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A month has gone by since the last earnings report for East West Bancorp (EWBC). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is East West Bancorp due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
East West Bancorp’s second-quarter 2025 adjusted earnings per share of $2.28 beat the Zacks Consensus Estimate of $2.23. Moreover, the bottom line increased 9.1% from the prior-year quarter’s level.
The results were primarily aided by an increase in NII and non-interest income. Also, loan and deposit balances increased sequentially in the quarter. However, higher provisions and non-interest expenses were headwinds.
The quarterly results excluded certain notable items. After considering those, net income available to common shareholders was $310.3 million or $2.24 per share, up from $288.2 million or $2.06 in the prior-year quarter.
Quarterly net revenues were $703.3 million, up 10.3% year over year. Moreover, the top line beat the Zacks Consensus Estimate of $699 million.
NII amounted to $617.1 million, which increased 11.5% year over year. Further, NIM expanded 8 bps to 3.35%. We expected NII and NIM to be $603.5 million and 3.37%, respectively.
Total non-interest income was $86.2 million, up 2.4%. An increase in all components except customer derivative income and lower gains on available-for-sale debt securities drove the improvement. We estimated non-interest income to be $89.2 million.
Non-interest expenses totaled $256 million, up 8.5% from the prior-year quarter’s level. The rise was due to an increase in all components except deposit account expense, deposit insurance premiums and regulatory assessments charges, and other operating expenses. Our estimate for the same was $261.3 million.
The efficiency ratio was 36.32, down from 36.93 in the prior-year quarter. A decline in the efficiency ratio indicates an improvement in profitability.
As of June 30, 2025, net loans held for investment (“HFI”) were $54.2 billion, reflecting a 1.3% rise sequentially. Further, total deposits rose 3.1% to $65 billion.
Annualized quarterly net charge-offs were 0.11% of average loans HFI, down 7 bps from the prior-year quarter’s level. As of June 30, 2025, non-performing assets amounted to $171.7 million, down 12.5% year over year.
The provision for credit losses was $45 million, up 21.6% from the prior-year quarter’s level. Our estimate for the same was $43 million.
As of June 30, 2025, the common equity Tier 1 capital ratio was 14.51, up from 13.74 as of June 30, 2024. The total risk-based capital ratio was 15.82, up from 15.05 a year ago.
At the end of the second quarter, the return on average assets was 1.62%, down from 1.63% as of June 30, 2024. Return on average tangible equity was 16.39%, down from 17.54%.
In the reported quarter, East West Bancorp repurchased roughly 26 thousand shares for $2 million. As of June 30, 2025, $241 million of authorization remained available for repurchase.
Management expects loans to increase in the range of 4-6% in 2025, driven by relative strength in commercial & industrial and residential lending. Commercial real estate loan growth is expected to be muted going forward. Management expects residential mortgage loans to contribute a similar or higher volume to the balance sheet in the third quarter of 2025.
Total revenues are expected to rise more than 7% in 2025, higher than the prior guidance of 6% increase.
NII growth is expected to be higher than 7% in 2025, compared with the previous outlook of the higher end of the 4-6% range.
Total operating non-interest expenses are anticipated to increase in the range of 7-9% in 2025 due to higher headcount and technological expenses, partially offset by lower expected deposit account expenses.
Management expects the NCO rate to be in the range of 15-25 bps in 2025, down from the earlier guidance of 25-35 bps.
The effective tax rate is expected to be roughly 23% in 2025, compared with the previous range of 21-23%. However, the tax rate for the remaining quarters will likely be below 23% or closer to 22%.
Further, amortization of tax credit and CRA investment expenses are anticipated to be in the range of $70 million to $80 million for 2025.
Since the earnings release, investors have witnessed a upward trend in estimates revision.
The consensus estimate has shifted 5.17% due to these changes.
At this time, East West Bancorp has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise East West Bancorp has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
East West Bancorp is part of the Zacks Banks - West industry. Over the past month, WaFd (WAFD), a stock from the same industry, has gained 1.5%. The company reported its results for the quarter ended June 2025 more than a month ago.
WaFd reported revenues of $186.26 million in the last reported quarter, representing a year-over-year change of -4.2%. EPS of $0.73 for the same period compares with $0.76 a year ago.
WaFd is expected to post earnings of $0.75 per share for the current quarter, representing a year-over-year change of +7.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for WaFd. Also, the stock has a VGM Score of D.
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This article originally published on Zacks Investment Research (zacks.com).
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