Cathay General Bancorp Forecasts Loan and Deposit Growth for 2024

Summary

  • Cathay General Bancorp announced a rise in net income to $82.5M in Q4 2023.
  • The bank recorded an increase in gross loans, particularly in the commercial and residential loan sectors.
  • Average deposit numbers also saw an increase.
  • Cathay’s loan and deposit growth is projected to increase by 4% to 5% for 2024.
  • Discussions with the Federal Reserve about potential capital buybacks are planned for the coming year.

In the fourth quarter of 2023, the American bank, Cathay General Bancorp (NASDAQ:), saw a marginal rise in net income, growing to $82.5M. This marks a 0.1% increase from the third quarter of the same year. Cathay reported a significant surge in gross loans, led by the commercial real estate and residential mortgage sectors, concurrently with a rise in total average deposits. The bank plans on sustaining consistent loan and deposit growth, forecasting a 4 to 5% rise in 2024. Furthermore, discussions with the Federal Reserve regarding prospective capital buybacks are anticipated within the year.

Key Findings

  • Net income of Cathay General Bancorp increased marginally to $82.5M in Q4 2023.
  • Gross loans rose by $524M, driven by the commercial and residential sectors.
  • Total average deposits witnessed an increase of $244.3M.
  • The bank predicts a growth between 4% to 5% in loans and deposits for 2024.
  • Non-accrual loans fell to 0.34% of total loans.
  • Both the Tier 1 leverage capital ratio and the Tier 1 risk-based capital ratio increased.
  • The bank is readying for three potential Fed rate cuts this year.

Outlook for the Company

  • Cathay predicts a growth between 4% and 5% in loans for 2024, with residential and commercial mortgages identified as primary drivers.
  • The bank also projects a 4% to 5% growth in deposits for 2024.
  • The net interest margin for 2024 is expected to lie between 3.15% and 3.25%.
  • Non-interest bearing deposit balances are expected to remain stable.
  • The bank expects an effective tax rate between 20% and 21% for 2024.

Negative Points to Note

  • Despite reduction, non-accrual loans still pose a risk.
  • The FDIC special assessment was the primary reason for the rise in non-interest expense.
  • The amortization of low-income housing tax credit is expected to be slightly higher than the previous year.

Positive Highlights

  • Gains in non-interest income were due to unrealized gains on equity securities.
  • The company’s capital ratios have been strengthened.
  • Management is optimistic about the potential for capital buybacks following discussions with the Fed.

Downsides

  • There was a decrease in construction loans in the company.
  • Classified loans dropped marginally but special mention loans increased.

Q&A Highlights

  • The company is hinting at possible Fed rate cuts and is shortening CD terms in anticipation.
  • Significant CD repricing is expected in Q1 2024.
  • The increase in the amortization of the low-income housing tax credit will be evenly distributed throughout 2024.
  • The NIM for December was reported at 3.19% with minimal prepayment fees in this quarter.

To conclude the earnings call, Cathay General Bancorp expressed optimism for 2024, despite challenges in rate cuts and increased tax credit amortization. The team expressed gratitude to all participants and ended on a positive note, indicating a positive outlook for their Forex trading with expectations of loan and deposit growth.

Insights from InvestingPro

Cathay General Bancorp (CATY) is navigating the financial landscape with a combination of conservative and growth strategies. As expressed in their recent earnings call, the bank anticipates a positive outlook for 2024, with projected loan and deposit growth. InvestingPro and InvestingPro Tips provide some insights based on real-time data:

InvestingPro Data:

  • Adjusted Market Cap: 3190M USD
  • Adjusted P/E Ratio as of Q3 2023: 8.65
  • Revenue Growth as of Q3 2023: 7.86 %

InvestingPro Tips:

  • Cathay General Bancorp is currently trading at a low P/E ratio compared to near-term earnings growth, which may appeal to value investors seeking growth potential.
  • Despite some drawbacks, analysts predict the company will be profitable this year, and the bank has shown a strong return over the last three months, with a total price return of 35.17%.

Investors can access a comprehensive range of tools and additional tips at InvestingPro for a deeper understanding of Cathay General Bancorp’s financial performance. InvestingPro is currently offering a special New Year sale with a discount of up to 50%. Use the coupon code SFY24 for an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 for an additional 10% off a 1-year InvestingPro+ subscription.

Full conference call transcript – Cathay General (CATY) Q4 2023:

Operator: Welcome to the Fourth Quarter and Full Year 2023 Cathay General Bancorp Earnings Conference Call. MJ, your call coordinator, currently has all participants in listen-only mode. After the management team’s detailed outline of Q4 results, the briefing will follow with a Q&A session. Today’s conference call is being recorded and available for replay at Cathay General Bancorp’s official website. We will now turn over to Georgia Lo, Investor Relations of Cathay General Bancorp.

Georgia Lo: Thank you, MJ, and good afternoon. I’m pleased to welcome you today with Mr. Chang Liu, our President and CEO, and Heng Chen, our Executive Vice President and CFO. The discussions today may contain forward-looking information under the Private Securities Litigation Reform Act of 1995 concerning our future results and events. These forecasts are subject to risks and uncertainties, which are elaborated further in our annual 10-K report for the year ended, December 31, 2022, and other reports and filings with the SEC over time. We discourage undue reliance on forward-looking statements. Let’s now discuss in detail the financial results for Q4 and the full year 2023.

[…]

Chang Liu: Thank you. We will now proceed to the Q&A portion of the call.

[…]

Operator: Thank you very much. With no further questions, I’ll turn the call back to the Cathay General Bancorp management team for concluding comments.

Chang Liu: We appreciate everyone for joining us today, and we look forward to speaking with you at our next quarterly earnings release call. Thank you.

Operator: Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day!

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