David Chiaverini, an analyst from Wedbush, maintained the Buy rating on Cathay General Bancorp (CATY – Research Report). The associated price target is $40.00.
David Chiaverini has given Cathay General Bancorp a Buy rating due to several factors. Despite a slightly weakened loan growth due to large commercial loan paydowns, and a lower than anticipated net interest margin (NIM), Chiaverini praised Cathay’s stronger than expected deposit growth, driven by both interest and non-interest bearing deposits. Cathay also managed to lessen its reliance on higher-cost FHLB borrowings by approximately $800 million, courtesy of the strong deposit growth. He also noted some increase in non-performing assets, classified loans, and net charge-offs, but it did not alter his overall positive outlook.
Chiaverini addressed the mixed guidance update given by the company for FY23, which saw negative revisions in core noninterest expense and NIM guidance, but reiterated 5%-7% growth in loan and deposit. The analyst also factored in the bank’s management’s intent to scrutinize the expense base for 2024 and possibly resume share repurchases within the next few months, pending board approval. Even though he lowered the core EPS estimates for 2023/2024/2025 due to a lower net interest margin and higher noninterest expense assumptions, he maintained his Outperform rating. He believes that Cathay is well-positioned to prudently grow in a challenging banking environment, as demonstrated by the recent quarter’s trends in deposits and loans.
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Cathay General Bancorp (CATY) Company Description:
Cathay General Bancorp is a holding company, which engages in the provision of financial services. It offers commercial mortgage loans, commercial loans, small business administration loans, residential mortgage loans, real estate construction loans, home equity lines of credit, and installment loans to individuals for automobile, household, and other consumer expenditures. The company was founded in 1962 and is headquartered in Los Angeles, CA.
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