Bank of Hawaii trades at $78.68 and has moved in lockstep with the market. Its shares have returned 9.5% over the last six months while the S&P 500 has gained 8.2%.
Is now the time to buy Bank of Hawaii, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Bank of Hawaii Not Exciting?
We don’t have much confidence in Bank of Hawaii. Here are three reasons you should be careful with BOH, plus one stock we’d rather own.
1. Net Interest Income Points to Soft Demand
Our experience and research show the market cares primarily about a bank’s net interest income growth as one-time fees are considered a lower-quality and non-recurring revenue source.
Bank of Hawaii’s net interest income has grown at a 2.8% annualized rate over the last five years, much worse than the broader banking industry and in line with its total revenue. This was driven by its loan growth as its net interest margin, which represents how much a bank earns in relation to its outstanding loan book, declined throughout that period.
2. Low Net Interest Margin Reveals Weak Loan Book Profitability
Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It’s a fundamental metric that investors use to assess lending premiums and returns.
Over the past two years, we can see that Bank of Hawaii’s net interest margin averaged a poor 2.4%. This metric is well below other banks, signaling its loans aren’t very profitable.
3. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Bank of Hawaii’s weak 2.4% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.
Final Judgment
Bank of Hawaii’s business quality ultimately falls short of our standards. That said, the stock currently trades at 2× forward P/B (or $78.68 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at a top digital advertising platform riding the creator economy.
Stocks We Like More Than Bank of Hawaii
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