Magazine article American Banker

Oppenheimer Sees Robust Growth in Chinese Market

Magazine article American Banker

Oppenheimer Sees Robust Growth in Chinese Market

Article excerpt

Banking companies that serve Chinese-Americans are poised for strong earnings growth this year, according to an analyst.

Behind the rise at Cathay General Bancorp and East West Bancorp Inc., both of Los Angeles, and UCBH Holdings Inc. of San Francisco will be increasing core deposits, more acquisitions, more new branches, and more growth in trade finance and loans, he wrote.

Christopher Nolan of Oppenheimer & Co., who began coverage of the three companies Tuesday, was the most bullish on Cathay, whose stock he rated "buy."

Its price/earnings multiple is likely to grow, fueled by fundamentals such as a stable net interest margin, a takeout premium, and recent acquisition deals, he wrote.

Shares of the $6.4 billion-asset company are trading at 15.2 times Mr. Nolan's $2.31 estimate of per-share 2006 earnings.

Cathay announced Feb. 21 that it had beaten UCBH in a four-month bidding war for Great Eastern Bank of New York. It is to pay $101 million, $3.6 million more than UCBH offered in October. The deal is expected to close next quarter.

Acquisitions are also important in the growth strategy at the $8.3 billion-asset East West, which is to pay $204 million this month for the $914 million-asset Standard Bank of Monterey Park, Calif.

Mr. Nolan rates East West's stock "neutral." He said acquisitions will give it a chance to appreciate "in line" with his 17% estimate of earnings growth this year.

East West has "limited balance-sheet flexibility" to help increase earnings this year, given its high ratio of loans to deposits and a relatively low loan-loss allowance, Mr. …

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