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.