Yahoo Finance East West Bancorp (EWBC) Q1 Earnings Beat, Stock Gains 2.9%
Shares of East West Bancorp, Inc. EWBC gained 2.92% in after-market trading following the release of better-than-expected first-quarter 2024 results. Adjusted earnings per share of $2.08 surpassed the Zacks Consensus Estimate of $2.00. However, the bottom line declined 10.3% from the prior-year quarter.
Results were primarily aided by an increase in non-interest income. Also, deposit balances increased sequentially in the quarter. However, lower net interest income (NII) and higher expenses and provisions were the undermining factors.
Results in the reported quarter excluded a $10 million pre-tax FDIC assessment charge and certain non-operating expenses. After considering those, net income available to common shareholders was $285.1 million or $2.03 per share, down from $322.4 million or $2.27 per share in the prior-year quarter.
Revenues Decline, Expenses Rise
Adjusted quarterly net revenues were $644.1 million, down 3.8% year over year. However, the top line beat the Zacks Consensus Estimate of $638.8 million.
NII was $565.1 million, which declined 5.8% year over year. The net interest margin (NIM) contracted 62 basis points (bps) to 3.34%. We expected NII and NIM to be $564.6 million and 3.44%, respectively.
Adjusted non-interest income was $79 million, up 12.9%. The improvement was driven by an increase in all the components except foreign exchange income, customer derivative revenue and net losses on sales of loans. We had estimated non-interest income to be $74 million.
Non-interest expenses were $246.9 million up 13% from the prior-year quarter. The increase was mainly due to a significant rise in deposit insurance premiums and regulatory assessment costs. Our estimate for the same was $255.4 million. Adjusted non-interest expenses were up 9.5% year over year to $223.4 million.
The adjusted efficiency ratio was 34.68%, up from 30.46% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Mar 31, 2024, net loans were $51.3 billion, reflecting a marginal decline sequentially. Total deposits increased 4.4% to $58.6 billion. Our estimates for net loans and total deposits were $52.1 billion and $55.6 billion, respectively.
Credit Quality Worsens
Annualized quarterly net charge-offs were 0.17% of average loans held for investment, up 16 bps from the prior-year quarter. As of Mar 31, 2024, non-performing assets amounted to $164.9 million, rising 76.5% year over year.
The provision for credit losses was $25 million, which increased 25% from the prior-year quarter. Our estimate for the same was $29.1 million.
Capital Ratios Improve, Profitability Ratios Worsen
As of Mar 31, 2024, common equity Tier 1 capital ratio was 13.53%, up from 13.06% as of Mar 31, 2023. The total risk-based capital ratio was 14.84%, up from 14.50% in the prior-year quarter.
At the end of the first quarter, adjusted return on average assets was 1.64%, down from 2.05% as of Mar 31, 2023. Adjusted return on average tangible equity was 18.05%, down from 23.44%.
Share Repurchase Update
In the reported quarter, East West Bancorp repurchased 1.2 million shares for $82 million.
As of Mar 31, 2024, approximately $89 million shares remained available under the authorization.
Our View
East West Bancorp is well-poised for organic growth on continued improvement in loan 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
WaFd, Inc.’s WAFD second-quarter fiscal 2024 (ended Mar 31) adjusted earnings of 73 cents per share handily surpassed the Zacks Consensus Estimate of 31 cents. However, the bottom line declined 13.1% sequentially.
WAFD’s results reflected a rise in NII and other income, which aided the top line. Also, higher loan and deposit balances were another positive. However, a rise in expenses and higher provisions acted as spoilsports.
Zions Bancorporation’s ZION first-quarter 2024 adjusted net earnings per share of $1.03 surpassed the Zacks Consensus Estimate of $1.00. However, the bottom line decreased 26% from the year-ago quarter.
ZION’s results were primarily aided by lower provisions and stable adjusted expenses. However, a decline in NII and non-interest income and a fall in loan balance were major headwinds.
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