A month has gone by since the last earnings report for East West Bancorp (EWBC). Shares have added about 14% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is East West Bancorp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
East West Bancorp Q1 Earnings & Revenue Beat, Costs Down
East West Bancorp’s first-quarter 2020 adjusted earnings per share of $1 surpassed the Zacks Consensus Estimate of 94 cents. However, the figure was lower than the prior-year quarter’s level of $1.16 per share.
An increase in revenues and a decline in expenses drove the performance. Moreover, loans and deposit balances witnessed growth in the quarter. However, higher provisions hurt results to some extent.
Net income (GAAP basis) was $144.8 million, down 11.7% from the year-ago quarter.
Revenues Improve, Expenses Decline
Total revenues were $416.8 million, up 3% year over year. Also, the reported figure beat the Zacks Consensus Estimate of $401.8 million.
NII was $362.7 million, increasing marginally year over year. NIM declined 35 basis points (bps) to 3.44%.
Non-interest income was $54 million, up 28.3% from the year-ago quarter. The rise was driven by an increase in all fee income components, except for net gains on sales of AFS debt securities.
Non-interest expenses declined 4.3% to $178.9 million. All cost components, except for deposit insurance premiums and regulatory assessments, legal expenses, data processing, deposit related expenses, and computer software expenses, witnessed a fall.
Efficiency ratio was 42.92%, down from 46.20% a year ago. A decline in the efficiency ratio indicates improved profitability.
Loans & Deposits Increase
As of Mar 31, 2020, total loans held for investment were $35.9 billion, up 3.2% sequentially. Total deposits increased 3.7% from the end of the previous quarter to $38.7 billion.
Credit Quality: Mixed Bag
Annualized quarterly net charge-offs were 0.01% of average loans held for investment, down from 0.18% at the end of the prior-year quarter.
As of Mar 31, 2020, non-PCI non-performing assets were $150.9 million, up 9.3% year over year. Also, provision for credit losses was $73.9 million up significantly from $22.6 million in the prior-year quarter.
Capital Ratios Improve & Profitability Ratios Deteriorate
Common equity Tier 1 capital ratio was 12.4% as of Mar 31, unchanged year over year. Total risk-based capital ratio was 14%, up from 13.9%.
At the end of the quarter, return on average assets was 1.30%, down from 1.63% as of Mar 31, 2018. Further, as of Mar 31, 2020, return on average tangible equity was 12.93%, down from 16.53%.
Share Repurchase Update
During the first quarter, the company repurchased shares worth $145.9 million.
Management has temporarily withdrawn its guidance due to economic uncertainties arising due to the coronavirus pandemic.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
Currently, East West Bancorp has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
East West Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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