Last Update 03 Dec 25

Fair value Decreased 0.38%

CATY: Net Interest Strength And Buybacks Will Offset Rising Credit Costs

Analysts have raised their price targets on Cathay General Bancorp to a range centered around approximately $52 per share, up from the low $50s. They cite solid net interest income and margin expansion that more than offset modest concerns about higher loan loss provisioning and slightly softer profit margins.

Analyst Commentary

Analyst reactions to the latest results highlight a generally constructive view on Cathay General Bancorp, with price targets moving modestly higher as the bank demonstrates resilience in core profitability metrics.

Bullish Takeaways

Bullish analysts point to solid net interest income growth and margin expansion as key supports for raising price targets, suggesting improved earnings power is not yet fully reflected in the share price.
Incremental price target increases into the low to mid 50 dollar range indicate confidence that the bank can execute steadily, even in a mixed macro environment for regional lenders.
Some bullish analysts are not really concerned about credit trends at this stage, viewing current provisioning levels as prudent rather than indicative of emerging stress, which supports a more constructive view on valuation risk.
Overall, the tone of recent research implies that, while the stock remains rated as a hold by several firms, the risk reward profile is gradually improving as management delivers consistent core performance.

Bearish Takeaways

Bearish analysts acknowledge the improvement in net interest margin but remain cautious that higher loan loss provisions could pressure earnings if credit conditions weaken further.
The continuation of Neutral and Market Perform ratings suggests lingering concerns around upside potential from current levels, with some viewing the shares as fairly valued after the recent rerating.
There is a view that modestly softer profit margins and the need to maintain disciplined provisioning may limit near term operating leverage, capping multiple expansion.
Uncertainty around the broader interest rate path and loan growth backdrop leads bearish analysts to prefer waiting for clearer catalysts before assigning more aggressive valuation targets.

What's in the News

Completed a significant share repurchase tranche, buying back 1,070,000 shares (1.54% of shares outstanding) for $50.09 million in Q3 2025, bringing total repurchases under the June 4, 2025 authorization to 1,874,179 shares (2.69%) for $85.65 million (company buyback update).
Reported a sharp increase in net charge offs for the third quarter ended September 30, 2025, rising to $15.65 million from $4.20 million a year earlier, signaling higher credit costs despite otherwise solid core performance (company credit quality disclosure).

Valuation Changes

Fair Value: edged down slightly to about $52.20 per share from roughly $52.40 per share, reflecting a marginally lower intrinsic value estimate.
Discount Rate: risen modestly to approximately 6.96% from about 6.78%, implying a slightly higher required return or risk adjustment in the model.
Revenue Growth: increased slightly to around 11.45% from roughly 11.00%, indicating a modestly more optimistic view on top line expansion.
Net Profit Margin: slipped somewhat to about 39.25% from approximately 41.03%, suggesting expectations for slightly lower profitability on future earnings.
Future P/E: declined marginally to roughly 10.08x from about 10.16x, pointing to a small compression in the valuation multiple applied to forward earnings.

Growth in core Asian-American markets and urban regions is fueling loan demand, bolstering revenue and supporting reliable future expansion.
Enhanced digital capabilities and disciplined credit practices are improving efficiency, asset quality, and noninterest income, strengthening long-term profitability and shareholder value.
Heavy exposure to commercial real estate, asset quality concerns, digital competition, geographic concentration, and regulatory pressures threaten growth, profitability, and long-term stability.

Catalysts

About Cathay General Bancorp

Operates as the holding company for Cathay Bank that offers various commercial banking products and services to individuals, professionals, and small to medium-sized businesses in the United States.What are the underlying business or industry changes driving this perspective?

Sustained growth in the bank's core Asian-American customer base, with ongoing wealth creation and business formation in key markets like California and New York, provides a reliable pipeline for new commercial and real estate lending, supporting future revenue and loan growth.
The continued economic expansion and commercial activity in urban regions where Cathay General operates is driving demand for both commercial and CRE loans, which is reflected in the upward revision of loan growth guidance and is likely to positively impact top-line revenue and net interest income.
The bank's ongoing investments and progress in digital capabilities are increasing operational efficiency and enabling additional cross-sell opportunities (evidenced by higher foreign exchange and derivative fee income), supporting margin expansion and noninterest income growth.
Strong credit discipline, with low nonaccrual and classified loan ratios despite headline charge-off events, underpins stable asset quality, translating to more predictable earnings and reduced long-term credit-cost volatility.
Disciplined capital allocation, including active share repurchases and steady dividend practices, is expected to drive higher EPS and total shareholder returns over time, enhancing the value proposition as the stock remains undervalued relative to underlying fundamentals.

Cathay General Bancorp Earnings and Revenue Growth

Cathay General Bancorp Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Cathay General Bancorp's revenue will grow by 11.0% annually over the next 3 years.
Analysts assume that profit margins will shrink from 41.8% today to 40.8% in 3 years time.
Analysts expect earnings to reach $393.8 million (and earnings per share of $5.5) by about September 2028, up from $294.7 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, down from 11.6x today. This future PE is lower than the current PE for the US Banks industry at 11.9x.
Analysts expect the number of shares outstanding to decline by 2.96% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Cathay General Bancorp Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy concentration in commercial real estate (CRE) loans, particularly in office and retail property segments (with office property loans alone comprising 14% of total CRE loans and 7% of total loans), exposes Cathay General Bancorp to persistent sector headwinds like declining CRE values, tenant bankruptcies, and higher delinquencies, which could lead to increased credit losses, higher provisioning, and pressure on earnings.
Rising levels of nonperforming and classified loans-such as the increase of nonaccrual loans and a significant rise in classified loans driven by downgrades and borrower cash flow problems-signal potential asset quality deterioration in the loan book, which may negatively impact future revenue stability and net margins.
Ongoing digital disruption in the banking sector and the shift to fintech solutions require substantial ongoing technology investments; if Cathay General Bancorp falls behind larger peers in digital banking capabilities, it risks losing market share and incurring higher costs, compressing net interest and fee margins over time.
Significant geographic focus in California and a customer base concentrated in the Chinese-American and Asian-American communities could amplify vulnerability to localized economic shocks, regulatory shifts, demographic changes, or immigration policy restrictions, potentially limiting loan and deposit growth and affecting long-term revenue streams.
Heightened regulatory scrutiny-such as evolving capital requirements (noted by slight decreases in risk-based capital ratios) and increased compliance costs associated with anti-money laundering and liquidity management-may further raise expense ratios and reduce profitability in a competitive, consolidating regional banking environment.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $51.6 for Cathay General Bancorp based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $45.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $964.1 million, earnings will come to $393.8 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 6.8%.
Given the current share price of $49.26, the analyst price target of $51.6 is 4.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Asian American Demand And Digital Banking Will Strengthen Performance