In a report published Wednesday, Barclays analysts downgraded the rating on Bank of Hawaii Corporation BOH from Overweight to Equal-Weight, while reducing the price target from $65 to $63.
The downgrade reflects expectations for:
- Bank of Hawaii's loan growth to decelerate from its recent robust levels
- The company's expense growth to offset the benefit from improving fee income trends
- Deceleration on the company's pace of capital return to support its leverage ratio.
"It is hard for us to imagine BOH’s loan growth improving much from here. Its average and period-end loans increased at linked quarter annualized clips of 18% and 16%, respectively, in 1Q15. It normally targets loan growth of GDP plus 300bps and Hawaii’s GDP is presently running at ~5%. Its recent y-o-y loan growth is significantly in excess of its Hawaiian peers," the analysts said.
The company has guided to expense growth, albeit modest, on account of growth initiatives and escalating compliance costs. Moreover, Bank of Hawaii's capital return could decline going forward.
The EPS estimates for 2015 and 2016 have been reduced by $0.05 to $3.95 and by $0.10 to $4.30, respectively.
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