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) Down 3% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
It has been about a month since the last earnings report for East West Bancorp (EWBC - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is East West Bancorp due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
East West Bancorp Q1 Earnings Beat Estimates
East West Bancorp’s first-quarter 2024 adjusted earnings per share of $2.08 surpassed the Zacks Consensus Estimate of $2.00. However, the bottom line declined 10.3% from the prior-year quarter.
Results were primarily aided by an increase in non-interest income. Also, deposit balances increased sequentially in the quarter. However, lower net interest income (NII) and higher expenses and provisions were the undermining factors.
Results in the reported quarter excluded a $10 million pre-tax FDIC assessment charge and certain non-operating expenses. After considering those, net income available to common shareholders was $285.1 million or $2.03 per share, down from $322.4 million or $2.27 per share in the prior-year quarter.
Revenues Decline, Expenses Rise
Adjusted quarterly net revenues were $644.1 million, down 3.8% year over year. However, the top line beat the Zacks Consensus Estimate of $638.8 million.
NII was $565.1 million, which declined 5.8% year over year. The net interest margin (NIM) contracted 62 basis points (bps) to 3.34%. We expected NII and NIM to be $564.6 million and 3.44%, respectively.
Adjusted non-interest income was $79 million, up 12.9%. The improvement was driven by an increase in all the components except foreign exchange income, customer derivative revenue and net losses on sales of loans. We had estimated non-interest income to be $74 million.
Non-interest expenses were $246.9 million up 13% from the prior-year quarter. The increase was mainly due to a significant rise in deposit insurance premiums and regulatory assessment costs. Our estimate for the same was $255.4 million. Adjusted non-interest expenses were up 9.5% year over year to $223.4 million.
The adjusted efficiency ratio was 34.68%, up from 30.46% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, net loans were $51.3 billion, reflecting a marginal decline sequentially. Total deposits increased 4.4% to $58.6 billion. Our estimates for net loans and total deposits were $52.1 billion and $55.6 billion, respectively.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.17% of average loans held for investment, up 16 bps from the prior-year quarter. As of Mar 31, 2024, non-performing assets amounted to $164.9 million, rising 76.5% year over year.
The provision for credit losses was $25 million, which increased 25% from the prior-year quarter. Our estimate for the same was $29.1 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Mar 31, 2024, common equity Tier 1 capital ratio was 13.53%, up from 13.06% as of Mar 31, 2023. The total risk-based capital ratio was 14.84%, up from 14.50% in the prior-year quarter.
At the end of the first quarter, adjusted return on average assets was 1.64%, down from 2.05% as of Mar 31, 2023. Adjusted return on average tangible equity was 18.05%, down from 23.44%.
Share Repurchase Update
In the reported quarter, East West Bancorp repurchased 1.2 million shares for $82 million.
2024 Outlook
Management assumes a softening economy in the second half of the year. Rate cuts are likely to begin in the third quarter of 2024.
The company expects loans to increase in the range of 3-5%, with a pick expected from the second quarter. The primary loan drivers are expected to be residential mortgage and commercial & industrial lending, along with improving the diversification of the portfolio.
Given the fewer rate cuts than previously expected, NII is projected to decline in the range of 2-4%. Earlier, the company had guided NII to fall in the 4-6% range.
Management expects further NIM compression in the second quarter as deposit mix shifts continue because of higher rates for a longer period. Thereafter, acceleration in asset growth is expected to stabilize NIM, and the metric will bottom out in the second half of the year.
Adjusted non-interest expenses (excluding tax credit investment & core deposit intangible amortization) are projected to increase by 6-8%, primarily due to compensation and benefits expenses and technology investments. Tax credit amortization expenses are anticipated to be in the $45-$65 million range.
Management expects the quarterly net charge-off (NCO) rate to be in the range of 15-25 bps.
The effective tax rate is expected to be in the range of 23-24%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, East West Bancorp has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, East West Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
East West Bancorp is part of the Zacks Banks - West industry. Over the past month, Westamerica (WABC - Free Report) , a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended March 2024 more than a month ago.
Westamerica reported revenues of $75.84 million in the last reported quarter, representing a year-over-year change of -4.8%. EPS of $1.37 for the same period compares with $1.47 a year ago.
