East West Bancorp(US:EWBC)2025-07-22 22:00Financial Data and Key Metrics Changes - The company reported record quarterly revenue and net interest income, with average loan and deposit growth of 2% quarter over quarter [4][5] - Adjusted return on tangible common equity was 16.7%, and return on average assets was 1.6% [5] - Net interest income increased to $617 million, up $17 million from Q1 [9] - Total non-interest income was $86 million, with fee income at $81 million, marking the third highest quarter for fees in the company's history [10] Business Line Data and Key Metrics Changes - Average loan balances increased by $940 million quarter over quarter, with commercial and industrial (C&I) lending being the largest contributor [8] - Demand for residential mortgage products remained strong, with expectations for similar or higher volume in Q3 [9] - The company experienced notable growth in commercial deposits, alongside consumer and business banking balances [7] Market Data and Key Metrics Changes - The criticized loans ratio decreased to 2.15% of loans, and non-performing assets decreased to 22 basis points of total assets [13] - The allowance for credit losses increased to $760 million, or 1.38% of total loans, reflecting changes in the economic outlook [14] Company Strategy and Development Direction - The company aims to maintain a strong capital position, with a tangible common equity ratio of 10% and a common equity Tier 1 capital ratio of 14.5% [15] - The focus remains on diversifying revenue streams and enhancing customer relationships to support growth [5][10] - The company is actively managing credit risk and optimizing deposit costs while preparing for potential rate cuts [20][49] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining margins and loan growth, despite potential rate cuts [20][34] - Client sentiment is improving, with businesses becoming more comfortable navigating tariff-related uncertainties [39] - The company expects full-year loan growth to be in the range of 4% to 6%, with net interest income and revenue trends projected to exceed 7% [16][17] Other Important Information - The company repurchased approximately 26,000 shares of common stock for about $2 million, with $241 million remaining for future buybacks [15] - The second quarter income tax expense was $92 million, with an effective tax rate of 22.9% [11] Q&A Session Summary Question: Ability to sustain loan yields and deposit beta - Management is focused on continuous deposit cost optimization and expects to maintain margins through Q3 [20] Question: Credit reserve build and C&I outlook - The reserve build relates to the CECL model and economic outlook rather than specific issues within the C&I book [23] Question: Impact of legislative changes on renewable energy tax credits - Existing investments and loan commitments remain unaffected by new rules, but future strategies are being reconsidered [26][28] Question: NII growth relative to loan growth - Management confirmed that NII growth is expected to track loan growth, with potential upside if rates remain higher for longer [34] Question: Client sentiment around investment pace - Client sentiment is improving, with businesses adapting to tariff situations and feeling more comfortable [39] Question: Trends in deposit costs - Average total deposit costs decreased, and management expects to continue this trend as they approach future rate cuts [46][49] Question: Core expenses and investments - The company is focused on hiring and building capabilities to support future growth, which will lead to increased expenses [50][51] Question: Loan growth in commercial real estate - The company aims for balanced growth across loan types, with a focus on C&I and single-family loans [81]