Fees and cost cutting boost Bankoh profit
The inverted yield curve continues to pressure the isle bank's interest income
Bank of Hawaii Corp., the state's second-largest bank in terms of assets, said yesterday that earnings increased 4.4 percent in the first quarter as noninterest income, such as fees, jumped 16 percent over a year ago.
Net income was $47.3 million, or 94 cents a share, compared with $45.4 million, or 87 cents a share. Analysts were looking for 93 cents a share.
Total revenue for the quarter increased 2.8 percent to $159 million from $154.8 million.
The bank, which continues to be squeezed by an inverted yield curve, said net interest income, which reflects the difference between what it pays depositors and what it brings in from loans, fell 4 percent to $98.1 million from $102.2 million. Its net interest margin dropped to 4.07 percent from 4.41 percent a year earlier. An inverted yield cure is when short-term interest rates are higher than long-term interest rates.
"The spread revenue was a little lighter than expected, but the fee income was better than expected and expense management continues to result in very high profitability," said FTN MidWest Research analyst Brett Rabatin. "It's a tough environment for the banks with the inverted yield curve and tough core deposit generation. Generally speaking, everyone's a little concerned about credit and whether that will eventually reduce profitability, given higher credit costs. BOH's credit continues to be very good."
Allan Landon, chairman and chief executive of Bank of Hawaii, acknowledged that this is a challenging time for the bank.
"(The inverted yield curve) continues to put pressure on our primary source of revenue, which is interest income, and it continues to push competition to raise rates on deposits to attract deposit balances," Landon said. "So more competition and less margin; it's just the environment we're in right now. It's not like bad credit times, which are sort of the toughest you can get, but this unusual interest environment does make it a challenge for continuing to raise profits."
Noninterest income, which includes service charges and fees, helped offset the drop in net interest income as the bank generated $61 million compared with $52.6 million a year earlier.
Total assets declined 0.3 percent to $10.49 billion from $10.53 billion. Total loans and leases gained 4.2 percent to $6.51 billion from $6.25 billion. And total deposits fell 2.4 percent to $7.95 billion from $8.15 billion.
The bank also maintained its quarterly dividend at 41 cents a share. It will be payable June 14 to shareholders of record at the close of business on May 31.