Bank of Hawaii (BOH) Down 5.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Bank of Hawaii (BOH). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Bank of Hawaii due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Bank of Hawaii Q2 Earnings Beat While Revenues Miss Estimates
Bank of Hawaii reported second-quarter 2023 earnings per share of $1.12, beating the Zacks Consensus Estimate by a penny. Yet, the bottom line declined 18.8% from the year-ago quarter’s number.
Results benefited from higher fee income and decent loan demand. However, a fall in NII, and a rise in operating expenses and provisions were significant drags.
The company’s net income came in at $46.1 million, down 19% year over year.
Revenues Decline & Expenses Rise
Total revenues fell 4.3% year over year to $167.6 million in the second quarter, missing the Zacks Consensus Estimate of $170.52 million.
The bank’s NII of $124.3 million dipped 6.4% year over year, primarily due to higher funding costs. This was partially offset by higher earning asset yields. NIM decreased 25 basis points (bps) to 2.22%.
Non-interest income came in at $43.3 million, up 2.6% year over year. The rise primarily resulted from an increase in service charges on deposit accounts, annuity and insurance, bank-owned life insurance and other income.
Non-interest expenses inched up 1.1% to $104 million. The upswing mainly resulted from a rise in net occupancy, net equipment, professional fees and FDIC insurance expenses.
The efficiency ratio was 62.07% compared with 58.80% recorded in the year-ago period. A rise in efficiency ratio reflects lower profitability.
As of Jun 30, 2023, total loans and leases balance, and total deposits marginally improved from the prior-quarter end to $13.9 billion and $20.5 billion, respectively.
Credit Quality: Mixed Bag
As of Jun 30, 2023, non-performing assets and allowance for credit losses decreased 25.9% and 2.1% year over year to $11.5 million and $145.4 million, respectively.
The company recorded a provision for credit losses of $2.5 million against a benefit of $2.5 million in the year-ago quarter. Moreover, $1.38 million was recorded in net loans and lease charge-offs compared with $0.63 million in the year-earlier quarter.
Capital and Profitability Ratios Deteriorate
As of Jun 30, 2023, Tier 1 capital ratio was 12.21%, down from 13.01% as of Jun 30, 2022. Total capital ratio was 13.24%, down from 14.14%. The ratio of tangible common equity to risk-weighted assets was 7.97%, down from 8.72% reported at the year-ago quarter end.
Return on average assets shrunk 23 bps year over year to 0.77%. Return on average shareholders' equity was 13.55% compared with 16.40% as of Jun 30, 2022.
2023 Outlook
Management expects loan growth to be flat for the rest of the year.
Bank of Hawaii projects non-interest income in the range of $40-$41 million per quarter for the remainder of the year.
The company suggests expenses to be approximately flat in the third quarter on a sequential basis and then lower trend in the fourth quarter.
The tax rate is anticipated to be approximately 24.5%, which does not include the recognition of low-income housing tax credit benefits.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Bank of Hawaii has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Bank of Hawaii has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Bank of Hawaii Corporation (BOH) : Free Stock Analysis Report
