On Thursday, Keefe, Bruyette & Woods made adjustments to its outlook on Cathay General Bancorp (NASDAQ:CATY), reducing the price target from $56.00 to $55.00, while keeping a Market Perform rating on the stock. The firm's analyst, Christopher McGratty, cited increased expenses, particularly regulatory costs, and slightly higher credit costs as the reasons for the revision of the company's 2025 and 2026 earnings estimates by -5% and -2%, respectively.
Cathay General Bancorp's core pre-provision net revenue (PPNR) matched the expectations of Keefe, Bruyette & Woods, but the firm anticipates that the bank's higher commercial real estate (CRE) concentration, which stands at 52% of loans and 288% of total risk-based capital, may raise concerns as the credit normalization process unfolds. Despite these challenges, the analyst acknowledges that Cathay's strong capital position, with a Common Equity Tier 1 (CET1) ratio of 13.5% and a tangible common equity to total assets (TCE/TA) ratio of 10.9%, offers a degree of resilience in case of economic downturns.
The bank's stock currently trades at a high-single-digit percentage price-to-earnings (P/E) discount relative to its peers based on 2026 earnings estimates. Keefe, Bruyette & Woods remains neutral with the Market Perform rating, balancing the bank's solid capital footing against the potential risks associated with its CRE loan concentration and the ongoing credit normalization.
Investors are keeping a close watch on Cathay General Bancorp as it navigates through the evolving financial landscape, with particular attention to the bank's CRE exposure and the broader economic indicators that could impact its performance. The revised price target reflects the firm's cautious stance on the bank's near-term prospects.
In other recent news, Cathay General Bancorp has reported strong financial results, surpassing analysts' expectations and outperforming Q3 2024 predictions. The company's earnings per share (EPS) reached $1.12, surpassing the projected $1.10. Additionally, Cathay General Bancorp's revenue exceeded expectations, coming in at $186.48 million against a forecast of $185.63 million. The company also announced a continuation of its stock buyback program, with $35 million planned for Q4 2024 and Q1 2025.
Stephens analyst Andrew Terrell revised the price target for Cathay General Bancorp shares, reducing it to $57 from the previous $60, while maintaining an Overweight rating on the stock. This revision followed Cathay General Bancorp's fourth-quarter performance, which revealed operating earnings per share (EPS) of $1.13, surpassing both Stephens' estimate of $1.09 and the consensus of $1.10.
The company's net interest income (NII) was reported to be 0.7% above consensus predictions. However, Cathay General Bancorp experienced elevated net charge-offs (NCOs) at 0.34%, attributed to one commercial and industrial shared national credit (C&I SNC).
Despite these credit concerns, Cathay General Bancorp provided guidance for 2025 that suggests potential for an earnings catalyst throughout the year, with net interest margin (NIM) expected to range between 3.10% and 3.20%. These are recent developments that investors should consider.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.