East West’s Profit Up; Shares Fall

East West Bancorp Inc. reported 39% higher first-quarter earnings Friday, but its stock tumbled as investors fretted that competition was forcing the San Marino bank to pay depositors higher interest.

The Chinese American bank, which has been expanding into mainstream banking, earned $23.5 million, or 44 cents a share, up from $16.9 million, or 33 cents, in the first quarter of 2004. But its stock fell $2.62 a share, or 7.6%, to $31.87 on Nasdaq.

The results met official Wall Street projections for “a pretty solid quarter,” said RBC Capital Markets analyst Joseph K. Morford, “but it was just not enough to satisfy the investors’ lofty expectations.”

East West had warned that its growth in loans could not continue at the recent annual pace of more than 30%, but some were disappointed at first-quarter loan growth of 24%, Morford said. The biggest worry, however, was rising interest costs for deposits.

In a call with analysts, East West Chief Financial Officer Julia Gouw said money market rates rose from an average of 1.5% in the fourth quarter last year to 1.94% in the first quarter, closing the month of March at 2.02%. Average interest on certificates of deposits rose from 1.89% in the fourth quarter to 2.22% in the latest period to a current 2.33%, she said.

Friedman Billings Ramsey downgraded East West shares, citing “faster-than-expected rising funding costs.”