U.S. regional banks with a focus on the Asian-American demographic have been showing the ability to grow loans and generate top-line revenue growth in an environment where the mainstream banks have had more difficulty, says Gary P. Tenner, CFA, Vice President and Senior Research Analyst at D.A. Davidson & Co.
“A lot of the banks have been originating new credit lines, though we’ve not seen customers draw down and really start utilizing those credit lines. Until we start seeing greater utilization of credit lines, I expect revenue and margins are going to be under pressure,” he said.
Tenner recommends Cathay General Bancorp (CATY), a U.S. regional bank with a focus on ethnic Asian populations, because its stock is trading at about 140 of tangible book value. Cathay has shown consistent progress and presents an investment opportunity in its segment.
“It’s a bank that’s actually been growing loans, growing top-line revenue, credit still has some room for improvement, so there is still, I think, some credit leverage in the story, and the margins have been improving as they have gotten a little more disciplined on their deposit pricing and they’ve repaid some funding,” Tenner said.
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