, up 7 bps from the prior-year quarter. As of Dec 31, 2023, non-performing assets amounted to $114 million, rising 14.2% year over year.
The provision for credit losses was $37 million, which rose 48% from the prior-year quarter. Our estimate for the same was $39.3 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Dec 31, 2023, the common equity Tier 1 capital ratio was 13.31%, up from 12.68% as of Dec 31, 2022. The total risk-based capital ratio was 14.76%, up from 14.00% in the prior-year quarter.
At the end of the fourth quarter, return on average assets was 1.37%, down from 2.08% as of Dec 31, 2022. Return on average tangible equity was 15.26%, down from 24.96% as of Dec 31, 2022.
Share Repurchase Update
In the reported quarter, the company repurchased 1.5 million shares for $82 million.
Dividend Hike
The company’s board of directors announced a quarterly cash dividend of 55 cents per share, representing a hike of 15% from the prior payout. The dividend will be paid out on Feb 15, to shareholders of record as of Feb 2.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan balances, higher interest rates and efforts to improve fee income. However, a rise in expenses and a tough macroeconomic environment are likely to hurt the bottom line.
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
The Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2023 adjusted earnings of $1.28 per share surpassed the Zacks Consensus Estimate of $1.12. However, the bottom line reflects a fall of 1.5% from the prior-year quarter.
Results were primarily aided by a rise in net interest revenues and fee revenues. The assets under management (AUM) balance witnessed a rise, which was another major positive for BK. However, higher expenses hurt the results to some extent. Also, the credit quality was weak in the reported quarter.
Northern Trust Corporation’s (NTRS - Free Report) fourth-quarter 2023 adjusted earnings per share (excluding the impacts of loss on available-for-sale debt securities and FDIC special assessment fees) of $1.46 surpassed the Zacks Consensus Estimate of $1.33. However, the bottom line declined 11.5% year over year.
Rising fee income was a positive for NTRS. Also, an increase in total assets under custody and AUM balances supported financials. Nonetheless, a fall in net interest income and a deterioration in the credit quality were headwinds.