Yahoo Finance East West Bancorp (EWBC) Stock Down 1.2% as Q4 Earnings Lag
East West Bancorp’s EWBC shares dipped 1.2% in response to lower-than-expected fourth-quarter 2021 results. Earnings per share of $1.52 missed the Zacks Consensus Estimate of $1.55. The bottom line jumped 32% from the prior-year quarter’s $1.15.
Results reflect higher revenues and negative provisions. The company witnessed a rise in loan balance during the quarter. However, lower interest rates and a rise in non-interest expenses were the undermining factors.
Net income was $217.8 million, surging 32.7% from the year-ago quarter.
In 2021, earnings of $6.10 per share missed the consensus estimate of $6.13 and surged 53.6% from 2020. Net income of $873 million was up 53.7% from 2020.
Revenues & Expenses Up
Net revenues were $477.2 million, rising 41.5% year over year. The top line beat the Zacks Consensus Estimate of $468.5 million.
In 2021, net revenues increased 12.3% year over year to $1.82 billion. The top line marginally beat the consensus estimate of $1.81 billion.
Net interest income was $405.7 million, growing 17.1% year over year. Net interest margin contracted 4 basis points (bps) to 2.73%.
Non-interest income was $71.5 million, increasing 2.4%. The improvement was primarily driven by higher deposit account fees, foreign exchange income, lending fees and wealth management fees.
Non-interest expenses were up 17.6% to $210.1 million. The increase was mainly due to a rise in all components except occupancy and equipment expenses, and data processing expenses.
Efficiency ratio was 44.03%, up from 42.90% recorded in the prior-year quarter. A rise in the efficiency ratio indicates a decrease in profitability.
As of Dec 31, 2021, net loans were $41.2 billion, up 3.1% sequentially. Total deposits were flat at $53.4 billion.
Strong Credit Quality
Annualized quarterly net charge-offs were 0.10% of average loans held for investment, down 10 bps year over year. Reversal of credit losses was $10 million against a provision of $24.3 million in the prior-year quarter.
As of Dec 31, 2021, non-performing assets were $103.5 million, plunging 56%.
Capital Ratios Mixed, Profitability Ratios Improve
As of Dec 30, 2021, common equity Tier 1 capital ratio was 12.8%, up from 12.7% in Dec 31, 2020. Total risk-based capital ratio was 14.1%, down from 14.3%.
At the end of the fourth quarter, the return on average assets was 1.39%, up from 1.24% as of Dec 31, 2020. As of Dec 31, 2021, return on average tangible equity was 16.32%, up from 13.56%.
Dividend Hike
Concurrently, the company announced a quarterly cash dividend of 40 cents per share, representing a hike of 21% from the prior payout. The dividend will be paid out on Feb 22 to stockholders of record on Feb 7.
Our View
East West Bancorp is well poised for organic growth on continued improvement in loan and deposit balances, and efforts to improve fee income. However, pressure on margins and rising operating costs are near-term concerns.
East West Bancorp, Inc. Price, Consensus and EPS Surprise
East West Bancorp, Inc. price-consensus-eps-surprise-chart | East West Bancorp, Inc. Quote
Currently, East West Bancorp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
F.N.B. Corporation’s FNB fourth-quarter 2021 adjusted earnings per share of 30 cents met the Zacks Consensus Estimate. The bottom line reflected a rise of 7.1% from the prior-year quarter.
F.N.B.’s results were primarily aided by a rise in fee income, lower expenses and provision benefits. However, a fall in NII was the undermining factor.
BankUnited, Inc.’s BKU fourth-quarter 2021 earnings per share of $1.41 surpassed the Zacks Consensus Estimate of $1.14. The bottom line also jumped 58.4% from the prior-year quarter.
BankUnited’s results primarily benefited from higher revenues, and a rise in loans and deposit balances. However, a rise in expenses and poor credit quality were the undermining factors.
SVB Financial Group’s SIVB fourth-quarter 2021 adjusted earnings per share of $6.56 comfortably outpaced the Zacks Consensus Estimate of $6.29. In the year-ago quarter, the company recorded earnings of $7.40 per share.
SVB Financial’s results primarily benefited from growth in revenues. Loans and deposit balances witnessed sequential improvement. However, a rise in expenses and lower NIM were the undermining factors.
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