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Bank of Hawaii Outlook Upgraded, Ratings Affirmed by Moody's

Zacks Equity Research

Bank of Hawaii Corporation’s BOH ratings outlook has been upgraded to stable from negative by Moody's Investors Service, a rating arm of Moody's Corporation MCO. Further, the rating agency affirmed the company's senior unsecured Medium Term Note (MTN) program ratings at (P)A2.

Additionally, the company’s bank subsidiary, Bank of Hawaii’s standalone baseline credit assessment has been maintained at a1. Moody’s also confirmed the subsidiary’s bank deposit ratings of Aa2/Prime-1, an issuer rating of A2, counterparty risk assessments of Aa3(cr)/Prime-1(cr), and counterparty risk ratings of A1/Prime-1.

Why was the Outlook Upgraded?

Moderate loan growth and strong deposit-to-loan ratio are the primary reasons that led Moody’s to upgrade Bank of Hawaii’s outlook. The company’s ratings outlook has been negative since April 2017, given the risk associated with sustainability of above-peer loan growth over the previous three years. This had resulted in lower capitalization and liquidity position.

Nonetheless, per the rating agency, Bank of Hawaii’s loan growth “has moderated to 7% in 2018 and 9% in 2017, compared to 13 to 14% annually from 2014 to 2016”.

Further, Bank of Hawaii’s deposit-to-loan ratio of 144% at 2018-end indicates strong loan funding base, despite the ratio declining from 159% at the end of 2016. Also, Moody’s expects the company’s capital decline during a stress scenario will be relatively “better than the US peer average.”

Reasons for Ratings Affirmations

Moody’s affirmed Bank of Hawaii's ratings based on the company’s marketing leading position in Hawaii and conservative credit profile. Strong liquidity position, solid asset quality and stable profitability are expected to support the company’s financials.

Our Take

With a rising interest-rate environment and improving non-interest bearing deposit balances, Bank of Hawaii'srevenues are expected to continue improving. Further, strong deposit balances will help the company generate higher loans and meet other general business purposes.

The stock has rallied 4.1% over the past three months.

Currently, Bank of Hawaii carries a Zacks Rank #3 (Hold).

Stocks to Consider

Stocks in the finance space worth a look are Stifel Financial Corp. SF and Evercore Inc EVR.

Stifel Financial has witnessed an upward earnings estimate revision of 6.9% for the current year, over the past 30 days. Its share price has increased 12.9% in the past three months. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Evercore’s Zacks Consensus Estimate for the current year has moved 5% upward over the past 30 days. Its shares have gained 13.9% in the past three months. It carries a Zacks Rank #2 (Buy).

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Moody's Corporation (MCO) : Free Stock Analysis Report
Bank of Hawaii Corporation (BOH) : Free Stock Analysis Report
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Stifel Financial Corporation (SF) : Free Stock Analysis Report
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