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East West Bancorp (EWBC) Q2 Earnings Beat, Fee Income Rises
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East West Bancorp, Inc.’s (EWBC - Free Report) second-quarter 2024 adjusted earnings per share (EPS) of $2.07 surpassed the Zacks Consensus Estimate of $1.97. However, the bottom line declined 5.9% from the prior-year quarter.
The results were primarily aided by an increase in adjusted non-interest income. Also, deposit and loan balances increased sequentially in the quarter. However, lower net interest income (NII) and higher adjusted non-interest expenses and provisions were the undermining factors.
Results of the reported quarter excluded a $2 million pre-tax FDIC assessment charge. After considering the same, net income available to common shareholders was $288.2 million or $2.06 per share, down from $312 million or $2.20 per share in the prior-year quarter.
Revenues Decline, Expenses Fall
Adjusted quarterly net revenues were $637.9 million, down 1.2% year over year. However, the top line beat the Zacks Consensus Estimate of $634.6 million.
NII was $553.2 million, which declined 2.4% year over year. The net interest margin (NIM) contracted 28 basis points (bps) to 3.27%. We expected NII and NIM to be $556.5 million and 3.29%, respectively.
Adjusted non-interest income was $84.7 million, up 7.7%. The improvement was driven by an increase in all the components except customer derivative revenues and other investment income. We had estimated non-interest income to be $76.8 million.
Non-interest expenses were $236.4 million, down 9.7% from the prior year quarter. The decline was mainly due to a significant fall in the amortization of tax credits and CRA investments. Our estimate for the same was $244.1 million. Adjusted non-interest expenses were up 6.4% year over year to $218.5 million.
The adjusted efficiency ratio was 34.25%, down from 40.56% in the prior year quarter. A decline in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2024, net loans were $52.1 billion, reflecting a 1.5% rise sequentially. Total deposits increased 2.5% to $60 billion. Our estimates for net loans and total deposits were $52.8 billion and $56.8 billion, respectively.
Credit Quality Deteriorates
Annualized quarterly net charge-offs were 0.18% of average loans held for investment, up 12 bps from the prior-year quarter. As of Jun 30, 2024, non-performing assets amounted to $196.3 million, rising 69.9% year over year.
The provision for credit losses was $37 million, which increased 42.3% from the prior-year quarter. Our estimate for the same was $36.5 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Jun 30, 2024, the common equity Tier 1 capital ratio was 13.74%, up from 13.17% as of Jun 30, 2023. The total risk-based capital ratio was 15.05%, up from 14.60% in the prior year quarter.
At the end of the second quarter, the adjusted return on average assets was 1.64%, down from 1.85% as of Jun 30, 2023. Adjusted return on average tangible equity was 17.62%, down from 21.01%.
Share Repurchase Update
In the reported quarter, East West Bancorp repurchased 0.6 million shares for $41 million.
As of Jun 30, 2024, approximately $49 million shares remained available under the authorization.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan and deposit balances, higher interest rates and efforts to improve fee income. However, a rise in expenses and a tough macroeconomic environment are likely to hurt the bottom line.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
Zions Bancorporation’s (ZION - Free Report) second-quarter 2024 adjusted net EPS of $1.21 surpassed the Zacks Consensus Estimate of $1.10. Moreover, the bottom line increased 9% from the year-ago quarter.
ZION’s results were primarily aided by lower provisions and higher NII. Also, higher loans and deposits were other positives. However, a decline in non-interest income and a rise in adjusted non-interest expenses were major headwinds.
Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2024 quarterly EPS of $1.07 surpassed the Zacks Consensus Estimate of 90 cents. Also, the bottom line increased 10.3% from the prior-year quarter.
CBSH’s results benefited from a rise in NII and non-interest income. Also, lower provisions were a tailwind. The company recorded an increase in capital ratios in the quarter. However, an increase in expenses hurt the results to some extent.
