Why Is Bank of Hawaii (BOH) Up 14.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Bank of Hawaii (BOH). Shares have added about 14.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bank of Hawaii 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.

Bank of Hawaii Q3 Earnings Beat Estimates

Bank of Hawaii reported third-quarter 2023 earnings per share of $1.17, beating the Zacks Consensus Estimate of 96 cents. However, the bottom line declined 8.6% from the year-ago quarter’s number.

Higher fee income and decent loan and deposit balance were positives. However, a fall in NII and a rise in provisions were significant drags.

The company’s net income came in at $47.9 million, down 9.3% year over year.

Revenues & Expenses Decline

BOH’s total revenues fell marginally year over year to $171.3 million in the third quarter, outpacing the Zacks Consensus Estimate of $159.8 million.

The bank’s NII was $120.9 million, down 14.6% year over year, primarily due to higher funding costs, partially offset by higher earning asset yields. Our estimate for the metric was $119.8 million. Net interest margin decreased 47 basis points (bps) to 2.13%.

Non-interest income came in at $50.3 million, jumping 64.2% year over year. The rise primarily resulted from an increase in almost all the components of non-interest income, except fees, exchange and other service charges and net investment securities losses. Our estimate for the same was $40.6 million.

Non-interest expenses decreased slightly to $105.6 million. The fall mainly resulted from a decline in salaries and benefits expenditures, net equipment and other expenses. Our estimate for non-interest expenses was $103.7 million.

The efficiency ratio was 61.66% compared with 61.37% recorded in the year-ago period. A rise in the efficiency ratio reflects lower profitability.

As of Sep 30, 2023, total loans and leases balance remained flat from the prior-quarter end to $13.9 billion. Total deposits increased 1.4% sequentially to $20.8 billion. Our estimates for total loans and leases and total deposits were $14.5 billion and $21.9 billion, respectively.

Credit Quality: Mixed Bag

As of Sep 30, 2023, non-performing assets and allowance for credit losses decreased 16.9% and nearly 1% year over year to $11.5 million and $145.3 million, respectively.

The company recorded a provision for credit losses of $2 million compared to nil provision in the year-ago quarter. Moreover, $2 million was recorded in net loans and lease charge-offs compared with $1.1 million in the prior-year quarter.

Capital and Profitability Ratios Deteriorate

As of Sep 30, 2023, the Tier 1 capital ratio was 12.53%, down from 12.72% as of Sep 30, 2022. The total capital ratio was 13.56%, down from 13.82%. However, the ratio of tangible common equity to risk-weighted assets was 8.10%, up from 7.97% reported at the end of the year-ago quarter.

Return on average assets shrunk 18 bps year over year to 0.78%. Return on average shareholders' equity was 13.92% compared with 15.25% as of Sep 30, 2022.

Share Repurchase Update

During the reported quarter, Bank of Hawaii did not repurchase any shares.

Fourth-Quarter 2023 Outlook

The company expects NII to decline modesty on a sequential basis. NIM is likely to increase 3-5 bps on a sequential basis. Bank of Hawaii projects non-interest income of $41-$42 million.

The company suggests expenses to be flat to down in the fourth quarter on a sequential basis.

The tax rate is anticipated to be 24.5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 15.69% due to these changes.

VGM Scores

Currently, Bank of Hawaii has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Bank of Hawaii has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Bank of Hawaii is part of the Zacks Banks - West industry. Over the past month, Westamerica (WABC), a stock from the same industry, has gained 7.1%. The company reported its results for the quarter ended September 2023 more than a month ago.

Westamerica reported revenues of $83 million in the last reported quarter, representing a year-over-year change of +15.1%. EPS of $1.55 for the same period compares with $1.29 a year ago.

Westamerica is expected to post earnings of $1.50 per share for the current quarter, representing a year-over-year change of +2.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Westamerica. Also, the stock has a VGM Score of D.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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