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Here's Why You Should Hold Bank of Hawaii (BOH) Stock Now

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Bank of Hawaii Corporation (BOH - Free Report) can be a solid bet now, given its robust revenue growth aided by solid loans and deposits balance. The bank’s strong capital position will likely support its capital-deployment measures. However, its expanding cost base remains a key concern.

Bank of Hawaii’s revenues witnessed a compound annual growth rate (CAGR) of 4.2% over the last five years (2013-2017), with the uptrend continuing in the first six months of 2018 as well. This upside primarily stemmed from increase in net interest income on the back of rate hikes. Non-interest bearing deposits, which constitute about 32% of total deposits, will boost the company’s interest income, as well as the net interest margin (NIM) going ahead.

The bank has been experiencing an increasing trend in loans and deposits balances for quite some time.  Loans and deposits witnessed a CAGR of 12.6% and 5.8%, respectively, over the past five years (2013-2017). Also, the trend continued into first two quarters of 2018. Strong deposit balances are expected to help the company generate higher loans and meet other general business purposes.

The company’s shares have gained 7.1% over the past year compared to the industry’s rally of 23.7%. The stock currently carries a Zacks Rank #3 (Hold).



However, Bank of Hawaii’s soaring expenses remain a major concern. Costs rose at a CAGR of 3% over the last four years (2014-2017), with the trend continuing in first-half 2018 as well. Salary expense remains the major factor for such increment.

Further, the stock is overvalued in comparison to its industry peers. Its current price/book and price-earnings (F1) ratios compare unfavorably with the respective industry averages.

Some better-ranked stocks in the same space are Bank of Commerce Holdings (CA) , Northrim BanCorp Inc (NRIM - Free Report) and SVB Financial Group . All three stocks flaunt a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Bank of Commerce’s current-year earnings has been revised 8.8% upward in the past 60 days. Its shares have rallied 18.8% over the past year.

Northrim BanCorp’s earnings estimates for 2018 moved 15.4% upward, in 60 days’ time. Its shares have gained 49.6% in a year’s time.

Over the past 60 days, SVB Financial’s 2018 earnings estimate moved 7.6% north. In the past year, the stock has surged 99.7%.

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