First Hawaiian (FHB): Exploring Valuation After Fed Rate Cut Optimism Lifts Bank Shares

Shares of First Hawaiian (FHB) climbed 3% after comments from New York Federal Reserve President John Williams pointed to the possibility of interest rate cuts. This lifted sentiment across regional banks ahead of the December Fed meeting.

See our latest analysis for First Hawaiian.

First Hawaiian’s recent 3% jump came following renewed optimism around interest rate cuts, energizing a regional bank sector that has contended with pressure much of the year. While the share price increased over the past week, First Hawaiian’s 1-year total shareholder return remains down 8.7%, suggesting that momentum may be shifting but longer-term performance has been mixed.

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But with shares still below their analyst price target and a mixed track record over the past year, investors are left to wonder: Is First Hawaiian trading at a discount, or is future growth already reflected in the price?

Most Popular Narrative: 9.8% Undervalued

First Hawaiian’s most widely followed narrative sees the fair value at $27.33, which is notably higher than the last close of $24.66. This gap has kept investors debating what is fueling the bank’s upside potential and whether the market is missing something in the latest repricing cycle.

Strategic investments and progress in digital banking adoption are enabling First Hawaiian to maintain expense discipline, streamline operations, and attract and retain younger customers. These efforts are expected to support margin improvement and cost-to-income ratio reduction.

Read the complete narrative.

What is the secret behind this bullish valuation? The narrative quietly hinges on just a handful of financial projections, including a future profit profile and an ambitious cost control plan that could change the game. Want to know what assumptions might unlock this premium fair value? Click to uncover the forecasts and see how analysts are connecting these dots.

Result: Fair Value of $27.33 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, continued declines in commercial and retail deposits or slowdowns in Hawaii's tourism-driven economy could challenge the current bullish outlook for First Hawaiian.

Find out about the key risks to this First Hawaiian narrative.

Another View: Are Multiples Telling a Different Story?

While DCF analysis suggests First Hawaiian is deeply undervalued, looking at its price-to-earnings ratio adds nuance. The bank trades at 11.8x earnings, which is higher than the US Banks industry average of 11.2x but below the peer average at 12.4x. It is also notably higher than its fair ratio of 10.4x. This suggests some valuation risk if the market shifts toward that fair ratio, so is the discount as real as it looks?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own First Hawaiian Narrative

If you see the numbers differently or want to dive into your own research, you can shape your perspective in just a few minutes with Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding First Hawaiian.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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