Breaking News

East West Bancorp (EWBC) Q3 Earnings Miss, Stock Down 5.1%

By Zacks Investment ResearchOct 17, 2019 09:54PM ET
East West Bancorp (EWBC) Q3 Earnings Miss, Stock Down 5.1%
By Zacks Investment Research   |  Oct 17, 2019 09:54PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Shares of East West Bancorp (NASDAQ:EWBC) tanked 5.1% following the release of third-quarter 2019 results. Earnings per share of $1.17 lagged the Zacks Consensus Estimate of $1.20. Nonetheless, the figure was on par with the prior-year quarter level.

While higher revenues, rise in loan and deposit balances, and fall in expenses supported the results, substantial increase in credit costs more than offset it. Additionally, lower interest rates acted as a headwind.

Moreover, management provided disappointing 2019 guidance on the back of the expectation of one more interest rate cut. Thus, the company’s share tanked 5.1% as the concerns weighed on investors’ sentiments.

Net income was $171.4 million, up marginally from the year-ago quarter.

Revenues Improve, Costs Down

Net revenues were $421.3 million, up 6.6% year over year. Also, the reported figure marginally beat the Zacks Consensus Estimate of $421.2 million.

Net interest income (NII) was $369.8 million, increasing 6% year over year. However, net interest margin (NIM) declined 17 basis points (bps) to 3.59%.

Non-interest income was $51.5 million, up 10.7% from the year-ago quarter. The rise was driven by increase in all fee income components except net gains on sales of fixed assets and lending fees.

Non-interest expenses declined 1.8% to $176.6 million. The fall was mainly due to decline in deposit insurance premiums and regulatory assessments cost, and amortization of tax credit and other investments expenses.

Efficiency ratio was 41.9%, down from 45.5% a year ago. A fall in the efficiency ratio indicates improved profitability.

Loans & Deposits Increase

As of Sep 30, 2019, total loans held-for-investment were $33.7 billion, up 0.8% sequentially. Total deposits increased 0.5% from the end of the previous quarter to $36.7 billion.

Credit Quality Worsens

Annualized net charge-offs were 0.26% of average loans held for investment, up from 0.05% at the end of the prior-year quarter.

Further, as of Sep 30, 2019, non-PCI non-performing assets were $134.5 million, up 17.3%. Also, provision for credit losses were $38.3 million, up significantly from $10.5 million in the prior-year quarter.

Capital Ratios Improve, Profitability Ratios Deteriorate

Common equity Tier 1 capital ratio was 12.8% as of Sep 30, 2019, up from 12.3% in the prior-year quarter. Total risk-based capital ratio was 14.2%, up from 13.8%.

At the end of the quarter, return on average assets was 1.58%, down from 1.76% as of Sep 30, 2018. Further, as of Sep 30, 2019, return on average tangible equity was 15.7%, down from 18.5%.

Dismal 2019 Outlook

Management provided 2019 guidance on assumption of one more rate cut later this month.

Total loans are expected to be up 7% year over year, down from prior guidance of 10% growth.

NII (excluding the impact of discount accretion) is projected to increase 6%, down from prior guidance of high-single digit growth rate.

NIM (excluding impact of the discount accretion) is projected to be 3.60-3.65%, lower than 3.60-3.70% expected previously.

Non-interest expenses (excluding tax credit amortization & core deposit intangibles) are expected to rise 3%, lower than the prior expectation of increase in mid-single digits rate.

Provision for credit losses is estimated to be $100 million, up from previous range of $80-$90 million.

Effective tax rate is anticipated to be 20%, including the impact of the $30.1 million reversal of previously claimed tax credits in the second quarter of 2019 or nearly 15% excluding the tax credit reversal.

Our Take

East West Bancorp remains well positioned for revenue growth, given the steady improvement in loan and deposit balances as well as efforts to improve fee income. However, persistently rising credit costs and lower rates are major concerns.

Currently, East West Bancorp carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Washington Federal’s (NASDAQ:WAFD) fourth-quarter fiscal 2019 (ended Sep 30) earnings came in at 66 cents per share, in line with the Zacks Consensus Estimate. The figure also reflects year-over-year growth of 6.5%.

Hancock Whitney Corporation’s (NASDAQ:HWC) third-quarter 2019 adjusted earnings per share of $1.03 beat the Zacks Consensus Estimate of $1.01. The bottom line comes in 2% higher than the year-ago quarter’s reported figure.

Commerce Bancshares, Inc.’s (NASDAQ:CBSH) third-quarter 2019 earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 93 cents. The figure was in line with the prior-year quarter.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft (NASDAQ:MSFT) in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.

See 7 breakthrough stocks now>>

Commerce Bancshares, Inc. (CBSH): Free Stock Analysis Report

Washington Federal, Inc. (WAFD): Free Stock Analysis Report

East West Bancorp, Inc. (EWBC): Free Stock Analysis Report

Hancock Whitney Corporation (HWC): Free Stock Analysis Report

Original post

Zacks Investment Research
East West Bancorp (EWBC) Q3 Earnings Miss, Stock Down 5.1%
East West Bancorp (EWBC) Q3 Earnings Miss, Stock Down 5.1%

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email