The stock price of
East West Bancorp, Inc.
) was up nearly 1% on Thursday's trading session following its
after-market release on Wednesday. The company's fourth-quarter
2013 earnings of 55 cents per share were in line with the Zacks
Consensus Estimate. However, it compared favorably with the
prior-year quarter figure of 49 cents, primarily driven by lower
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For the full year 2013, the company recorded earnings per share
of $2.10 compared with $1.89 cents in 2012. Further, earnings
were in line with the Zacks Consensus Estimate.
Results benefited from a decline in provision for loan losses,
partially offset by a decrease in the top line and higher
operating expense. Improvements in loans and deposits as well as
credit quality were the tailwinds for the quarter. Further, while
capital ratios were strong, profitability ratios were a mixed
Net income came in at $75.8 million, up 5.4% year over year.
Further, for full-year 2013, net income came in at $295.0
million, increasing 4.7% from $281.7 million in 2012.
Performance in Detail
East West Bancorp's total revenue was down nearly 1.0% from the
prior-year quarter to $256.6 million. However, revenues surpassed
the Zacks Consensus Estimate of $226.0 million.
For 2013, total revenue came in at $976.2 million, down from
$1,045.5 million in 2012. However, total revenue surpassed the
Zacks Consensus Estimate of $882.0 million.
Adjusted net interest income was $198.24 million, down marginally
from the prior-year quarter figure of $198.42 million. Net
interest margin (NIM) was 4.55%, down 19 basis points (bps) from
the prior-year quarter figure.
Non-interest loss increased 97.8% year over year to $36.6
million. This substantial rise was attributable to changes in net
reduction of Federal Deposit Insurance Corporation (FDIC)
indemnification asset and receivable. Nevertheless, sequentially,
the company reported 11.5% decline in net interest loss mainly
due to 23.7% increase in total fees and other operating income.
Non-interest expense rose to $124.4 million from $105.2 million
in the prior-year quarter. Despite this increase, for full-year
2013, expenses fell 1.7% to $415.5 million.
The efficiency ratio for East West Bancorp deteriorated to 47.69%
from 41.41% in the prior-year quarter. An increase in efficiency
ratio indicates decline in profitability.
East West Bancorp's average loans were $17.5 billion, up 20.1%
from the year-ago quarter. Total deposits for the quarter rose
12.6% year over year to $20.5 billion.
East West Bancorp's asset quality showed improvement in the
quarter. As of Dec 31, 2013, non-accrual loans (excluding covered
loans) as a percentage of total loans was 0.62%, down from 0.72%
as of Dec 31, 2012.
Total nonperforming assets (excluding covered assets) were $130.6
million, down 7.4% from the year-ago quarter. Moreover, provision
for loan losses fell 54.3% year over year to $6.3 million.
Capital and Profitability Ratios
East West Bancorp's capital ratios were strong and well above the
minimum requirement. As of Dec 31, 2013, Tier 1 leverage ratio
was 8.6%, Tier 1 risk-based capital ratio was 11.9% and total
risk-based capital ratio came in at 13.5%.
However, profitability ratios were a mixed bag. The return on
average assets declined 7 bps to 1.21% from the Dec 31, 2012
level. As of Dec 31, 2013, return on average common equity came
in at 12.65%, up from 12.26% as of Dec 31, 2012.
Management expects earnings per share between 49 cents to 51
cents in first-quarter 2014 and $2.24 to $2.28 for full-year
For 2014, adjusted NIM is expected to be 3.29%-3.33%. Further,
management foresees 8% to 10% growth in total loans and provision
for loan losses of nearly $20 million. Non-interest expense will
range from $430 million to $440 million and effective tax rate
will be 35%.
The full-year guidance as well as earnings guidance for
first-quarter 2014 was provided after taking into consideration
tentative one-time costs related to the acquisition of MetroCorp
in first-quarter 2014,
The near-zero interest rate condition will continue to weigh on
interest income. This, along with the limited scope to boost fee
income, will keep the top line under pressure in the coming
quarters. Moreover, though we observe disciplined expense
management on the company's front, expenses will rise due to
inorganic growth plans of the company.
Nevertheless, we remain optimistic about East West Bancorp's
efficient capital deployment activities based on its strong
balance sheet position. Additionally, further improvement in
credit quality will bolster the company's growth prospects.
At present, East West Bancorp has a Zacks Rank #3 (Hold).
Among other banks,
First Interstate Bancsystem Inc.
) is slated to release earnings results on Jan 29, while
Bank of Hawaii Corp.
UMB Financial Corporation
) are scheduled to report on Jan 27 and Jan 28, respectively.