East West Bancorp, Inc. EWBC remains well poised for organic growth, supported by continued rise in loan balances along with higher rates. Moreover, the company’s capital deployment actions seem impressive.
However, persistently increasing costs remain a major concern for the company. Also, deteriorating asset quality is likely to hurt financials in the near term.
The company’s Zacks Consensus Estimate for current-year earnings has remained unchanged over the past 30 days. Thus, the stock currently carries a Zacks Rank #3 (Hold).
Its price performance also does not seem very impressive. Shares have lost 24.2% over the past year compared with 13% decline of the industry.
Looking at the fundamentals, East West Bancorp’s net interest income (NII), the primary source of its revenues, witnessed a CAGR of 7.4% over the last five years (2014-2018). Moreover, persistent improvement in loans and deposits are expected to support top-line growth in the upcoming quarters.
Moreover, the company is finally looking forward to improvement in the interest rate environment. After years of facing a declining trend, it witnessed a rise in net interest margin (NIM) in 2017 and 2018, which benefited from increased yields and growth in loan balances.
However, over the last five years (2014-2018), non-interest expenses rose at a CAGR of 7.6%. The increase was mainly due to rise in compensation and employee benefit costs. The costs are expected to remain elevated due to an increase in headcount and investments in technology.
Further, the company has considerable exposure to risky loans. High level of commercial real estate loans will likely put it in a tight spot. While the housing sector is rebounding, any deterioration in the real estate prices will weigh on the company’s financials.
Stocks to Consider
Some better-ranked stocks from the finance space are Evercore Inc. EVR, LPL Financial Holdings Inc. LPLA and Stifel Financial Corp. SF. All three stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Evercore has witnessed an upward earnings estimate revision of nearly 5% for the current year, over the past 60 days. Its shares have gained 27.3% over the past three months.
The Zacks Consensus Estimate for earnings for LPL Financial has increased 8% over the past 60 days. Its shares have gained 12.6% over the past three months.
Stifel Financial’s earnings estimates for the current year have been revised upward by 6.9% over the past 60 days. Its shares have gained 24.6% over the past three months.
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East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
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