East West Bancorp(EWBC)2024-10-23 01:39Financial Data and Key Metrics Changes - In Q3 2024, net income was $299 million, or $2.14 per diluted share, with a 1% quarter-over-quarter growth in average loans and a 3% growth in average deposits [4][6] - Net interest income increased by $20 million, or 4%, from the previous quarter, primarily due to higher loan income, while the cost of average interest-bearing deposits decreased [4][8] - Tangible book value per share grew by 7%, and the return on average tangible common equity was over 17% [5] Business Line Data and Key Metrics Changes - Average and period-end loans grew by 1% quarter-over-quarter, with consistent residential mortgage production and strong C&I growth driven by entertainment and private equity sectors [6] - Average and end-of-period deposits reached a record $61.7 billion, with a non-interest-bearing deposit mix of 24% of total deposits [6][7] - Fee income reached a record level of $81 million, up 6% quarter-over-quarter, driven by strong syndications activity and commercial cash management solutions [9] Market Data and Key Metrics Changes - The securities portfolio increased to $13.1 billion, with a significant portion in Ginnie Mae floating rate securities, and average cash and equivalents rose to $5 billion [7] - The net interest margin was 3.24%, a decline of 3 basis points from the prior quarter, reflecting Fed rate cuts [8] Company Strategy and Development Direction - The company aims to optimize its liability profile by managing deposit pricing and leveraging organic net inflows to enhance liquidity [14] - There are no current plans to open additional branches or deepen the network in China, focusing instead on optimizing existing operations [32] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about credit risk and expects net charge-offs to be in the range of 15 to 25 basis points for Q4 and the full year [11] - The company anticipates full-year end-of-period loan growth in the range of 2% to 4%, with net interest income expected to decline by 2% to 4% [12][13] Other Important Information - The allowance for credit losses at the end of Q3 was $696 million, or 1.31% of total loans, indicating a stable credit quality [11] - The common equity tier one capital ratio stands at 14.1%, well above regulatory requirements [12] Q&A Session Summary Question: Deposit growth rate and loan-to-deposit ratio - Management indicated that the faster deposit growth provides more flexibility for funding loan growth, with a deliberate strategy to lower deposit pricing [14] Question: Capital management and buybacks - Management expressed a patient approach to capital management, focusing on optimizing the balance sheet before considering buybacks [19][22] Question: Loan growth expectations post-elections - Management noted that loan growth could return to high single digits if economic conditions improve post-elections, but current customer loan utilization is lower than historical averages [28][30] Question: Fee income sustainability - Management believes that the strong fee income results are driven by focused sales efforts and are optimistic about maintaining growth in this area [36][38]