Loans & Solid Balance Sheet to Aid East West Bancorp (EWBC)
East West Bancorp’s EWBC focus on revenue growth through improving loan balances is anticipated to support its financials despite the low interest rates. Further, a strong capital position is likely to help sustain its capital-deployment activities.
East West Bancorp’s organic growth remains impressive. The company’s revenues are largely driven by an improving net interest income (NII), which has witnessed a compound annual growth rate (CAGR) of 5.1% over the last four years (2017-2020). Moreover, its total loans and deposits have witnessed a CAGR of 8.5% and 12.5%, respectively, over the last three years (2018-2020). Given the anticipations of a decent rise in loan demand, the company’s NII is likely to improve further.
East West Bancorp is also focused on maintaining a solid balance sheet. As of Dec 31, 2020, the bank had a total debt of $1.13 billion, and cash and cash equivalents worth $4.02 billion. Given the decent earnings strength and sufficient liquidity, the bank will be able to continue meeting debt obligations, even if the economic situation worsens.
Apart from this, the company’s capital-deployment initiatives look encouraging. East West Bancorp hiked its quarterly dividend by 20% this January, following a 20% hike in April 2019, 15% in July 2018 and 11.1% in January 2015. Further, in March 2020, management authorized a share-repurchase program of up to $500 million worth of shares, of which $354.1 million remained under the buyback plan as of Dec 31, 2020. Thus, given a strong liquidity position, the company will likely be able to sustain efficient capital deployments.
Additionally, over the past six months, shares of East West Bancorp have appreciated 117.7%, outperforming the industry’s 86.1% rally. Moreover, the company’s earnings estimates have shown a favorable trend. The Zacks Consensus Estimate has moved marginally upward for both 2021 and 2022 over the past seven days. Currently, the stock sports a Zacks Rank #1 (Strong Buy).
However, East West Bancorp has been witnessing a contraction in net interest margin (NIM) for the past two years mainly due to lower interest rates. Despite decent loan demand, the NIM might remain under pressure in the near term due to the Fed’s accommodative policy stance.
Other Banks to Consider
Other similarly-ranked finance banks include Ameris Bancorp ABCB, Park National Corporation PRK and Amerant Bancorp Inc. AMTB.
Ameris Bancorp has witnessed an upward earnings estimate revision of 16.4% for the current year, over the past 60 days. Its share price has surged 128.8% over the past six months. You can the complete list of today’s Zacks #1 Rank stocks here.
Park National’s earnings estimate has been revised 11.8% upward for the current year in 60 days’ time. Shares of the company have appreciated 60.6% in the last six months.
Amerant Bancorp has recorded an upward earnings estimate revision of 74.1% for the ongoing year, in the past 60 days. The stock has rallied 83.5% in six months’ time.
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