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East West Bancorp (EWBC) Q2 Earnings Beat, Fee Income Rises
East West Bancorp, Inc.’s (EWBC - Free Report) second-quarter 2024 adjusted earnings per share (EPS) of $2.07 surpassed the Zacks Consensus Estimate of $1.97. However, the bottom line declined 5.9% from the prior-year quarter.
The results were primarily aided by an increase in adjusted non-interest income. Also, deposit and loan balances increased sequentially in the quarter. However, lower net interest income (NII) and higher adjusted non-interest expenses and provisions were the undermining factors.
Results of the reported quarter excluded a $2 million pre-tax FDIC assessment charge. After considering the same, net income available to common shareholders was $288.2 million or $2.06 per share, down from $312 million or $2.20 per share in the prior-year quarter.
Revenues Decline, Expenses Fall
Adjusted quarterly net revenues were $637.9 million, down 1.2% year over year. However, the top line beat the Zacks Consensus Estimate of $634.6 million.
NII was $553.2 million, which declined 2.4% year over year. The net interest margin (NIM) contracted 28 basis points (bps) to 3.27%. We expected NII and NIM to be $556.5 million and 3.29%, respectively.
Adjusted non-interest income was $84.7 million, up 7.7%. The improvement was driven by an increase in all the components except customer derivative revenues and other investment income. We had estimated non-interest income to be $76.8 million.
Non-interest expenses were $236.4 million, down 9.7% from the prior year quarter. The decline was mainly due to a significant fall in the amortization of tax credits and CRA investments. Our estimate for the same was $244.1 million. Adjusted non-interest expenses were up 6.4% year over year to $218.5 million.
The adjusted efficiency ratio was 34.25%, down from 40.56% in the prior year quarter. A decline in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2024, net loans were $52.1 billion, reflecting a 1.5% rise sequentially. Total deposits increased 2.5% to $60 billion. Our estimates for net loans and total deposits were $52.8 billion and $56.8 billion, respectively.
Credit Quality Deteriorates
Annualized quarterly net charge-offs were 0.18% of average loans held for investment, up 12 bps from the prior-year quarter. As of Jun 30, 2024, non-performing assets amounted to $196.3 million, rising 69.9% year over year.
The provision for credit losses was $37 million, which increased 42.3% from the prior-year quarter. Our estimate for the same was $36.5 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Jun 30, 2024, the common equity Tier 1 capital ratio was 13.74%, up from 13.17% as of Jun 30, 2023. The total risk-based capital ratio was 15.05%, up from 14.60% in the prior year quarter.
At the end of the second quarter, the adjusted return on average assets was 1.64%, down from 1.85% as of Jun 30, 2023. Adjusted return on average tangible equity was 17.62%, down from 21.01%.
Share Repurchase Update
In the reported quarter, East West Bancorp repurchased 0.6 million shares for $41 million.
As of Jun 30, 2024, approximately $49 million shares remained available under the authorization.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan and deposit balances, higher interest rates and efforts to improve fee income. However, a rise in expenses and a tough macroeconomic environment are likely to hurt the bottom line.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
East West Bancorp, Inc. price-consensus-eps-surprise-chart | East West Bancorp, Inc. Quote
Currently, EWBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Zions Bancorporation’s (ZION - Free Report) second-quarter 2024 adjusted net EPS of $1.21 surpassed the Zacks Consensus Estimate of $1.10. Moreover, the bottom line increased 9% from the year-ago quarter.
ZION’s results were primarily aided by lower provisions and higher NII. Also, higher loans and deposits were other positives. However, a decline in non-interest income and a rise in adjusted non-interest expenses were major headwinds.
Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2024 quarterly EPS of $1.07 surpassed the Zacks Consensus Estimate of 90 cents. Also, the bottom line increased 10.3% from the prior-year quarter.
CBSH’s results benefited from a rise in NII and non-interest income. Also, lower provisions were a tailwind. The company recorded an increase in capital ratios in the quarter. However, an increase in expenses hurt the results to some extent.