UPDATE 1-East West shares soar after it snaps up key rival

Mon Nov 9, 2009 3:41pm EST

* Co sees profitability in first half of 2010

* Sees UCB deal to be highly accretive

* Shares up 57 pct on heavy volumes

(Recasts; Adds conference call details, analysts comments, updates share movement)

By Brenton Cordeiro

BANGALORE, Nov 9 (Reuters) - East West Bancorp (EWBC.O) said it expects to return to profitability by the first half of 2010, following its regulator-assisted acquisition of key rival United Commercial Bank (UCB) -- a unit of UCBH Holdings Inc UCBH.O -- on Friday.

"This acquisition is highly accretive and will return East West to profitability in the very, very near term," Chief Executive Dominic Ng said on a conference call with analysts.

Shares of East West Bancorp (EWBC.O) jumped to as much as 57 percent to touch a high of $13.57 in late afternoon trade Monday on Nasdaq, with the number of shares traded over nine times their 50-day moving average volume.

Analysts cheered the deal, with Morgan Stanley upgrading East West to "overweight" from "equal-weight," and at least two other brokers raising their price targets on the stock.

The deal, which comes with reduced risk because of the Federal Deposit Insurance Corp (FDIC) backstop on future credit losses, ups East West's asset base more than 50 percent to $19 billion and expands its presence among the Chinese-American population it primarily serves.

"This is a highly attractive acquisition for East West because it takes out one of its long-time key competitors, making it the dominant bank in the Chinese-American bank niche," BMO Capital Markets analyst Lana Chan said.

Chan raised her price target on the bank's stock to $15 from $12.

East West, which caters to the Chinese community in the United States, acquired San Francisco-based UCB in an FDIC-assisted transaction late on Friday, which includes UCB's 63 U.S. branches, a branch in Hong Kong and a subsidiary, UCB-China, in Shanghai. [ID:nN06212635]

"The deal also includes UCB-China, which gives East West a rare and valuable Chinese banking license," analyst Joe Morford of RBC Capital Markets said in a note to clients.

On Friday, East West said it completed a capital raise of $500 million through the private placement of 18.2 million common shares at $9.04 per share.

The accretion from acquiring UCB more than offsets the dilution from the capital raise, BMO's Chan said.

In July, East West offered 11 million shares at $6.35 per share. (Reporting by Brenton Cordeiro in Bangalore; Editing by Vikram S Subhedar, Unnikrishnan Nair)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.