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East West Bancorp (EWBC) Up on Q4 Earnings Beat, Dividend Hike
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East West Bancorp’s (EWBC - Free Report) fourth-quarter 2020 earnings per share of $1.15 outpaced the Zacks Consensus Estimate of $1.03. However, the figure is down 10.9% from the prior-year quarter. Results included adjustments related to DC Solar tax credit investments.
Results reflect rise in non-interest income and lower expenses. Also, the company witnessed a rise in loan and deposits balance during the quarter. These factors, along with a 20% dividend hike, seem to have led to bullish investor sentiments as the company’s shares rallied almost 5% following the earnings release.
However, decline in net interest income, mainly due to lower interest rates, was a major undermining factor. Also, provisions increased during the quarter.
Adjusted net income was $161.5 million or $1.13 per share, down from $187.1 million or $1.28 per share in the year-ago quarter.
In 2020, earnings of $3.97 per share beat the consensus estimate of $3.85 but was down 13.9% year over year. Adjusted net income was $565.2 million or $3.95 per share, down from $707.9 million or $4.84 per share in 2019.
Revenues & Expenses Down
Net revenues for the quarter were $416.4 million, down 4.1% year over year. However, the figure beat the Zacks Consensus Estimate of $389.8 million.
In 2020, net revenues declined 4.6% to $1.61 billion. However, the top line surpassed the consensus estimate of $1.58 billion.
Net interest income came in at $346.6 million, down 5.9% year over year. Net interest margin also contracted 70 basis points (bps) to 2.77%.
Non-interest income was $69.8 million, up 6.1%. This rise mainly resulted from higher deposit account fees, foreign exchange income and other income.
Non-interest expenses declined 8.9% to $178.7 million. The fall was primarily due to lower amortization of tax credit and other investments, legal expenses and consulting expenses.
Efficiency ratio was 42.90%, down from 45.20% recorded in the prior year quarter. A fall in the efficiency ratio indicates improvement in profitability.
As of Dec 31, 2020, net loans were $37.8 billion, up 2.6% sequentially. Total deposits increased 7.6% to $44.9 billion.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.20% of average loans held for investment, up 10 bps year over year.
As of Dec 31, 2020, non-performing assets were $234.9 million, surging 93.3%. Also, provision for credit losses was $24.3 million, up 31% from the prior-year quarter.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2020, common equity Tier 1 capital ratio was 12.7% as of Dec 31, 2020, down from 12.9% as of Dec 31, 2019. Total risk-based capital ratio was 14.3%, down from 14.4%.
At the end of the fourth quarter, return on average assets was 1.24%, down from 1.68% as of Dec 31, 2019. Further, as of Dec 31, 2020, return on average tangible equity was 13.77%, down from the 16.61%.
Dividend Hike
Concurrently, East West Bancorp announced a quarterly cash dividend of 33 cents per share, representing a 20% hike from the prior payout. The dividend will be paid out on Feb 23 to shareholders of record as on Feb 9.
Our View
East West Bancorp is well poised for organic growth on continued improvement in loan and deposit balances, and efforts to improve fee income. However, pressure on margins and rising credit costs amid the pandemic are near-term concerns.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.
Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.
Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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East West Bancorp (EWBC) Up on Q4 Earnings Beat, Dividend Hike
East West Bancorp’s (EWBC - Free Report) fourth-quarter 2020 earnings per share of $1.15 outpaced the Zacks Consensus Estimate of $1.03. However, the figure is down 10.9% from the prior-year quarter. Results included adjustments related to DC Solar tax credit investments.
Results reflect rise in non-interest income and lower expenses. Also, the company witnessed a rise in loan and deposits balance during the quarter. These factors, along with a 20% dividend hike, seem to have led to bullish investor sentiments as the company’s shares rallied almost 5% following the earnings release.
However, decline in net interest income, mainly due to lower interest rates, was a major undermining factor. Also, provisions increased during the quarter.
Adjusted net income was $161.5 million or $1.13 per share, down from $187.1 million or $1.28 per share in the year-ago quarter.
In 2020, earnings of $3.97 per share beat the consensus estimate of $3.85 but was down 13.9% year over year. Adjusted net income was $565.2 million or $3.95 per share, down from $707.9 million or $4.84 per share in 2019.
Revenues & Expenses Down
Net revenues for the quarter were $416.4 million, down 4.1% year over year. However, the figure beat the Zacks Consensus Estimate of $389.8 million.
In 2020, net revenues declined 4.6% to $1.61 billion. However, the top line surpassed the consensus estimate of $1.58 billion.
Net interest income came in at $346.6 million, down 5.9% year over year. Net interest margin also contracted 70 basis points (bps) to 2.77%.
Non-interest income was $69.8 million, up 6.1%. This rise mainly resulted from higher deposit account fees, foreign exchange income and other income.
Non-interest expenses declined 8.9% to $178.7 million. The fall was primarily due to lower amortization of tax credit and other investments, legal expenses and consulting expenses.
Efficiency ratio was 42.90%, down from 45.20% recorded in the prior year quarter. A fall in the efficiency ratio indicates improvement in profitability.
As of Dec 31, 2020, net loans were $37.8 billion, up 2.6% sequentially. Total deposits increased 7.6% to $44.9 billion.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.20% of average loans held for investment, up 10 bps year over year.
As of Dec 31, 2020, non-performing assets were $234.9 million, surging 93.3%. Also, provision for credit losses was $24.3 million, up 31% from the prior-year quarter.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2020, common equity Tier 1 capital ratio was 12.7% as of Dec 31, 2020, down from 12.9% as of Dec 31, 2019. Total risk-based capital ratio was 14.3%, down from 14.4%.
At the end of the fourth quarter, return on average assets was 1.24%, down from 1.68% as of Dec 31, 2019. Further, as of Dec 31, 2020, return on average tangible equity was 13.77%, down from the 16.61%.
Dividend Hike
Concurrently, East West Bancorp announced a quarterly cash dividend of 33 cents per share, representing a 20% hike from the prior payout. The dividend will be paid out on Feb 23 to shareholders of record as on Feb 9.
Our View
East West Bancorp is well poised for organic growth on continued improvement in loan and deposit balances, and efforts to improve fee income. However, pressure on margins and rising credit costs amid the pandemic are near-term concerns.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
East West Bancorp, Inc. price-consensus-eps-surprise-chart | East West Bancorp, Inc. Quote
Currently, East West Bancorp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Banks
Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.
Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.
Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>