East West Bank (EWBC)

Cross-border banking company East West Bancorp (NASDAQ:EWBC) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 18.3% year on year to $778 million. Its GAAP profit of $2.65 per share was 12.3% above analysts’ consensus estimates.

Company Overview

As the largest independent bank in the U.S. focused on bridging financial services between America and Asia, East West Bancorp (NASDAQ:EWBC) operates a commercial bank that provides personal and business banking services with a unique focus on facilitating U.S.-Asia cross-border transactions.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

East West Bancorp competes with other regional banks with Asian operations such as Cathay Bank (NASDAQ:CATY), as well as larger financial institutions with international presence including HSBC (NYSE:HSBC), Citigroup (NYSE:C), and Bank of America (NYSE:BAC).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, East West Bank grew its revenue at an excellent 11.7% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. East West Bank’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.2% over the last two years was well below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, East West Bank reported year-on-year revenue growth of 18.3%, and its $778 million of revenue exceeded Wall Street’s estimates by 7.1%.

Net interest income made up 86.3% of the company’s total revenue during the last five years, meaning East West Bank barely relies on non-interest income to drive its overall growth.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, East West Bank’s efficiency ratio has swelled by 3 percentage points, going from 36.8% to 36.1%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q3, East West Bank’s efficiency ratio was 35.6%, beating analysts’ expectations by 64.2 basis points (100 basis points = 1 percentage point). This result was 1.2 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects East West Bank to maintain its trailing one-year ratio with a projection of 37.1%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

East West Bank’s EPS grew at an astounding 17.2% compounded annual growth rate over the last five years, higher than its 11.7% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For East West Bank, its two-year annual EPS growth of 1.1% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, East West Bank reported EPS of $2.65, up from $2.14 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects East West Bank’s full-year EPS of $9.06 to grow 4.7%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

East West Bank’s TBVPS grew at an incredible 12.4% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 16.7% annually over the last two years from $43.33 to $58.97 per share.

Over the next 12 months, Consensus estimates call for East West Bank’s TBVPS to grow by 10.1% to $64.92, solid growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, East West Bank has averaged a Tier 1 capital ratio of 14.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, East West Bank has averaged an ROE of 16.9%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows East West Bank has a strong competitive moat.

We were impressed by how significantly East West Bank blew past analysts’ net interest income expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 1.2% to $100 immediately following the results.

Updated: December 4, 2025 at 11:35 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own East West Bank, you should also grasp the company’s longer-term business quality and valuation.

East West Bank isn’t a bad business, but we have other favorites. First off, its revenue growth was good over the last five years. And while East West Bank’s declining net interest margin shows its loan book is becoming less profitable, its TBVPS growth was exceptional over the last five years.

East West Bank’s P/B ratio based on the next 12 months is 1.7x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $125.87 on the company (compared to the current share price of $108.88).