UBS recently revised its price target for East West Bancorp (EWBC) to $125, a slight decrease from its previous $126, yet maintained a "Neutral" rating on the stock. This adjustment comes after UBS updated its financial models following East West Bancorp's strong fourth-quarter 2025 results. The firm observed that mid-cap banks, including EWBC, generally demonstrated solid performance in the preceding quarter, successfully navigating potential credit risk issues. Furthermore, UBS noted that investor confidence in regional banks is likely to persist, bolstered by a steepening yield curve, accelerated loan growth, and increased merger and acquisition activities, such as Santander's purchase of Webster.
East West Bancorp released its earnings on January 22, reporting a substantial 21.5% year-over-year increase in fourth-quarter net income, reaching $356.3 million. This growth significantly enhanced the bank's return on average common equity by 103 basis points, moving from 15.08% to 16.11%. In response to this robust financial health, EWBC's quarterly dividend was raised by 33% to $0.80. The company also experienced a 15.9% year-over-year surge in its book value per share, climbing from $55.79 to $64.68, reflecting a strong operational quarter.
The primary catalyst for this earnings expansion was an 11.9% year-over-year rise in net interest income (NII), which grew from $588 million to $658 million. This increase was attributed to both an expansion in net interest margin (NIM) and considerable loan growth. NIMs improved by 17 basis points to 3.41% as the cost of deposits decreased by 43 basis points to 2.16%, effectively offsetting a slight decline in average loan yields. Concurrently, the bank's loan portfolio expanded by 6.0% year-over-year, reaching $56.9 billion, and management anticipates a 5% to 7% increase in both loans and net interest income for the upcoming year 2026.
East West Bancorp's consistent growth and strategic financial management demonstrate the resilience and potential within the regional banking sector. Their ability to expand net interest income and loan portfolios, coupled with a proactive dividend increase, signals a healthy and forward-looking financial institution. This performance underscores the importance of strong fundamentals and adaptive strategies in achieving sustainable success and delivering value to shareholders.
