Market Overview

East West Bancorp Reports Net Income for Third Quarter 2019 of $171 Million and Diluted Earnings Per Share of $1.17; Record Operating Revenue of $421 Million

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East West Bancorp, Inc. ("East West" or the "Company") (NASDAQ:EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the third quarter of 2019. For the third quarter of 2019, net income was $171.4 million or $1.17 per diluted share, both up by 14% compared to the second quarter of 2019. Third quarter 2019 return on average assets was 1.58% and return on average equity was 14.1%.

"For the third quarter of 2019, East West achieved both record total operating1 revenue of $421 million and record net interest income of $370 million," stated Dominic Ng, Chairman and Chief Executive Officer of East West. "In a challenging environment of declining interest rates, we achieved a quarter-over-quarter increase in net interest income through balance sheet growth combined with a decrease in the cost of deposits. For the third quarter of 2019, the average cost of deposits decreased by six basis points to 1.05%, compared to 1.11% in the second quarter of 2019."

"Total loans grew $291 million, or 3% annualized, to a record $34.0 billion as of September 30, 2019 from $33.7 billion as of June 30, 2019. Year-to-date, total loans grew 7% annualized. Total deposits grew $182 million, or 2% annualized, to a record $36.7 billion as of September 30, 2019 from $36.5 billion as of June 30, 2019. Year-to-date, total deposits grew 5% annualized."

"We maintained strong expense discipline, resulting in a modest decline in noninterest expenses quarter-over-quarter," continued Ng. "However, the provision for credit losses increased to $38 million for the third quarter, and our pre-tax income declined by 7.5% from the second quarter of 2019. Nevertheless, net income grew 14% quarter-over-quarter as we benefitted from a linked-quarter reduction in the income tax expense."

"Overall, our third quarter 2019 return on assets was 1.58% and return on equity was 14.1%. We continue to deliver strong returns, in line with our long-term track record of generating attractive profitability," concluded Ng.

 

 

1

Operating revenue consists of net interest income before provision for credit losses and noninterest income, excluding non-operating items.

HIGHLIGHTS OF RESULTS

  • Third Quarter Earnings – Third quarter 2019 net income was $171.4 million, up by 14% compared to second quarter 2019 net income of $150.4 million, but 5% lower than second quarter adjusted2 net income of $180.5 million. Third quarter 2019 diluted earnings per share ("EPS") were $1.17, up by 14% compared to second quarter 2019 diluted EPS of $1.03, but 5% lower than second quarter adjusted2 EPS of $1.24.
  • Net Interest Income and Net Interest Margin – Third quarter 2019 net interest income ("NII") was $369.8 million, a quarterly increase of $2.5 million or 1%, and a year-over-year increase of $21.1 million or 6%. Third quarter 2019 net interest margin ("NIM") was 3.59%, a 14 basis point contraction from 3.73% in the previous quarter. Quarter-over-quarter, the average loan yield contracted by 17 basis points, and the average cost of deposits decreased by six basis points.
  • Record Loans – Total loans of $34.0 billion as of September 30, 2019 were up $291.0 million, or 3% linked quarter annualized, from $33.7 billion as of June 30, 2019. Total loans grew $2.8 billion, or 9% year-over-year. Average loans of $33.7 billion grew $679.9 million quarter-over-quarter, or 8% linked quarter annualized. Average loan growth during the quarter was well-diversified across commercial and consumer loan portfolios.
  • Record Deposits – Total deposits of $36.7 billion as of September 30, 2019 were up $182.0 million, or 2% linked quarter annualized, from $36.5 billion as of June 30, 2019. Total deposits grew $3.0 billion, or 9% year-over-year. Average deposits of $36.5 billion grew $1.2 billion quarter-over-quarter, or 13% linked quarter annualized. Average deposit growth during the quarter was well balanced across money market, noninterest-bearing demand and time deposits, partially offset by a decrease in interest-bearing checking accounts.
  • Asset Quality Metrics – The allowance for loan losses was $345.6 million, or 1.02% of loans held-for-investment ("HFI") as of September 30, 2019; the comparable ratios were 0.98% as of June 30, 2019, and 0.99% as of September 30, 2018. Non-purchased credit impaired ("Non-PCI") nonperforming assets were $134.5 million, or 0.31% of total assets as of September 30, 2019; the comparable ratios were 0.28% as of June 30, 2019, and 0.29% as of September 30, 2018. For the third quarter of 2019, the provision for credit losses was $38.3 million; net charge-offs were $22.5 million, or annualized 0.26% of average loans HFI.
  • Capital Levels – Capital levels for East West were strong. As of September 30, 2019, stockholders' equity was $4.9 billion, or $33.54 per share. Tangible equity3 per common share was $30.22 as of September 30, 2019, an increase of 4% linked quarter and 17% year-over-year.



    As of September 30, 2019, the tangible equity to tangible assets ratio3 was 10.3%, the common equity tier 1 ("CET1") capital ratio was 12.8%, and the total risk-based capital ratio was 14.2%.

 

 

2

See reconciliation of GAAP to non-GAAP financial measures in Table 13.

3

See reconciliation of GAAP to non-GAAP financial measures in Table 16.

QUARTERLY RESULTS SUMMARY

 

Quarter Ended

($ in millions, except per share data and ratios)

September 30,

2019

June 30,

2019

September 30,

2018

Net income

$

171.4

 

$

150.4

 

$

171.3

 

Adjusted net income (1)

$

171.4

 

$

180.5

 

$

171.3

 

Earnings per share (diluted)

$

1.17

 

$

1.03

 

$

1.17

 

Adjusted earnings per share (diluted) (1)

$

1.17

 

$

1.24

 

$

1.17

 

Book value per common share

$

33.54

 

$

32.53

 

$

29.29

 

Tangible equity (1) per common share

$

30.22

 

$

29.20

 

$

25.91

 

Tangible equity to tangible assets ratio (1)

10.28

%

10.02

%

9.74

%

Return on average assets (2)

1.58

%

1.45

%

1.76

%

Return on average equity (2)

14.1

%

12.9

%

16.2

%

Return on average tangible equity (1)(2)

15.7

%

14.5

%

18.5

%

Adjusted return on average assets (1)(2)

1.58

%

1.74

%

1.76

%

Adjusted return on average equity (1)(2)

14.1

%

15.5

%

16.2

%

Adjusted return on average tangible equity (1)(2)

15.7

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