Yahoo Finance East West Bancorp (EWBC) Q1 Earnings Beat on Higher NII
East West Bancorp’s EWBC earnings per share of $2.27 in the quarter surpassed the Zacks Consensus Estimate of $2.16. The bottom line also jumped 36.9% from the prior-year quarter. Our estimate for earnings per share was $2.02.
Results were primarily aided by higher net interest income (NII) and reflect improvement in profitability ratios. The company also witnessed a rise in loan balance during the quarter. However, an increase in non-interest expenses, lower non-interest income and higher provisions were the undermining factors.
Net income was $322.4 million, surging 35.7% from the year-ago quarter. Our estimate for the metric was $287.2 million.
Revenues & Expenses Up
Net revenues were $659.8 million, rising 33.2% year over year. However, the top line missed the Zacks Consensus Estimate of $667.1 million. Our estimate for total revenues was $652.2 million.
NII was $599.9 million, growing 44.3%. Net interest margin expanded 109 basis points (bps) to 3.96%. Our estimates for NII and NIM were $609.5 million and 4.02%, respectively. Non-interest income was $60 million, decreasing 24.8%.
The improvement was driven by an increase in almost all fee income components, except for interest rate contracts and other derivative income, other income, and Net (losses) gains on sales of loans. Our estimate for the metric was $42.5 million.
Non-interest expenses were up 15.3% to $218.4 million. The increase was mainly due to a rise in all components except legal expenses, data processing expenses, and amortization of tax credit and other investments. Our estimate for the same was $284.8 million.
Efficiency ratio was 33.11%, down from 38.25% in the prior-year quarter. A decrease in the efficiency ratio indicates an increase in profitability.
As of Mar 31, 2023, net loans were $48.3 billion, up 1.4% sequentially. Total deposits were down 2.2% to $54.7 billion.
Credit Quality – Mixed Bag
Annualized quarterly net charge-offs were 0.01% of average loans held for investment, down 7 bps year over year. As of Mar 31, 2023, non-performing assets were $93.4 million, decreasing 1%.
Provision for credit losses was $20 million, which rose significantly from $8 million in the prior-year quarter. Our estimate for the same was $36 million.
Capital Ratios and Profitability Ratios Improve
As of Mar 31, 2023, the common equity Tier 1 capital ratio was 13.06%, up from 12.55% on Mar 31, 2022. Total risk-based capital ratio was 14.50%, up from 13.88%.
At the end of the first quarter, the return on average assets was 2.01%, up from 1.56% as of Mar 31, 2022. Return on average tangible equity was 22.94%, up from 18% as of Mar 31, 2022.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan balances, increasing 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, the company 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
Commerce Bancshares Inc.’s CBSH first-quarter 2023 earnings per share of 95 cents surpassed the Zacks Consensus Estimate of 92 cents. The bottom line increased 3.3% from the prior-year quarter.
CBSH’s results benefited from an increase in NII, driven by a rise in loan balance and higher interest rates. Also, non-interest income grew during the quarter. However, a rise in non-interest expenses and provisions was a major setback. The company witnessed a decline in deposit balance during the quarter.
Hancock Whitney Corporation’s HWC first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter. Our estimate for earnings was $1.38 per share.
HWC’s results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provisions were concerning.
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