Westamerica is expected to post earnings of $1.34 per share for the current quarter, representing a year-over-year change of -11.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Westamerica. Also, the stock has a VGM Score of C.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
East West Bancorp (EWBC) Down 3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for East West Bancorp (EWBC - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is East West Bancorp due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
East West Bancorp Q1 Earnings Beat Estimates
East West Bancorp’s first-quarter 2024 adjusted earnings per share of $2.08 surpassed the Zacks Consensus Estimate of $2.00. However, the bottom line declined 10.3% from the prior-year quarter.
Results were primarily aided by an increase in non-interest income. Also, deposit balances increased sequentially in the quarter. However, lower net interest income (NII) and higher expenses and provisions were the undermining factors.
Results in the reported quarter excluded a $10 million pre-tax FDIC assessment charge and certain non-operating expenses. After considering those, net income available to common shareholders was $285.1 million or $2.03 per share, down from $322.4 million or $2.27 per share in the prior-year quarter.
Revenues Decline, Expenses Rise
Adjusted quarterly net revenues were $644.1 million, down 3.8% year over year. However, the top line beat the Zacks Consensus Estimate of $638.8 million.
NII was $565.1 million, which declined 5.8% year over year. The net interest margin (NIM) contracted 62 basis points (bps) to 3.34%. We expected NII and NIM to be $564.6 million and 3.44%, respectively.
Adjusted non-interest income was $79 million, up 12.9%. The improvement was driven by an increase in all the components except foreign exchange income, customer derivative revenue and net losses on sales of loans. We had estimated non-interest income to be $74 million.
Non-interest expenses were $246.9 million up 13% from the prior-year quarter. The increase was mainly due to a significant rise in deposit insurance premiums and regulatory assessment costs. Our estimate for the same was $255.4 million. Adjusted non-interest expenses were up 9.5% year over year to $223.4 million.
The adjusted efficiency ratio was 34.68%, up from 30.46% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, net loans were $51.3 billion, reflecting a marginal decline sequentially. Total deposits increased 4.4% to $58.6 billion. Our estimates for net loans and total deposits were $52.1 billion and $55.6 billion, respectively.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.17% of average loans held for investment, up 16 bps from the prior-year quarter. As of Mar 31, 2024, non-performing assets amounted to $164.9 million, rising 76.5% year over year.
The provision for credit losses was $25 million, which increased 25% from the prior-year quarter. Our estimate for the same was $29.1 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Mar 31, 2024, common equity Tier 1 capital ratio was 13.53%, up from 13.06% as of Mar 31, 2023. The total risk-based capital ratio was 14.84%, up from 14.50% in the prior-year quarter.
At the end of the first quarter, adjusted return on average assets was 1.64%, down from 2.05% as of Mar 31, 2023. Adjusted return on average tangible equity was 18.05%, down from 23.44%.
Share Repurchase Update
In the reported quarter, East West Bancorp repurchased 1.2 million shares for $82 million.
2024 Outlook
Management assumes a softening economy in the second half of the year. Rate cuts are likely to begin in the third quarter of 2024.
The company expects loans to increase in the range of 3-5%, with a pick expected from the second quarter. The primary loan drivers are expected to be residential mortgage and commercial & industrial lending, along with improving the diversification of the portfolio.
Given the fewer rate cuts than previously expected, NII is projected to decline in the range of 2-4%. Earlier, the company had guided NII to fall in the 4-6% range.
Management expects further NIM compression in the second quarter as deposit mix shifts continue because of higher rates for a longer period. Thereafter, acceleration in asset growth is expected to stabilize NIM, and the metric will bottom out in the second half of the year.
Adjusted non-interest expenses (excluding tax credit investment & core deposit intangible amortization) are projected to increase by 6-8%, primarily due to compensation and benefits expenses and technology investments. Tax credit amortization expenses are anticipated to be in the $45-$65 million range.
Management expects the quarterly net charge-off (NCO) rate to be in the range of 15-25 bps.
The effective tax rate is expected to be in the range of 23-24%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, East West Bancorp has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, East West Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
East West Bancorp is part of the Zacks Banks - West industry. Over the past month, Westamerica (WABC - Free Report) , a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended March 2024 more than a month ago.
Westamerica reported revenues of $75.84 million in the last reported quarter, representing a year-over-year change of -4.8%. EPS of $1.37 for the same period compares with $1.47 a year ago.
Westamerica is expected to post earnings of $1.34 per share for the current quarter, representing a year-over-year change of -11.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Westamerica. Also, the stock has a VGM Score of C.