Hope Bancorp (HOPE)

Regional banking company Hope Bancorp (NASDAQ:HOPE) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 21.8% year on year to $142 million. Its non-GAAP profit of $0.25 per share was in line with analysts’ consensus estimates.

Company Overview

With roots in serving Korean-American communities and now expanded to a multi-ethnic clientele across 12 states, Hope Bancorp (NASDAQ:HOPE) operates Bank of Hope, providing commercial and retail banking services with a focus on serving multi-ethnic communities across the United States.

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.

Hope Bancorp competes with other regional banks serving similar markets, including East West Bancorp (NASDAQ:EWBC), Hanmi Financial (NASDAQ:HAFC), and BBCN Bancorp, as well as larger national institutions like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) in its operating regions.

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. Hope Bancorp struggled to consistently generate demand over the last five years as its revenue dropped at a 1.4% annual rate. This wasn’t a great result and suggests it’s a low quality business.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Hope Bancorp’s recent performance shows its demand remained suppressed as its revenue has declined by 11% annually over the last two years. 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, Hope Bancorp reported robust year-on-year revenue growth of 21.8%, and its $142 million of revenue topped Wall Street estimates by 2.3%.

Net interest income made up 93.1% of the company’s total revenue during the last five years, meaning Hope Bancorp lives and dies by its lending activities because non-interest income barely moves the needle.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

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.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, Hope Bancorp’s efficiency ratio has increased by 15.1 percentage points, going from 53.4% to 69.8%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Hope Bancorp’s efficiency ratio came in at 68.2% this quarter, falling short of analysts’ expectations by 190.3 basis points (100 basis points = 1 percentage point). This result was 1.5 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Hope Bancorp to rein in some of its expenses as it anticipates an efficiency ratio of 63.6%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Hope Bancorp, its EPS declined by 4% annually over the last five years, more than its revenue. However, its efficiency ratio actually improved during this time, telling us that non-fundamental factors such as taxes affected its ultimate earnings.

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

For Hope Bancorp, its two-year annual EPS declines of 21% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Hope Bancorp reported adjusted EPS of $0.25, up from $0.21 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Hope Bancorp’s full-year EPS of $0.83 to grow 36.1%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

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. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Hope Bancorp’s TBVPS grew at a sluggish 1.2% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 1.9% annually from $13.01 to $13.51 per share.

Over the next 12 months, Consensus estimates call for Hope Bancorp’s TBVPS to grow by 3.5% to $13.99, paltry 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, Hope Bancorp has averaged a Tier 1 capital ratio of 12.7%, 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, Hope Bancorp has averaged an ROE of 6.9%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was encouraging to see Hope Bancorp beat analysts’ net interest income expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EPS was just in line. Zooming out, we think this was a decent quarter. The stock traded up 1.8% to $10.88 immediately after reporting.

Updated: December 3, 2025 at 11:47 PM EST

Before deciding whether to buy Hope Bancorp or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies supporting the economy, but in the case of Hope Bancorp, we’ll be cheering from the sidelines. To kick things off, its revenue has declined over the last five years. And while its estimated net interest income growth for the next 12 months is great, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its net interest income growth was weak over the last five years.

Hope Bancorp’s P/B ratio based on the next 12 months is 0.6x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $12.38 on the company (compared to the current share price of $10.94).