Yahoo Finance East West Bancorp (EWBC) Q4 Earnings Top, Stock Up 10.2%
East West Bancorp’s EWBC shares have gained 10.2% following the release of its fourth-quarter and full-year 2022 results last week. Earnings per share of $2.37 in the quarter surpassed the Zacks Consensus Estimate of $2.22 and jumped 55.9% from the prior-year quarter.
Results reflect higher net interest income (NII) and improvement in profitability ratios. The company witnessed a rise in loan balance during the quarter. However, an increase in non-interest expenses and higher provisions were the undermining factors.
Net income was $336.8 million, surging 54.6% from the year-ago quarter.
In 2022, earnings of $7.92 per share surpassed the Zacks Consensus Estimate of $7.52 and grew 29.8% year over year. Net income of $1.1 billion was up 29.2%.
Revenues & Expenses Up
Net revenues were $670.4 million, rising 40.5% year over year. Also, the top line beat the Zacks Consensus Estimate of $654 million.
In 2022, net revenues increased 29% to $2.34 billion and beat the Zacks Consensus Estimate of $2.28 billion.
NII was $605.5 million, growing 49.3%. Net interest margin expanded 125 basis points (bps) to 3.98%.
Non-interest income was $64.9 million, decreasing 9.2%.
Non-interest expenses were up 22.4% to $257.1 million. The increase was mainly due to a rise in all components except occupancy and equipment expenses, and data processing expenses.
Efficiency ratio was 38.35%, down from 44.03% recorded in the prior-year quarter. A decrease in the efficiency ratio indicates an increase in profitability.
As of Dec 31, 2022, net loans were $47.6 billion, up 1.6% sequentially. Total deposits were up 3.9% to $56 billion.
Credit Quality – Mixed Bag
Annualized quarterly net charge-offs were 0.08% of average loans held for investment, down 2 bps year over year. As of Dec 31, 2022, non-performing assets were $99.8 million, decreasing 3.6%.
Provision for credit losses was $25 million against a reversal of $10 million in the prior-year quarter.
Capital Ratios Decline, Profitability Ratios Improve
As of Dec 31 2022, common equity Tier 1 capital ratio was 12.7%, down from 12.8% in Dec 31, 2021. Total risk-based capital ratio was 14%, down from 14.1%.
At the end of the fourth quarter, the return on average assets was 2.08%, up from 1.39% as of Dec 31, 2021. As of Dec 31, 2022 return on average tangible equity was 24.96%, up from 16.32%.
Dividend Hike
EWBC announced a quarterly cash dividend of 48 cents per share, representing a hike of 20% from the prior payout. The dividend will be paid out on Feb 21 to stockholders of record on Feb 6.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan balances, rising interest rates and efforts to improve fee income. However, mounting expenses and a tough macroeconomic environment are likely to weigh on the financials in the near term.
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 (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corporation’s HWC fourth-quarter 2022 earnings of $1.65 per share surpassed the Zacks Consensus Estimate of $1.63. The bottom line rose 6.5% from the prior-year quarter’s earnings of $1.55.
Results of HWC were benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, mainly due to higher mortgage rates, was the undermining factor. Also, higher expenses and a rise in provisions were concerns.
Washington Federal’s WAFD first-quarter fiscal 2023 (ended Dec 31, 2022) earnings of $1.16 per share surpassed the Zacks Consensus Estimate of $1.11 per share. The bottom line reflects a year-over-year jump of 63.4%.
Results of WAFD were primarily supported by robust loan balances and an increase in NII. However, a substantial increase in provision for credit losses, rising expenses and decrease in other income were headwinds.
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