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Bank of Hawaii (BOH) Stock Gains 4.6% on Q3 Earnings Beat

Bank of Hawaii Corporation BOH reported third-quarter 2023 earnings per share of $1.17, beating the Zacks Consensus Estimate of 96 cents. However, the bottom line declined 8.6% from the year-ago quarter’s number.

Investors have been bullish on the stock, as the share price gained 4.6% in the Oct 23 trading session on higher fee income and decent loan and deposit balance. However, a fall in net interest income (NII) and a rise in provisions was a significant drag.

The company’s net income came in at $47.9 million, down 9.3% year over year.

Revenues & Expenses Decline

BOH’s total revenues fell marginally year over year to $171.3 million in the third quarter, outpacing the Zacks Consensus Estimate of $159.8 million.

The bank’s NII was $120.9 million, down 14.6% year over year, primarily due to higher funding costs, partially offset by higher earning asset yields. Our estimate for the metric was $119.8 million. Net interest margin decreased 47 basis points (bps) to 2.13%.

Non-interest income came in at $50.3 million, jumping 64.2% year over year. The rise primarily resulted from an increase in almost all the components of non-interest income, except fees, exchange and other service charges and net investment securities losses. Our estimate for the same was $40.6 million.

Non-interest expenses decreased slightly to $105.6 million. The fall mainly resulted from a decline in salaries and benefits expenditures, net equipment and other expenses. Our estimate for non-interest expenses was $103.7 million.

The efficiency ratio was 61.66% compared with 61.37% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.

As of Sep 30, 2023, total loans and leases balance remained flat from the prior-quarter end to $13.9 billion. Total deposits increased 1.4% sequentially to $20.8 billion. Our estimates for total loans and leases and total deposits were $14.5 billion and $21.9 billion, respectively.

Credit Quality: Mixed Bag

As of Sep 30, 2023, non-performing assets and allowance for credit losses decreased 16.9% and nearly 1% year over year to $11.5 million and $145.3 million, respectively.

The company recorded a provision for credit losses of $2 million compared to nil provision in the year-ago quarter. Moreover, $2 million was recorded in net loans and lease charge-offs compared with $1.1 million in the prior-year quarter.

Capital and Profitability Ratios Deteriorate

As of Sep 30, 2023, the Tier 1 capital ratio was 12.53%, down from 12.72% as of Sep 30, 2022. The total capital ratio was 13.56%, down from 13.82%. However, the ratio of tangible common equity to risk-weighted assets was 8.10%, up from 7.97% reported at the end of the year-ago quarter.

Return on average assets shrunk 18 bps year over year to 0.78%. Return on average shareholders' equity was 13.92% compared with 15.25% as of Sep 30, 2022.

Share Repurchase Update

During the reported quarter, Bank of Hawaii did not repurchase any shares.

Conclusion

The company’s strong balance-sheet position, higher interest rates and a rise in non-interest income will continue to support financials. However, a fall in NII and rising provisions are near-term concerns.

Bank of Hawaii Corporation Price, Consensus and EPS Surprise

Bank of Hawaii Corporation Price, Consensus and EPS Surprise
Bank of Hawaii Corporation Price, Consensus and EPS Surprise

Bank of Hawaii Corporation price-consensus-eps-surprise-chart | Bank of Hawaii Corporation Quote

Currently, BOH 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

Webster Financial WBS reported third-quarter 2023 adjusted earnings per share of $1.55, which surpassed the Zacks Consensus Estimate of $1.50. The figure excludes 27 cents of charges related to the merger with Sterling Bancorp on Jan 31, 2022.

Results of WBS were positively impacted by an improvement in NII due to higher rates. However, elevated expenses and lower non-interest income created a hindrance.

BankUnited, Inc. BKU reported third-quarter 2023 earnings per share of 63 cents, which missed the Zacks Consensus Estimate of 71 cents. The bottom line also declined 43.8% from the prior-year quarter.

Results were adversely impacted by an increase in non-interest expenses, lower deposit and loan balance and a decline in NII. However, higher non-interest income acted as a tailwind for BKU.

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