E New Stock Buy: Bank Of Hawaii

Bank of Hawaii Corporation (BOH) is a 120-year-old regional financial services company with $16.9 billion in assets. Through its subsidiaries, the company provides a broad range of financial products and services to businesses, consumers and governments in Hawaii, Guam and other Pacific Islands. The company’s principal subsidiary, Bank of Hawaii, provides banking and investment services through its 69 branch locations, 382 ATMs, online and mobile banking services and 24-hour customer service center.

EFFICIENT BANK

In 1893, Peter Cushman Jones, a 60 year-old businessman, persuaded his two close friends to join him in organizing a new bank in the Islands. Four years later, with $400,000 in capital, Bank of Hawaii became the first chartered and incorporated bank to do business in the Republic of Hawaii, operating from a two-story wooden building in downtown Honolulu.Today, Bank of Hawaii is the second largest bank in the state with $17 billion in assets offering a broad range of financial products and services through three business segments: Retail Banking, Commercial Banking and Investment Services & Private Banking. The bank also offers services to government entities in Hawaii.

Bank of Hawaii operates in a unique competitive landscape where the top four banks control more than 80% of the regional market, providing the bank with a sticky, low-cost deposit base that reduces its sensitivity to pricing pressure as interest rates rise. In addition to its low-cost deposit base, Bank of Hawaii is a low-cost operator, evidenced by its 2017 efficiency ratio (non-interest expense divided by total revenues) of 55.7%, which places it among the country’s most efficiently run banks. The conservatively-managed bank maintains a pristine balance sheet with solid asset quality and robust liquidity and capital levels, far exceeding regulators’ requirements.   

PROFITABLE GROWTH

During the past five years, Bankof Hawaii has banked profitable growth with revenues compounding 4% annually, net income growing by 5% annually and EPS increasing at a 6% annual pace. During the period, average loans and leases have increased at a 12% annual clip to $9.3 billion while average deposits have grown by 6% annually to $14.5 billion. Return on average equity averaged a profitable 15.2% over the last five years. Credit quality steadily improved with non-performing loans declining over the past five years from $40 million to $16 million.
 

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