First Hawaiian Inc. (NASDAQ: FHB) held a conference call announcing third quarter earnings. While Hawaii’s economy remains resilient, with unemployment remaining low at 2.9%, the bank reported mixed financial performance. Despite the decline in tourism, the bank’s net interest income increased to $156.7 million and its credit quality remained stable. Due to unexpected loan repayments, loan size decreased and deposits also decreased slightly.
The bank plans to resume $40 million worth of share buybacks in 2024 and anticipates growth opportunities in commercial real estate and dealer floor plans. Fee revenues are particularly strong from credit and debit card fees, and the bank expects to maintain interest-free deposits at pre-pandemic levels.
main points
- First Hawaiian Inc.’s total loans and deposits decreased, but its net interest income increased.
- The bank maintains strong credit quality and capital levels and plans to resume share buybacks.
- While growth is expected in commercial real estate and dealer floor plans, the consumer segment may show weakness.
- Fee revenues are robust, with credit and debit card fees expected to drive $50 million in revenue in the fourth quarter.
- Securities returns fell slightly and classified assets rose, but there was no broader negative trend.
company outlook
- The bank expects its net interest margin to decline slightly in the fourth quarter.
- Growth opportunities are expected primarily in commercial real estate and dealer floor plans.
- Management aims to maintain non-interest-bearing deposits at around 34%, the pre-pandemic level.
negative highlights
- Hawaii’s tourism industry has seen a slight decline, with both visitor numbers and spending down.
- Unexpected loan repayments led to a decrease in total loan volume.
- Deposits decreased due to the decline in public deposits, but corporate deposits increased.
positive highlights
- Hawaii’s economy has shown resilience with low unemployment rates.
- Net interest income increased, and the bank released $3.8 million in tax reserves.
- Strong capital levels will support the resumption of share buybacks.
What is lacking
- Banks face competitive pressures in loan growth, especially in floor plan financing.
- Securities portfolio yields declined slightly due to a small amount of floating rate loans.
Q&A Highlights
- Management discussed the impact of rising interest rates and proactive deposit attraction strategies.
- Provisioning is associated with lower FICO scores and environmental factors rather than specific portfolio concerns.
- Cost increases are expected to be in line with industry standards and are significantly lower than in previous years.
In summary, First Hawaiian Inc. is navigating the challenging economic environment with cautious optimism, leveraging its strong capital position and fee income to offset pressure on loan growth and securities yields. The bank’s strategic focus on specific growth segments and efficient management of assets and liabilities show it is well positioned to withstand potential headwinds in the coming quarters.
InvestingPro Insights
First Hawaiian Inc. (NASDAQ: FHB) continues to demonstrate financial resilience in a challenging economic environment. The bank has a market capitalization of $3.06 billion, giving it a significant presence in Hawaii’s banking sector, according to InvestingPro data. The company’s P/E ratio of 13.81 suggests that it is trading at a reasonable valuation relative to its earnings, which may be attractive to value-oriented investors.
One of the key strengths highlighted in InvestingPro Tips is that First Hawaiian has paid a dividend for nine consecutive years. This consistent dividend history aligns well with the strong capital levels and plans to resume share buybacks mentioned in the earnings call. The current dividend yield of 4.34% may be particularly attractive to income-focused investors in the current market environment.
Despite loan growth difficulties noted in the earnings call, InvestingPro data shows First Hawaiian remained profitable with revenue of $802.87 million over the past 12 months. This profitability is further supported by InvestingPro Tip, which states that analysts predict the company will remain profitable this year. The bank’s ability to generate profits despite economic headwinds demonstrates its operating efficiency and strong market position in Hawaii.
This article was translated with the help of artificial intelligence. Please refer to the Terms of Use for further details.
