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Bank of Hawaii (BOH) Down 0.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Bank of Hawaii (BOH - Free Report) . Shares have lost about 0.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Bank of Hawaii 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 drivers.

Bank of Hawaii Q2 Earnings Beat Estimates on High Revenues

Bank of Hawaii reported a positive earnings surprise of 2.2% in second-quarter 2019. Earnings per share of $1.40 surpassed the Zacks Consensus Estimate of $1.37. Further, the reported figure compares favorably with $1.30 earned in the prior-year quarter.

Though results were unfavorably impacted by elevated expenses and provisions, investors’ optimism was reflected on growth in revenues. Further, strong capital position along with higher loan and deposit balances were the supporting factors.

The company’s net income came in at $56.9 million, up 4% from the $54.7 million reported in the prior-year quarter.

Revenues Increase, Expenses Escalate, Loans & Deposits Improve

The company’s total revenues increased 4.4% year over year to $170.2 million in the quarter. The revenue figure also beat the Zacks Consensus Estimate of $167.8 million.

The bank’s net interest income was recorded at $124.7 million, up 2.4% year over year. Net interest margin (NIM) remained stable at 3.04%, year on year.

Non-interest income came in at $45.5 million, up 10.2% year over year. This upsurge primarily resulted from rise in almost all components of income, partially mitigated by lower fees, exchange, and other service charges.

The bank’s non-interest expense flared up 2.1% year over year to $92.7 million. This upsurge reflects higher salaries and benefits, occupancy, equipment, as well as data-processing and other expenses.

Efficiency ratio came in at 54.69%, edging down from 56.12% recorded in the comparable quarter last year. Notably, a rise in the efficiency ratio reflects lower profitability.

As of Jun 30, 2019, total loans and leases balances climbed 2% from the end of the prior quarter to $10.8 billion, while total deposits inched up 1.5% to $15.5 billion.

Credit Quality: A Mixed Bag

As of Jun 30, 2019, allowance for loan and lease losses decreased slightly year over year to $107.7 million, while non-performing assets surged 43.4% year over year to $21.8 million.

In addition, the company recorded provision for credit losses of $4 million in the reported quarter, up 14.3% year over year. Further, net charge-offs were $2.4 million or 9 basis points (bps) annualized of total average loans and leases outstanding, up from the $3.3 million or 13 bps recorded in the prior-year quarter.

Strong Capital and Profitability Ratios

Bank of Hawaii was well capitalized with robust profitability ratios during the April-June quarter.

As of Jun 30, 2019, Tier 1 capital ratio was 12.46% compared with 13.27% as of Jun 30, 2018. Total capital ratio was 13.57% compared with 14.47% witnessed in the comparable quarter last year. The ratio of tangible common equity to risk-weighted assets was 12.17% compared with 12.68% at the end of the year-ago quarter.

Return on average assets were up 1 basis point year over year to 1.31%, while return on average shareholders' equity advanced 29 bps to 17.97%.

Capital Deployment

During the second quarter, the company repurchased 433,400 shares of common stock, at an average price of $80.49 and for a total cost of $34.9 million.

 

 

 

 


Outlook

Given the current challenging-rate environment, management anticipates net interest margin in the second half of the year to be at the level similar to the second quarter.

Non-interest income is expected to be around $43 million per quarter for the remainder of 2019.

In 2019, the company predicts non-interest expenses to be up about 2-3% year over year.

Effective tax rate for 2019 will likely be around 22%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Bank of Hawaii has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of this revision looks promising. Notably, Bank of Hawaii has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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