East West Bancorp Q3 Earnings Beat on Higher Fee Income, Stock Up 2.4%
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Shares of East West Bancorp, Inc. EWBC gained 2.4% in the after-market trading session on better-than-expected quarterly results. Its third-quarter 2024 adjusted earnings per share (EPS) of $2.09 surpassed the Zacks Consensus Estimate of $2.05. Further, the bottom line increased 3.5% from the prior-year quarter.
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The results were primarily aided by an increase in net interest income (NII) and non-interest income alongside lower non-interest expenses. Also, deposit and loan balances increased sequentially in the quarter. During the quarter, provisions remained stable.
Results of the reported quarter excluded certain notable items. After considering the same, net income available to common shareholders was $299.2 million or $2.14 per share, up from $287.7 million or $2.02 per share in the prior-year quarter.
EWBC’s Revenues Rise, Expenses Fall
Total quarterly net revenues were $657.5 million, up 1.5% year over year. Moreover, the top line beat the Zacks Consensus Estimate of $641.8 million.
NII was $572.7 million, which increased marginally year over year. However, net interest margin (NIM) contracted 24 basis points (bps) to 3.24%. We expected NII and NIM to be $560.2 million and 3.26%, respectively.
Total non-interest income was $84.8 million, up 10.4%. The improvement was driven by an increase in all the components except customer derivative revenues. We had estimated non-interest income to be $77.8 million.
Non-interest expenses were $226.2 million, down 10.3% from the prior year quarter. The decline was mainly due to a significant fall in the amortization of tax credits and CRA investments. Our estimate for the same was $248 million.
The efficiency ratio was 34.38%, down from 38.89% in the prior-year quarter. A decline in the efficiency ratio indicates an improvement in profitability.
As of Sept. 30, 2024, net loans were $52.6 billion, reflecting a roughly 1% rise sequentially. Total deposits increased 2.8% to $61.7 billion. Our estimates for net loans and total deposits were $53.3 billion and $60.1 billion, respectively.
Credit Quality Deteriorates for East West Bancorp
Annualized quarterly net charge-offs were 0.22% of average loans held for investment, up 8 bps from the prior-year quarter. As of Sept. 30, 2024, non-performing assets amounted to $195.5 million, up 88.5% year over year.
The provision for credit losses was $42 million, stable compared with the prior-year quarter. Our estimate for the same was $38 million.
EWBC’s Capital Ratios Improve, Profitability Ratios Worsen
As of Sept. 30, 2024, the common equity Tier 1 capital ratio was 14.08%, up from 13.30% as of Sept. 30, 2023. The total risk-based capital ratio was 15.39%, up from 14.74% in the prior year quarter.
At the end of the third quarter, the return on average assets was 1.62%, down from 1.66% as of Sept. 30, 2023. Return on average tangible equity was 17.08%, down from 18.65%.
