Bancorp East WestEWBC’s third quarter 2021 earnings per share of $ 1.57 exceeded Zacks’ consensus estimate of $ 1.50. Net income jumped 40.2% from 70 cents in the previous year’s quarter.
The results reflect higher revenues and negative provisions. The company saw an increase in loan and deposit balances during the quarter. However, falling interest rates and increasing operating costs were the unfavorable factors.
Net income was $ 225.4 million, up 41.3% from the previous year quarter.
Increasing income and expenses
Net income was $ 468.8 million, up 23.8% year-over-year. The top line beat Zacks’ consensus estimate of $ 456.6 million.
Net interest income was $ 395.7 million, up 22.1%. The net interest margin contracted by 2 basis points (bps) to 2.70%.
Non-interest income was $ 73.1 million, up 34.1%. The improvement was largely the result of higher deposit fees, foreign exchange income and wealth management fees.
Non-interest expense increased 19% to $ 205.4 million. The increase is mainly due to an increase in all components except occupancy and equipment expenses, data processing expenses and computer software expenses.
The efficiency ratio was 43.81%, down from 45.85% in the previous year quarter. A decrease in the efficiency ratio indicates an improvement in profitability.
As of September 30, 2021, net lending was $ 39.9 billion, up 1.1% sequentially. Total deposits increased 1.5% to $ 53.4 billion.
Credit quality improves
Quarterly annualized net write-offs represented 0.13% of average loans held for investment, down 13 basis points year-over-year. The allowance for credit losses was negative at $ 10 million compared to a provision of $ 10 million in the prior year quarter.
As of September 30, 2021, non-performing assets stood at $ 172.6 million, down 33.6%.
Strong capital and profitability ratios
As at September 30, 2021, the Common Equity Tier 1 capital ratio was 12.8%, in line with the September 30, 2020 level. The capital ratio based on total risk stood at 14.2 %, down from 14.5%.
At the end of the third quarter, the average return on assets was 1.46%, compared to 1.26% as of September 30, 2020. As of September 30, 2021, the average return on equity was 17.25%, compared to 13.5%. 88%.
Management assumes that there will be no change in interest rates. Loans are now expected to grow 10-11% (up from the previously mentioned range of 9-10% growth), thanks to a strong pipeline.
The adjusted NII (excluding paycheck protection program income) is now expected to increase by 10-11%.
Non-adjusted interest charges (excluding investment tax credit and intangible amortization of basic deposits) should increase by 5%.
Management expects to record a negative provision of approximately $ 10 million for the fourth quarter, based on current macroeconomic forecasts and loan growth prospects. This is a change from the lack of provision for credit losses as previously planned.
The effective tax rate should be 17%, including the impacts of tax credit investments. The company anticipates amortization of the tax credit and other investments in the fourth quarter of 2021 of nearly $ 30 million.
Our point of view
East West Bancorp is well positioned for organic growth through continued improvement in loan and deposit balances and efforts to improve commission income. However, pressure on margins and rising operating costs are short-term concerns.
East West Bancorp, Inc. Price, Consensus and BPA Surprise
East West Bancorp, Inc. price-consensus-eps-surprise-chart | Estimate East West Bancorp, Inc.
Currently, East West Bancorp wears a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Performance of other banks
Hancock Whitney CorporationHWC’s adjusted third-quarter 2021 earnings of $ 1.45 per share exceeded Zacks’ consensus estimate of $ 1.29. The net result improved by 61.1% compared to the quarter of the previous year.
Commerce Bancshares inc.CBSH’s third quarter 2021 earnings per share of $ 1.05 exceeded Zacks’ consensus estimate of $ 1.00. Net income, however, was down almost 1% from the previous year quarter.
Zions BancorporationZION’s third quarter 2021 net earnings per share of $ 1.45 exceeded Zacks’ consensus estimate of $ 1.38. The bottom line represents an increase of 43.6% over the number for the quarter of the previous year.
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