High Costs, Geographic Concentration Hurt Bank of Hawaii (BOH)
Bank of Hawaii Corporation BOH is likely to be impacted negatively by rising expenses and declining fee income in the upcoming period. Also, geographic concentration of the bank’s lending activities is concerning.
Bank of Hawaii’s rising cost base exposes the company to operational risks. The banks non-interest expenses have increased over the years.
The company has undertaken additional investments in technology, innovation, and other variable expenses. Hence, its cost base is likely to remain high in the upcoming period. Our estimate for the metric suggests a compound annual growth rate of 2.6% over the next three years.
Unimpressive fee income growth is a major headwind for Bank of Hawaii. The metric has declined over the years. Further, a decline in mortgage banking income and volatility in trust and assets management income have been affecting non-interest income. Moreover, the lack of efforts to diversify and expand sources of fee income is concerning.
Additionally, a substantial portion of BOH’s real estate loans is concentrated in the Hawaii region. As of Mar 31, 2023, 89% of the company’s lending activity was concentrated in the State of Hawaii. Such geographic concentration makes the company vulnerable to potential economic or political doldrums in the region.
Nonetheless, a strong balance sheet position and decent revenue growth is likely to offer some support in the upcoming period. Also, given its substantial liquidity, we expect capital deployment activities to be sustainable.
Shares of this Zacks Rank #4 (Sell) company have lost 45.8% over the past six months compared with the industry’s decline of 35.5%.
Image Source: Zacks Investment Research
Finance Stocks Worth Considering
A couple of better-ranked stocks from the finance sector are Velocity Financial, Inc. VEL and Coastal Financial Corporation CCB, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VEL’s 2023 earnings has been revised 14.8% upward over the past 30 days. The stock has increased 21.4% over the past six months.
The consensus estimate for CCB’s fiscal 2023 earnings has been revised 4.9% upward over the past 30 days. The company’s share price has decreased 20% over the past six months.
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Bank of Hawaii Corporation (BOH) : Free Stock Analysis Report
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