Earnings Call: Bank of Hawaii Reports Solid Q3 2023 Performance, Anticipates Modest Loan Growth

Bank of Hawaii reported a robust financial performance for the third quarter of 2023, despite challenges in the local economy due to recent wildfires. The bank’s credit quality remained strong with low net charge-offs and nonperforming assets, and a stable deposit base. The bank also indicated expectations of a modest lending environment and flat to slightly up growth over the next year.

Key takeaways from the earnings call:

• Average deposits grew while loan levels remained flat. The margin continued to be pressured by the inversion in the curve, but the erosion slowed compared to the previous quarter.
• The bank’s deposit base remained stable, and it has built additional sources of liquidity. This aligns with the InvestingPro Tip that the Bank of Hawaii yields high returns on invested capital and has maintained dividend payments for 52 consecutive years.
• The local economy in Hawaii performed well, with a strong performance in the visitor industry. However, the recent wildfires in Maui had an impact on visitor statistics for August.
• The residential real estate market on Oahu showed mixed results, with a decrease in median sales price for single-family homes but an increase for condominiums.
• The bank anticipates a modest lending environment and flat to slightly up growth over the next year.
• The bank’s CEO, Peter Ho, mentioned that they were starting to see insurance proceeds and federal and state monies related to the Maui wildfires, which would help lubricate the dynamic environment.

The bank’s CFO, Dean Shigemura, discussed the bank’s margin and stated that with the hedges in place, they have been able to neutralize the impact from the liability side, and if they get another rate increase, they would benefit from margin expansion. He also mentioned a securities loss trade they did in the quarter, which was a mix of corporates and munis and had a payback period of about three years. The trade was capital accretive for the bank.

During the earnings call, the Bank of Hawaii also discussed a recent transaction in corporate and municipal bonds, which has a payback period of approximately three years and was capital accretive. The bank also mentioned its aggressive approach in the consumer savings account space, aiming to deliver value to customers while maintaining a quality rate. They confirmed that their margin guidance includes the impact of the swaps made throughout the quarter, with an additional $500 million added in early October. When asked about potential rate cuts by the Fed, the bank expressed that they expect to benefit from lower rates on the short end. The call concluded with closing remarks from the Bank of Hawaii representatives.

InvestingPro data reveals that the Bank of Hawaii has a market cap of 1900M USD and a P/E ratio of 9.27. The bank’s revenue stands at 687.76M USD, with an operating income of 276.23M USD. Despite a declining trend in earnings per share, as indicated by InvestingPro Tips, the bank’s stockholders receive high returns on book equity. For more insights like these, consider subscribing to InvestingPro which offers an additional 9 tips for Bank of Hawaii.

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