• I believe the margin should rebound nicely over the next couple of quarters.
• Profitability levels are likely to have bottomed in the second quarter and should improve materially over the next year.
• I believe that the credit concerns currently weighing on the stock are likely to prove too draconian.

Investment Thesis

Headquartered in Los Angeles, California, Hope Bancorp, Inc. (HOPE) is a $17.2 billion asset holding company and parent to Bank of Hope. Interestingly enough, HOPE is actually the only large scale community bank that is Korean-American focused. It has a pretty diverse lending set with a clear emphasis on commercial real estate and SBA lending. It has offices all over the United States; more specifically branches are located in Alabama, California, Georgia Illinois, New Jersey, New York, Texas, Virginia, and Washington State, along with having an office in Seoul, South Korea.

I completely understand why HOPE trades at a discount to peer banks given its past credit problems. Most peer mid-size community banks are trading at 1.1x price to tangible book value per share. As one can see from the chart below, HOPE currently trades at a 40% discount to that. My bullish stance on the shares is based on the current valuation being too low relative to peers.

Fundamentally, I believe HOPE has appropriately built up its loan loss reserve enough to warrant a roughly peer like valuation. I think the credit profile does give people caution, which I understand. However, my argument is that HOPE has already positioned itself to sustain above average losses. In my mind, the share price should be much closer to peers.

Data by YCharts

Revenue Outlook