Cathay General shares spike after 1Q profit beats Street

Shares of Cathay General Bancorp., which operates banks mostly in California, spiked Friday after first-quarter earnings beat Wall Street estimates.

For the period ended March 31, Los Angeles-based Cathay posted earnings of $27.3 million, or 55 cents per share, compared with earnings of $30 million, or 57 cents per share, in the year-ago period.

That beat analysts' average expectation for profit of 52 cents per share, according to a poll by Thomson Financial.

The stock jumped $2.72, or 17 percent, to $18.73 in afternoon trading.

Cathay General said strong loan and investment securities growth helped push net interest income up 3.4 percent to $75.2 million from $72.8 million.

Non-interest income, which includes fees and charges, rose 11 percent to $6.5 million from $5.9 million.

RBC Capital Markets analyst Joe Morford said expense control helped Cathay General beat estimates, and that credit is holding up "relatively well."

He kept a "Sector Perform" rating on the shares.

Still, Federal Reserve interest rate cuts have compressed margins, Morford said. He cut his price target to $19 from $25, implying he expects the stock to rise about 19 percent above Thursday's $16.01 close.

Friedman, Billings, Ramsey & Co. analyst James Abbott kept an "Underperform" rating and cut his price target to $14 from $15. He lowered his 2008 earnings estimate to $1.80 per share from $1.85 per share.

Loans not being repaid fell 16.4 percent from the previous quarter, but Abbott said he thinks the improvement is temporary.