Is Hope Bancorp (HOPE) Undervalued Amid Fed Easing and Regional Bank Recovery?

The question of whether Hope Bancorp (NASDAQ: HOPE) is undervalued hinges on a nuanced interplay of valuation metrics, earnings momentum, and macroeconomic tailwinds. As the Federal Reserve signals a potential easing cycle and regional banks show signs of recovery, investors are scrutinizing HOPE's financial health and growth prospects. This analysis evaluates HOPE's valuation relative to peers and identifies key earnings catalysts that could drive its stock higher-or expose vulnerabilities.

Valuation Metrics: A Mixed Picture

Hope Bancorp's price-to-earnings (P/E) ratio of 28.46 as of Q3 2025 appears elevated compared to the forward P/E range of 9.8x to 13.9x observed among top regional banks according to market analysis. However, this metric must be contextualized. HOPE's Non-GAAP earnings per share (EPS) of $0.25 in Q3 2025, though slightly below estimates, reflects a 28% year-over-year increase in net income to $30.8 million. The company's enterprise value to sales ratio of 0.98 suggests a more conservative valuation relative to revenue, aligning it with peers like Truist Financial (TFC) and Citizens Financial Group (CFG), which trade at P/B ratios of 0.97x and 0.96x, respectively according to sector benchmarks. While HOPE's P/B ratio remains undisclosed, its asset base of $18.51 billion and a 2.89% net interest margin (up 20 bps year-over-year) indicate operational efficiency that could justify a premium to book value as reported by Seeking Alpha.

The broader regional bank sector's EV/EBITDA multiple of 9.95x in Q3 2025 provides a benchmark for HOPE's potential undervaluation. Though HOPE's specific EV/EBITDA is unavailable, its 21.8% year-over-year revenue growth and $142.03 million Q3 revenue suggest strong earnings visibility. If the company's EBITDA expansion outpaces its P/E multiple, it could close the valuation gap with peers.

Earnings Catalysts: Fed Easing and Operational Leverage

The Federal Reserve's anticipated rate cuts in 2025 present a critical catalyst for HOPE. A narrowing of the deposit rate-cost of funds spread could reduce interest expense, amplifying net interest margins. HOPE's 2.89% NIM in Q3 2025 already reflects operational improvements, and further margin expansion could drive earnings growth. Analysts project FY2025 EPS of $1.09, implying a 36% year-over-year increase if the company meets its revised target of $0.87.

HOPE's asset-light model also offers leverage. With total deposits of $15.83 billion despite a 1% quarterly decline, the bank can deploy liquidity into higher-yielding assets as interest rates normalize. Additionally, the company's 5.3% annualized dividend yield, though attractive, carries a payout ratio of 143.59%, signaling potential sustainability risks. A reduction in this ratio-through earnings growth or dividend adjustments-would bolster investor confidence.

Risks and Peer Comparisons

HOPE's valuation must be weighed against sector-wide challenges. Regional banks face margin compression from deposit outflows and regulatory pressures, as seen in Q3 M&A activity like Pacific Premier Bancorp's $2.07 billion acquisition by Columbia Banking according to investment bank reports. While HOPE's 1.05% allowance coverage ratio for loans appears prudent, its $8.7 million provision for credit losses in Q3 2025 highlights exposure to economic downturns.

Comparatively, peers like East West Bancorp (EWBC) trade at a 1.70x P/B ratio according to sector analysis, underscoring investor optimism about its profitability. HOPE's lack of a clear P/B or EV/EBITDA edge may limit its appeal unless earnings growth accelerates.

Conclusion: A High-Conviction Play with Caveats

Hope Bancorp's valuation is neither clearly undervalued nor overpriced. Its elevated P/E ratio contrasts with strong revenue growth and operational improvements, while its dividend yield remains a double-edged sword. The Fed's easing cycle and HOPE's asset deployment potential offer compelling catalysts, but the high payout ratio and deposit volatility warrant caution. For investors with a medium-term horizon, HOPE could represent a speculative opportunity if earnings growth outpaces its valuation multiples and the bank executes a sustainable dividend policy.