We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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) Stock Dips Despite Q4 Earnings Beat
Read MoreHide Full Article
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
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.