East West Bancorp(US:EWBC)2024-01-24 00:58Financial Data and Key Metrics Changes - The company reported an 18% year-over-year growth in tangible book value per share in 2023 [1] - Fourth quarter net income was $239 million, with an adjusted EPS of $2.02 excluding one-time charges [49] - The annual net charge-offs to average loans were just 9 basis points, and the non-performing assets to total asset ratio was 16 basis points at year-end [47][73] Business Line Data and Key Metrics Changes - Total average loans grew by 9% for the year, driven by strong residential mortgage and commercial real estate platforms [50] - Residential mortgage originations were $3.5 billion in 2023, with expectations for continued strength in this area [51] - Average commercial real estate (CRE) balances grew, particularly in multifamily and industrial property lending, while office loans declined [51] Market Data and Key Metrics Changes - The company added $1 billion in customer deposits in each of the last two quarters, totaling 40,000 new deposit accounts over the year [46] - The average cost of deposits for Q4 was 260 basis points, up 17 basis points from the previous quarter [68] - Non-interest-bearing demand accounts are expected to trend around 27% to 28% as a benchmark for future growth [33] Company Strategy and Development Direction - The company aims to focus on driving core deposit growth and maintaining strong capital levels, with a CET1 capital ratio of 13.3% [75] - A 15% increase in the quarterly common stock dividend to $0.55 per share was announced, reflecting confidence in earnings stability [48][76] - The company plans to continue diversifying its loan portfolio while managing credit risks proactively [72][114] Management's Comments on Operating Environment and Future Outlook - Management anticipates a softening economy in 2024, with loan growth expected to be in the range of 3% to 5% [88] - Net interest income is projected to decline by 4% to 6% due to expected rate cuts [88] - The company remains optimistic about its operational ability to reprice non-time deposits in a falling rate environment [68] Other Important Information - The company repurchased 1.5 million shares of common stock for $82 million during Q4 2023 [76] - The allowance for loan losses increased by $13 million quarter-over-quarter, reflecting net loan growth [74] Q&A Session Summary Question: What is the outlook for net interest income (NII) given the expected rate cuts? - Management indicated that NII would perform better if fewer rate cuts occur than projected, and proactive measures are being taken to manage rate sensitivity [110] Question: How does the company view the competitive landscape in 2024? - The company sees a marginally better competitive landscape due to disruptions in the banking sector and plans to continue recruiting talent selectively [112][113] Question: What is the expected loan-to-deposit ratio moving forward? - The company expects to operate in the lower 90% range for the loan-to-deposit ratio and plans to migrate towards a more high-quality liquid asset (HQLA) profile [102]