East West Bancorp(US:EWBC)2023-10-19 18:45Financial Data and Key Metrics Changes - In Q3 2023, the company reported net income of $288 million and diluted earnings per share of $2.02, driven by record quarterly revenue and net interest income [42] - Net interest income reached $571 million, marking a new record for the third quarter, while net interest margin (NIM) was 3.48%, a compression of 7 basis points quarter-over-quarter [62] - Average loans grew by 2% sequentially, while average deposits increased by $900 million or 2% from the previous quarter [59] Business Line Data and Key Metrics Changes - The loan portfolio is well-diversified, with significant growth in low-risk residential mortgages, which accounted for nearly half of the loan growth [44] - The criticized loan ratio increased to 2.01% of loans held for investment, while the special mention loan ratio rose to 95% [54] - Non-performing assets decreased modestly to $104 million, representing 15 basis points of total assets [53] Market Data and Key Metrics Changes - Customer deposits grew by $1 billion from the prior period, with notable increases in both consumer and commercial balances [44] - The average cost of deposits for Q3 was 243 basis points, up 31 basis points from the previous quarter [64] - The company is seeing increased customer demand from other banks, as clients seek stability and consistency amid market disruptions [10][15] Company Strategy and Development Direction - The company is focused on maintaining a diversified portfolio and strong customer relationships, which have proven resilient during economic cycles [11][77] - The Board of Directors has approved the resumption of the share repurchase program in Q4 2023, reflecting confidence in the company's capital position [45][57] - The management emphasizes a cautious approach to new customer acquisition, prioritizing quality over quantity [15] Management Comments on Operating Environment and Future Outlook - Management expects continued modest compression in net interest margins due to the current rate outlook and potential Fed actions [3] - The company is positioned for stable growth, with a focus on customer care and maintaining strong capital ratios [10][69] - Management remains vigilant regarding credit risk, particularly in light of rising rates and inflation impacting borrowers [54] Other Important Information - The company reported a provision for credit losses of $42 million in Q3, compared to $26 million in Q2, indicating proactive risk management [55] - The average loan-to-deposit ratio was 90% during Q3, with noninterest-bearing demand deposits making up 30% of average deposits [59] - The company has a strong capital position, with tangible common equity growing to 9.03% as of September 30 [56] Q&A Session Summary Question: What is the outlook for net interest income and managing wholesale deposits? - Management indicated plans to pay down up to $1.75 billion in wholesale deposits by year-end, having already paid off $1.6 billion in Q3 [71] Question: How aggressive will the company be with share buybacks? - Management stated they will be opportunistic with the $254 million buyback authorization, proceeding based on market conditions [72] Question: What is the company's perspective on credit risk and the office portfolio? - Management expressed confidence in the overall credit portfolio, noting a slight increase in charge-offs but no significant concerns [84] Question: How is the company managing deposit costs moving forward? - Management expects a lag in reducing deposit costs, contingent on Fed rate movements, but is optimistic about future adjustments [85] Question: What is the company's strategy regarding interest rate swaps? - The company added $750 million to its interest rate swap book in Q3, indicating a proactive approach to managing interest rate risk [94] Question: How does the management view the recent leadership changes? - Management emphasized the importance of strong leadership for future growth and stability, highlighting the successful transition of roles within the executive team [103]