East West Bancorp(US:EWBC)2025-07-22 22:02Financial 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 [5][6] - Adjusted return on tangible common equity was 16.7%, and return on average assets was 1.6% [6] - Total average deposits grew 2% quarter over quarter, while end of period deposits increased by 3% [8][9] - Net interest income rose to $617 million, up $17 million from Q1 [10] - 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 [11] 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 [9] - Demand for residential mortgage products remained strong, with expectations for continued contribution in Q3 [10] - Commercial real estate balances grew modestly as the company supported longstanding clients [10] Market Data and Key Metrics Changes - The company maintained strong asset quality metrics, with non-performing assets decreasing to 22 basis points of total assets [14] - Criticized loans ratio decreased to 2.15% of loans, and special mention ratio decreased to 81 basis points of total loans [14] Company Strategy and Development Direction - The company aims to continue growing its loan portfolio, with full-year loan growth expected to be in the range of 4% to 6% [17] - The focus remains on optimizing deposit costs and managing asset repricing to maintain margins [21][34] - The company is exploring opportunities to enhance fee income capabilities and is actively hiring to support growth [75] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about client sentiment improving, despite ongoing tariff uncertainties [39][42] - The company is confident in its ability to manage risks associated with tariffs due to its diversified loan portfolio [41] - Future net interest income and revenue trends are expected to exceed 7% for the full year [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 [16] - The effective tax rate for the second quarter was 22.9%, with expectations for the full year to be around 23% [12] Q&A Session Summary Question: Beyond margin, how sustainable are loan yields and deposit beta? - Management is focused on deposit cost optimization and expects to maintain margins through Q3, regardless of potential rate cuts [21] Question: Can you provide insight on the reserve build related to C&I? - The reserve build was influenced by the CECL model and economic outlook rather than specific issues within the C&I book [25] Question: What is the impact of recent legislative changes on renewable energy tax credits? - Existing investments and loan commitments remain unaffected by new rules, but future strategies are being reconsidered [27] Question: How does the company view NII growth relative to loan growth? - The company is asset sensitive, and slower rate cuts would be beneficial for NII growth, which is expected to align with loan growth [34] Question: What is the sentiment around client investment pace? - Client sentiment is improving, with more certainty regarding tariffs, and the company is well-positioned to manage these changes [39] Question: Can you discuss the trends in deposit costs? - Average total deposit costs decreased, and the company expects to continue this trend as it approaches future rate cuts [46] Question: What are the expectations for core expenses in the second half of the year? - The company is investing in hiring and building capabilities, which will lead to increased expenses [49] Question: How does the company plan to optimize its balance sheet? - Continuous efforts are being made to optimize deposits and the investment portfolio, with a focus on growing the C&I book [73] Question: What are the long-term plans for capital utilization? - The company intends to build out key businesses and enhance fee income capabilities while maintaining strong returns for shareholders [75]