East West Bancorp (EWBC) vs. CVB Financial (CVBF) Critical Analysis

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East West Bancorp (NASDAQ: CVBF) and CVB Financial (NASDAQ:CVBF) are both mid-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, valuation, dividends, risk, institutional ownership, analyst recommendations and profitability.

Profitability

This table compares East West Bancorp and CVB Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
East West Bancorp 34.15% 15.12% 1.59%
CVB Financial 34.66% 12.20% 1.59%

Dividends

East West Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 1.4%. CVB Financial pays an annual dividend of $0.56 per share and has a dividend yield of 2.3%. East West Bancorp pays out 26.6% of its earnings in the form of a dividend. CVB Financial pays out 52.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. CVB Financial has increased its dividend for 4 consecutive years. CVB Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and target prices for East West Bancorp and CVB Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
East West Bancorp 0 5 8 0 2.62
CVB Financial 0 5 0 0 2.00

East West Bancorp presently has a consensus price target of $71.50, indicating a potential upside of 10.68%. CVB Financial has a consensus price target of $25.13, indicating a potential upside of 2.55%. Given East West Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe East West Bancorp is more favorable than CVB Financial.

Earnings and Valuation

This table compares East West Bancorp and CVB Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
East West Bancorp $1.58 billion 5.91 $505.62 million $3.46 18.67
CVB Financial $329.34 million 8.21 $104.41 million $1.07 22.90

East West Bancorp has higher revenue and earnings than CVB Financial. East West Bancorp is trading at a lower price-to-earnings ratio than CVB Financial, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

89.8% of East West Bancorp shares are held by institutional investors. Comparatively, 69.1% of CVB Financial shares are held by institutional investors. 0.7% of East West Bancorp shares are held by company insiders. Comparatively, 6.9% of CVB Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

East West Bancorp has a beta of 1.37, suggesting that its stock price is 37% more volatile than the S&P 500. Comparatively, CVB Financial has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500.

Summary

East West Bancorp beats CVB Financial on 9 of the 16 factors compared between the two stocks.

About East West Bancorp

East West Bancorp, Inc. operates as the bank holding company for East West Bank that provides a range of personal and commercial banking services to small and medium-sized businesses, business executives, professionals, and other individuals in the United States and Greater China. It operates through three segments: Retail Banking, Commercial Banking, and Other. The company offers various deposit products, including personal and business checking and savings accounts, time deposits, individual retirement accounts, travelers checks, safe deposit boxes, and MasterCard and Visa merchant deposit services. It is involved in lending activities, such as commercial and residential real estate, construction, and trade finance, as well as commercial business comprising accounts receivable, small business administration, inventory, and working capital loans. In addition, the company offers commercial lending loans that include commercial and industrial, multifamily residential, and land loans; and consumer lending loans, which comprise single-family residential, home equity lines of credit, and other consumer loans, as well as financing to clients needing a financial bridge to facilitate their business transactions between the United States and Greater China. Further, it provides various international finance, trade finance, and cash management services and products; treasury services; and Internet-based services, including online banking services. As of January 25, 2018, the company operated a network of approximately 130 locations in California, Georgia, Massachusetts, Nevada, New York, Texas, and Washington; full service branches in Hong Kong, Shanghai, Shantou, and Shenzhen; and representative offices in Beijing, Chongqing, Guangzhou, Taipei, and Xiamen. East West Bancorp, Inc. was founded in 1998 and is headquartered in Pasadena, California.

About CVB Financial

CVB Financial Corp. operates as a bank holding company for Citizens Business Bank that provides banking, lending, and investment services. It operates in two segments, Banking Centers; and Dairy & Livestock and Agribusiness. The company offers checking, savings, and money market accounts, as well as time certificates of deposit; and serves as a federal tax depository for business customers. It also provides commercial lending products comprising lines of credit and other working capital financing, accounts receivable lending, and letters of credit; loans to finance the operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers, and farmers; lease financing services for municipal governments; commercial real estate and construction loans that are secured by owner-occupied and investor owned properties; and consumer financing products, including automobile leasing and financing, lines of credit, credit cards, home mortgages, and home equity loans and lines of credit. In addition, the company offers various specialized services, such as cash management systems for monitoring cash flow, a credit card program for merchants, courier pick-up and delivery, payroll services, remote deposit capture, electronic funds transfer, and online account access. Further, it provides trust and investment-related services to customers through its CitizensTrust Division, such as fiduciary services, mutual funds, annuities, 401(k) plans, and individual investment accounts. The company's customers consist primarily of small to mid-sized businesses and individuals located in the Inland Empire, Los Angeles County, Orange County, San Diego County, Ventura County, Santa Barbara County, and the Central Valley area of California. As of April 18, 2018, the company operated 51 banking centers and 3 trust office locations. CVB Financial Corp. was founded in 1974 and is headquartered in Ontario, California.

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