Strong Results Ease Some Worries About East West Bancorp, But Valuation Is Still Appealing

With meaningful exposure to China and worries not only about the long-term health of the U.S.-China trade relations, but also concerns about asset sensitivity and credit quality, the wall of worry has been higher of late for East West Bancorp (EWBC), leading to pronounced underperformance over the past year. Strong fourth-quarter results should help ease some of those fears, but credit costs will be an ongoing concern in 2020.

East West Bancorp is a riskier-than-average bank investment idea, and I use a higher discount rate as a result. Even with that higher discount, though, I think the market is undervaluing what I see as mid-single-digit core earnings growth prospects over the next decade, not to mention opportunities to return more capital to shareholders and/or acquire within its existing footprint.

Read more here:
Strong Results Ease Some Worries About East West Bancorp, But Valuation Is Still Appealing