East West Bancorp Undervalued On Above-Average Loan Growth And Core Earnings Growth Potential

 

Trying to figure out why any particular stock underperforms over the short term can be an exercise in utter frustration. Sure, sometimes there are obvious drivers (earnings misses, clear deterioration in market fundamentals, et al), but other times there’s no easy go-to explanation. Such would seem to be the case for East West Bancorp (EWBC) - the business is performing well and I don’t see many fundamental issues in the bank’s served markets.

I continue to believe that East West offers attractive long-term upside, as this affinity-based bank continues to grow its high-quality loan book and leverage an attractive deposit base, as well as growth in U.S.-China trade. I do think the company will encounter more loan competition as it grows (and targets larger customers / loan amounts), but that risk seems more than reflected in the share price, and this looks to me like a relatively rare bank stock that offers high single-digit long-term core growth (or better) at a reasonable valuation.

Continue reading here: 

East West Bancorp Undervalued On Above-Average Loan Growth And Core Earnings Growth Potential

East West Bancorp Still A Great Mid-Cap Bank, But Priced More Like It

Back in late September I thought that East West Bancorp (EWBC) was a great mid-cap bank not getting its due from the market. While even average bank stocks have run since then, East West’s better than 110% jump since that last article does make it a standout alongside what I believe are other differentiated growth stories among smaller banks like First Republic (FRC), Bank OZK (OZK), Pinnacle Financial (PNFP), and SVB Financial (SIVB).

I have significantly upgraded my earnings growth assumptions since then; in large part due to an improved credit and spread outlook, as well as improving economy, but also in part to a more aggressive approach on capital allocation (holding on to more capital to grow the business). That significantly boosts my long-term core earnings growth estimate (to the mid-to-high single-digits), but it’s hard to argue to that East West’s differentiated growth opportunities are going unappreciated today.

 

Read more here: 

East West Bancorp Still A Great Mid-Cap Bank, But Priced More Like It

East West Bancorp Not Getting Much Appreciation For Above-Average Margins And Growth Potential

With all that has happened in the wake of the COVID-19 pandemic, including a pledge from the Fed to keep rates very low into 2023, it's not so surprising that banks have underperformed. So, in that context, East West Bancorp's (EWBC) in-line-with-peers 30%-plus year-to-date plunge is perhaps likewise not so surprising. Although there are a lot of positives to this name, including its cross-border lending capabilities and strong profitability, the reality is that East West cannot escape the pressures of weaker spreads, limited loan growth, and rising credit costs.

There are a lot of banks that look undervalued today, so investors are spoiled for choice. East West doesn't skew as among the cheapest, but I think there's an argument for it as a more compelling idea on the basis of its elevated quality. With that, I believe this is still a name worth considering.

 

Read more here:
East West Bancorp Not Getting Much Appreciation For Above-Average Margins And Growth Potential