Shares of East West Bancorp (EWBC - Free Report) gained 9.5%, following the release of first-quarter 2020 results. Quarterly adjusted earnings per share of $1 surpassed the Zacks Consensus Estimate of 94 cents. However, the figure was lower than the prior-year quarter’s level of $1.16 per share.
An increase in revenues and a decline in expenses drove the performance. Moreover, loans and deposit balances witnessed growth in the quarter. However, higher provisions hurt results to some extent.
Net income (GAAP basis) was $144.8 million, down 11.7% from the year-ago quarter.
Revenues Improve, Expenses Decline
Total revenues for the quarter were $416.8 million, up 3% year over year. Also, the reported figure beat the Zacks Consensus Estimate of $401.8 million.
Quarterly net interest income (NII) was $362.7 million, increasing marginally year over year. Net interest margin (NIM) declined 35 basis points (bps) to 3.44%.
Non-interest income was $54 million, up 28.3% from the year-ago quarter. The rise was driven by an increase in all fee income components, except for net gains on sales of AFS debt securities.
Non-interest expenses declined 4.3% to $178.9 million. All cost components, except for deposit insurance premiums and regulatory assessments, legal expenses, data processing, deposit related expenses, and computer software expenses, witnessed a fall.
Efficiency ratio was 42.92%, down from 46.20% a year ago. A decline in the efficiency ratio indicates improved profitability.
Loans & Deposits Increase
As of Mar 31, 2020, total loans held for investment were $35.9 billion, up 3.2% sequentially. Total deposits increased 3.7% from the end of the previous quarter to $38.7 billion.
Credit Quality: Mixed Bag
Annualized quarterly net charge-offs were 0.01% of average loans held for investment, down from 0.18% at the end of the prior-year quarter.
As of Mar 31, non-PCI non-performing assets were $150.9 million, up 9.3% year over year. Also, provision for credit losses was $73.9 million compared with $22.6 million in the prior-year quarter.
Capital & Profitability Ratios
Common equity Tier 1 capital ratio was 12.4% as of Mar 31, unchanged year over year. Total risk-based capital ratio was 14%, up from 13.9%.
At the end of the quarter, return on average assets was 1.30%, down from
1.63% as of Mar 31, 2018. Further, as of Mar 31, 2020, return on average tangible equity was 12.93%, down from 16.53%.
East West Bancorp is well poised for organic growth on the back of continued improvement in loan and deposit balance. Further, a decline in expenses is a positive for the company. However, pressure on margins is anticipated to hurt financials in the near term. Furthermore, rising provision for loan losses amid the coronavirus outbreak is concerning.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
Currently, East West Bancorp carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
M&T Bank Corporation (MTB - Free Report) pulled off a first-quarter 2020 positive earnings surprise of 26% on higher mortgage banking revenues. Net operating earnings per share of $1.95 surpassed the Zacks Consensus Estimate of $1.55. However, the bottom line compared unfavorably with $3.35 per share reported in the year-ago quarter.
Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
Regions Financial Corporation (RF - Free Report) reported first-quarter 2020 adjusted earnings of 15 cents per share, missing the Zacks Consensus Estimate of 19 cents. The figure plummeted 59.5% year over year.
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